In 2008 when President Obama assembled his economic team to help deal with the growing financial crisis, even their worst nightmare scenario woefully underestimated the depth of the economic collapse. Their failure is now our failure.Ezra Klein has an outstanding look at the economic history of a policy failure and the implications for President Obama’s re-election in 2012
To understand how the [Obama] administration got it so wrong, we need to look at the data it was looking at.
The Bureau of Economic Analysis, the agency charged with measuring the size and growth of the U.S. economy, initially projected that the economy shrank at an annual rate of 3.8 percent in the last quarter of 2008. Months later, the bureau almost doubled that estimate, saying the number was 6.2 percent. Then it was revised to 6.3 percent. But it wasn’t until this year that the actual number was revealed: 8.9 percent. That makes it one of the worst quarters in American history. Bernstein and Romer knew in 2008 that the economy had sustained a tough blow; t hey didn’t know that it had been run over by a truck.
There were certainly economists who argued that the recession was going to be worse than the forecasts. Nobel laureates Krugman and Joe Stiglitz were among the most vocal, but they were by no means alone. In December 2008, Bernstein, who had been named Biden’s chief economist, told the Times, “We’ll be lucky if the unemployment rate is below double digits by the end of next year.”
While the stimulus was far, far, far smaller than the $2.1 trillion that might have actually saved the economy, what we did do, worked. Go read the whole piece. It will chill your bones and make you question whether this (or any other) administration could have handled the depth of the economic failure we experienced. It does not bode well for Obama’s chances in 2012 and, quite frankly, given the extent of this policy failure, it shouldn’t.