The Public Is Way Ahead of the Pundits in Knowing How to Solve the Economic Crises, And Obama Knows it

By Dean Baker, The Guardian. Posted March 5, 2009.

He also proposes to eliminate the fund managers' tax break that allowed managers of hedge and equity funds (some of the richest people in the country) to pay tax at just a 15% rate. Obama proposes to have these Wall Street tycoons subject to the same tax rates as everyone else.

There are many other areas where the budget turns to long-neglected areas, most importantly a proposal to establish a cap and trade system to provide incentives to reduce greenhouse gas emissions. It is not clear that Obama can accomplish the full agenda laid out in his budget, but there is no doubt that he hopes to accomplish a great deal in his term in office.

Remarkably, much of the discussion of the budget did not focus on Obama's agenda, but rather his deficit targets. In particular, many commentators questioned whether he would reach his deficit target for 2012 because the economy might be weaker than his budget assumes.

The pundits' concern on this point should have caused people to throw their television sets, radios and newspapers out the window. Let's suppose that the pundits are correct and the economy sinks farther and later grows more slowly than the Obama administration assumed in planning its budget.

Would the pundits have Obama therefore cut more spending and raise more taxes? This would be close to crazy. With the economy plummeting, the first priority of the administration and Congress must be to boost the economy.

If the unemployment rate is 12% when Obama's first term ends, he can forget about getting re-elected, even if the budget is balanced. On the other hand, if he has managed to bring the unemployment rate down to a reasonable level, no one other than a few Washington pundits will be bothered by the deficit that might have been necessary to achieve this result.

The electorate is well ahead of the punditry on this issue. The federal government is the only force capable of turning the economy around in the near future and sustaining growth. The public recognizes this fact and will demand good economic policy even as the punditry continue to push policies that would throw the economy into another depression. Even if they have very large megaphones, the punditry are thankfully still a very small minority and unlikely to get their dream.

© 2009 Guardian News and Media Limited

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Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer ( www.conservativenannystate.org) and the more recently published Plunder and Blunder: The

Rise and Fall of The Bubble Economy. He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues. You can find it at the American Prospect's web site.

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