Wednesday, April 8, 2009

Obama's Liberal Critics

With the mainstream Republican party offering nothing of value to the debate over how to cure our economic woes, the Obama administration's main meaningful opposition has come from those who supported him in the '08 election. Congressional Democrats have raised objections to aspects of his proposed budget. Evan Thomas of Newsweek writes that Nobel Prize winning economist and New York Times op-ed columnist Paul Krugman has been the most vocal critic of the administration's approach.

Krugman generally applauds Obama's efforts to tax the rich in his budget and try for massive health-care reform. On the all-important questions of the financial system, he says he has not given up on the White House's seeing the merits of his argument—that the government must guarantee the liabilities of all the nation's banks and nationalize the big "zombie" banks—and do it fast. "The public wants to trust Obama," Krugman says. "This is still Bush's crisis. But if they wait, Obama will be blamed for a fair share of the problem."

Krugman's suggestion that the government could take over the banking system is deeply impractical, Obama aides say. Krugman points to the example of Sweden, which nationalized its banks in the 1990s. But Sweden is tiny. The United States, with 8,000 banks, has a vastly more complex financial system. What's more, the federal government does not have anywhere near the manpower or resources to take over the banking system.

A common theme from Krugman's recent columns in the Times is that the administration has not gone far enough with either its stimulus package or its effort to bolster and reform the banking system. His great fear is that by the time Obama realizes his measures have not been enough the economic problems will be far more difficult to solve than they already are.

Unlike the GOP, Krugman is offering credible objections to the administration's approach and coherent alternative proposals. While no one knows how this will all play out, Krugman's objections are sobering.

--Ballard Burgher

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