by Charles Lemos, Tue Aug 24, 2010 at 02:57:41 PM EDT
"President Obama should ask for - and accept - the resignations of the remaining members of his economic team, starting with Secretary Geithner and Larry Summers, the head of the National Economic Council," said Minority Leader John Boehner in a morning speech to business leaders at the City Club of Cleveland. And with that masterful stroke of political rhetoric, long called for by many observers on the left including this one, John Boehner has set the terms of the debate for the Fall election. Granted, the Fall election was always bound to be a referendum on the President's economic policies but now Boehner has floated an idea that many outside the GOP's base can latch onto.
Beyond that demand for personnel changes in the White House Economic Team, Boehner's speech offered the standard Republican boilerplate of failed ideas: lower taxes, fewer regulations, free trade agreements, and unspecified spending cuts but presumably to social safety net entitlement programmes. While the speech is disingenuous - he quotes John F. Kennedy "an economy constrained by high tax rates will never produce enough revenue to balance the budget, just as it will never create enough jobs." but neglects to mention the top marginal rate in 1961 was 91 percent a far cry from today's 35 percent - the speech, politically speaking, is Boehner's finest hour. It's the pitch for a man who thinks himself the Speaker-in-waiting.
Mind you, the Democrats have somewhat pre-empted Boehner by making him a campaign issue and the White House is firing back. Bill Burton, the White House deputy press secretary, said he had reviewed Boehner's speech and found "what was most surprising was his full-throated defense of the indefensible." Burton rejected Boehner's call for Obama to dismiss Geithner and Summers, saying the "irony of this is that Boehner would fire the people who made the tough decisions, who did the hard work to get the economy going again." And the problem with the Administration, they think the economy is on the right track when we are headed for long period of Japanese-style malaise.
The other must read piece of news today is in the Wall Street Journal where Jon Hilsenrath covers the on-going debate at the Federal Reserve over how to kick start the economy.
After steering the economy away from another Great Depression, Mr. Bernanke confronts a painfully slow rebound.
Unemployment is still high and inflation is uncomfortably low. Fed officials, who spent much of the early part of this year planning for an exit from easy-money policies, have been forced to think about doing more to jolt the economy to life.
Fed officials emphasize they have common objectives despite being deeply divided over what to do next: They seek to avoid either deflation, a broad decline in prices and wages, or an upsurge of inflation. And they share a strong desire to get the economy growing fast enough to sustain a recovery without unusual government support.
The Fed already has cut the short-term interest rates it targets to near zero, vowed to keep them there for an extended period and purchased trillions of dollars in securities, with money the central bank creates, to push down long-term interest rates.
The most contentious issue now is whether to print more money and buy even more long-term securities, which would expand the Fed's portfolio further. An earlier bond-buying program ended in March.
A decision hinges largely on whether the Fed sees inflation falling much further or if economic growth fails to revive. The Fed and most private forecasters still expect faster growth in 2011, and few economists are predicting outright deflation.
Among the other issues: Should the Fed act quickly, or should it wait for firmer evidence that the economy is truly faltering? And if it does decide to act, should it take small, cautious steps or large, dramatic ones?
Deflation is a concern of mine but what troubles me most isn't the Fed's wrangling though it sheds clarity over the situation but rather that Administration appears lackadaisical in tackling unemployment. From day one, it should have been priority one but the views of Christina Romer were dismissed by Summer, Geithner and Emanuel, the troika that runs the White House economic policy. Rightly or wrongly, the troika is perceived as putting the interests of Wall Street ahead of Main Street and perceptions do matter. Still, it is hard to discern a sustained effort by the Administration on the nation's unemployment problem. By letting unemployment fester, it has gives credence to the GOP thus giving them an opening.