Recession: What can the President do?

Paul Krugman and Jesse Eisinger both have new columns out today, and they’re remarkably similar, dealing as they do with what, if anything, the next president is going to be able to do about the economic malaise facing the USA.

Jesse is in full-on ultrabear mode:

From the moment the next president takes office, one issue will overwhelm all others: the American financial crisis…

The threat now is to the foundation of our economic structure. Faith in the financial system is crumbling. Because of the scope of the problem, dealing with its aftermath will dominate the next president’s entire agenda.

Other concerns will still draw attention. But they will come in second. Health-care reform? Not going to happen anytime soon. Immigration overhaul? Pay no attention. Global warming? Iraq? By necessity, these issues will recede from view (though they will obviously remain problems).

The next president will take office during what may well come to be known as the Great Recession, the worst financial crisis of the post-World War II era…

The next president may well be dealing with markets in a continued free fall and a Fed that’s out of ammo and suffering serious damage to its reputation.

Jesse concludes that something really big is needed: a "New New Deal" which can socialize the risk which has increasingly been borne by working families in recent years. And Krugman provides some details of what such a New New Deal might look like:

Reinvigorated regulation could help restore confidence to the financial system. A return to pro-labor policies could help raise real wages. Pro-competitive policies — which are not the same thing as giving powerful businesses whatever they want — could help America regain its leadership in information technology. In other words, there’s a lot that could be done to perk up our sagging confidence.

All the same, both columns are stronger on problems than they are on solutions, and my feeling is that even the president of the United States of America doesn’t have enough power to turn a real Great Recession around. The financial crisis might yet work itself out, or it might continue to get seriously worse. Either way, I’m far from convinced that the US government is going to be able to do much about it.

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