The prophets of doom

Meet the Cassandras, 14 economists, bloggers, politicians and businesspeople of all political stripes who have become the most strident critics of President Obama's stewardship of the economy.


Andrew Leonard
April 16, 2009 2:34PM (UTC)

At a moment of economic stress greater than most living Americans have ever experienced, it is no wonder that every move made by the administration of President Barack Obama to address the multiple simultaneous crises afflicting the economy has been greeted with howls of criticism from the left, right and middle. Now is a fertile time for a harvest of Cassandras, all preaching apocalypse. But it can be confusing -- is the stimulus too big, or too small? Should banks be allowed to fail, or should they be nationalized?

Hard answers are in short supply. But here's a guide to the prophets of doom. We've identified them, attempted to ascertain the moment when they first turned against the White House, and summarized the basic points of their critique. We've included economists, members of the business community, bloggers and, just for fun, two of the most anti-Obama Republicans we could dig up.

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THE ECONOMISTS

PAUL KRUGMAN: New York Times Op-Ed columnist, Princeton economics professor, Nobel Prize winner

Earliest critique: Jan. 9, 2009

Without missing a beat, Paul Krugman went from being George Bush's most passionate and prominent critic to fulfilling the exact same role for Barack Obama.

Stimulus: Not nearly big enough to make up for the loss of potential economic output. Relied far too much on tax cuts.

Banking plan: Geithner's plan has no chance of working. Defunct banks must be seized and nationalized, the sooner the better.

Most hurtful quote: On the Geithner plan: "This is more than disappointing. In fact, it fills me with a sense of despair."

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GREG MANKIW: Professor of economics at Harvard University; former chairman of President Bush's Council of Economic Advisers; visiting fellow at the American Enterprise Institute

Earliest critique: Pre-inauguration, in the New York Times, Jan. 11, 2009

In the econoblogosphere, Mankiw plays a role for conservatives analogous to what Paul Krugman provides for the left, albeit without the passion.

Stimulus: Mankiw is skeptical of fiscal policy, believing that tax cuts, as opposed to spending, should be the fiscal instruments of choice. He also fears the rise of protectionism that the Buy American stimulus provisions threaten.

Banking plan: Mankiw's bottom line: The banks need to suffer more. Specifically, he follows the influential libertarian economist Tyler Cowen's argument (recently featured in the New York Times) that banking creditors need to accept losses on their bad bets.

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Most hurtful quote: "[T]he borrowing and debt imposed on future generations will not be very different [from Bush], at least if the numbers in the Obama administration’s own budget document can be trusted."

SIMON JOHNSON: Co-founder of the Baseline Scenario, a blog about the global economic and financial crisis; Ronald A. Kurtz Professor of Entrepreneurship at MIT's Sloan School of Management; senior fellow at the Peterson Institute for International Economics; former chief economist at the IMF

Simon Johnson expressly disavows being a populist, but outside of Paul Krugman, few critics have been more unremitting or convincing in their attacks on Obama's approach to the banking industry. His Atlantic magazine blockbuster, "The Quiet Coup," paints a disturbing picture of a United States government co-opted by Wall Street's elite.

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Earliest critique: In a Joe Nocera New York Times column, Feb. 14, 2009

Stimulus: Needs to be bigger.

Banking plan: The banking and financial lobby "oligarchs" wield too much power over Washington. Their stranglehold must be broken. Insolvent banks must be placed into a government-mediated receivership. The Geithner plan won't work.

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Most hurtful quote: The last paragraph of "The Quiet Coup": "The conventional wisdom among the elite is still that the current slump 'cannot be as bad as the Great Depression.' This view is wrong. What we face now could, in fact, be worse than the Great Depression -- because the world is now so much more interconnected and because the banking sector is now so big. We face a synchronized downturn in almost all countries, a weakening of confidence among individuals and firms, and major problems for government finances. If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late."

NOURIEL ROUBINI: Professor of economics at New York University's Stern School of Business; chairman of RGE Monitor, an economic consultancy firm; former senior economist in the White House Council of Economic Advisers under Clinton

At the height of the housing boom, no one was predicting an economic collapse with more fervor than Nouriel "Doctor Doom" Roubini. As the crisis kept deepening, he kept predicting it would get worse, and kept being proved right.

Earliest critique: In Forbes, Feb. 12, 2009

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Stimulus: Should have included fewer tax cuts, and needs to be better coordinated with stimulus spending by other major economies.

Banking plan: Roubini believes banks in the U.S. and U.K. are largely insolvent and should be nationalized. He initially decried the Geithner plan as cumbersome and complicated in early February, but raised eyebrows around the econoblogosphere in late March when he said that the plan was viable.

Most hurtful quote: "The U.S. financial system is effectively insolvent."

WILLEM BUITER: Professor of European political economy, London School of Economics and Political Science; former chief economist of the European Bank for Reconstruction and Development; author of the Financial Times' Maverecon economics blog.

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Buiters should get the nod as the most relentlessly caustic critic of Bush, Obama and everyone else.

Earliest critique: Jan. 5, 2009, Financial Times.

Stimulus: Against it. Won't work, based on "Keynesian fallacies. The U.S must "focus on getting credit mechanisms and the financial system going again."

Banking plan: The Geithner plan is "financial shenanigans." The "zombie banks" need to die.

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Most hurtful quote: Very difficult to pick, because almost everything Buiters writes is hurtful to someone. But this is typical: On housing: "Myopia, opportunistic behaviour and insider protection: welcome to U.S. home financing policy."

MARTIN WOLF: Associate editor and chief economics commentator of the Financial Times; author of "Why Globalization Works" and "Fixing Global Finance."

Wolf enjoys a special kind of credibility because he has gradually transformed from a staunch defender of modern capitalism to one of the most articulate critics of its failings.

Earliest critique: Jan. 13, 2009.

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Stimulus: Without global coordination with other major international economies, even a large U.S. stimulus won't be enough to restore prosperity.

Banking plan: Banking plans must be restructured, zombie banks must die. The problem is not a lack of liquidity that can be solved by the Geithner plan -- banks are insolvent.

Most hurtful quote: "I am becoming ever more worried. I never expected much from the Europeans or the Japanese. But I did expect the U.S., under a popular new president, to be more decisive than it has been. Instead, the Congress is indulging in a populist frenzy; and the administration is hoping for the best."

WILLIAM BLACK: Associate professor of economics and law at the University of Missouri - Kansas City; author of the popular book "The Best Way to Rob a Bank Is to Own One: How Corporate Executives and Politicians Looted the S&L Industry" (2005); former executive director of the Institute for Fraud Prevention (2005-07)

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Earliest critique: In the Huffington Post, "The Audacity of Dopes," Feb. 10, 2009.

Stimulus: The stimulus is too small.

Banking plan: The Geithner plan just serves the interests of the bankers who created the mess in the first place. The banks should be put into receivership, as the law requires. The Obama administration is helping to cover up fraud by using the stress tests to allow the banks to declare that they have sufficient capital.

Most hurtful quote: On the Geithner plan: "No, except that it's trillions, if we're lucky, [that] will go under their plan to the people that caused this crisis. And it will be the greatest looting of the American people in our history and it will destroy the Obama presidency if it continues."

DEAN BAKER: Co-director of the Center for Economic and Policy Research, holds a Ph.D. in economics

Earliest critique: Jan. 13, 2009

Stimulus: Blames Democratic "moderates" for causing the stimulus to be too small and thus resulting in higher job losses.

Banking plan: Strongly opposed to the Geithner plan, believes it won't work, diverts taxpayer dollars to Wall Street. The government is giving too much to the banks without getting enough control in return.

Most hurtful quote: "Treasury Secretary Timothy Geithner's latest bank bailout plan is another Rube Goldberg contraption intended to funnel taxpayer dollars to bankrupt banks, without being overly visible about the process ... It is hard to understand this plan as anything other than a last ditch effort to save the Wall Street banks. Unfortunately, Mr. Obama seems prepared to risk his presidency on their behalf."

THE BUSINESS COMMUNITY

JIM CRAMER: Host of CNBC's "Mad Money" and co-founder of the TheStreet.com; author and former hedge fund manager.

Earliest critique: On MSNBC's "Hardball," Jan. 28, 2009.

Categorizing Jim Cramer's opinions can be a challenge, because he can change his opinions drastically from one day to the next. He has argued that the stimulus needs to be 10 times as big as it currently is, but also criticized it for pumping up the deficit. He supports taxing the rich, but not right now.

Stimulus: The stimulus is a disaster and a fraud, has instilled fear in the economy, and is far too small.

Banking plan: Cramer first supported the Geithner plan to get toxic assets off the balance sheets of banks, but has flip-flopped several times on Geithner himself. He is opposed to "lurching nationalization," and believes the banks will be profitable again if we can remain patient.

Most hurtful quote: (On the stimulus) "But Obama has undeniably made things worse by creating an atmosphere of fear and panic rather than an atmosphere of calm and hope. He's done it by pushing a huge amount of change at a very perilous moment, by seeking to demonize the entire banking system and by raising taxes for those making more than $250,000 at the exact time when we need them to spend and build new businesses, and by revoking deductions for funds to charity that help eliminate the excess supply of homes."

JIM ROGERS: Legendary investor, financial commentator and co-founder with George Soros of Quantum Fund and creator of Rogers International Commodities Index

Jim Rogers is a ubiquitous presence on the financial news networks, and is never at a loss for a strong opinion. The ultimate advocate of a "let the free market sort everyone out and only the strong survive" philosophy.

Earliest critique: August 2008: "We'll be worse off whoever is president."

Stimulus: Won't work because "the idea that you can fix a period of excess borrowing and excess consumption by more borrowing and more consumption to me is just ludicrous."

Banking plan: Will lead to a duplication of Japan's lost decade. "It's exactly the same mistakes the Japanese have made. They haven't recovered 19 years later, neither will we in the United States." Would prefer to see the banks allowed to go bankrupt.

Most hurtful quote: "The world is in serious trouble and American politicians and European politicians are making it much worse. This has a long way to go. I don't particularly like to say this but it is going to be the worst recession since the 1930's."

THE BLOGGERS

YVES SMITH: Author of the popular financial blog Naked Capitalism since 2006; head of Aurora Advisors, New York-based management consulting firm.

It's safe to say that in the econoblogosphere Yves Smith is the anti-Will Rogers: She has never met an Obama economic policy she liked.

Earliest critique: Dec. 8, 2008.

Stimulus: Too small, won't work without a thorough cleanup with the financial system and an overhaul of financial regulation.

Banking plan: Will not work. Banks are insolvent and must be nationalized immediately. Obama's efforts to fix the financial system do not deal with the "opaqueness and complexity" of the instruments that started this mess.

Most hurtful quote: "I cannot recall a major U.S. policy initiative being met with as much immediate revulsion as the so-called Geithner plan. Even the horrific TARP, which showed utter contempt for Congress and the American public was in some ways less troubling."

BARRY RITHOLTZ: Author of financial blog the Big Picture; regular commentator on CNBC, Bloomberg, Fox and PBS; CEO and director of Equity Research at Fusion IQ, an online quantitative research firm

Barry Ritholtz has ridden his blog's huge popularity to a bookstore near you. Keep your eye out for "Bailout Nation."

Earliest critique: Jan. 29, 2009

Stimulus: Too small.

Banking plan: Will not work. Nationalization in the form of "prepackaged Chapter 11 bankruptcy reorganization is the fastest way to fix the banking system.

Most hurtful quote: In response to Geithner's statement that "We have a financial system that is run by private shareholders, managed by private institutions, and we'd like to do our best to preserve that system," Ritholtz exploded: "No! Defending these idiots was your old gig. In the new job, you no longer work for the cretins responsible for bringing down the global economy. Please stop rationalizing their behavior, and preserving the status quo!"

THE POLITICIANS

MICHELE BACHMANN: Member of the U.S. House of Representatives, Minnesota, 6th District

Earliest critique: Dec. 19, 2008

When you're talking House Republicans, you're not going to find too many nice things said about Obama's economic policies. But no one has taken the criticism to further extremes than Bachmann, who is convinced that the new White House is ushering in an era of "economic Marxism."

Stimulus: Opposed. Advocates cutting taxes and spending instead.

Banking plan: Opposed. Part of Obama's final leap to socialism.

Most hurtful quote: "I think what we're seeing is an implementation of all of the radical ideas that Bill Ayers and Ward Churchill, the radical ideas that we've seen on some college campuses, they're now being implemented in our government and they're taking a nefarious route ... If you look at FDR, LBJ, and Barack Obama, this is really the final leap to socialism."

RON PAUL: Member of the U.S. House of Representatives, Texas, 14th District; failed presidential candidate, 2008

Ron Paul gets special credit for being the elected politician who has most consistently warned that economic disaster lay around the corner. He was bound to be right, sooner or later.

Earliest critique: Nov. 5, 2008

Stimulus: Since nearly all government spending is bad, fundamentally opposed to fiscal policy. Stimulus spending will only further aggravate the national debt, and turn the recession into a depression. Furthermore, it is unconstitutional to expand government so greatly.

Banking plan: Ron Paul once introduced a bill calling for the Federal Reserve to be abolished, so it's safe to say he does not fall into the nationalize-the-banks camp. The banks should live or die by the free market.

Most hurtful quote: "It is a strong ideological position to believe that government can run things because if it isn't socialism, it's fascistic and it's inflationary and it's control, and it's loss of liberty ..."


Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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Related Topics ------------------------------------------

Barack Obama Great Recession Paul Krugman U.s. Economy

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