Imagine, for a moment, how difficult it would have been to land a man on the moon if half of the U.S. Congress had believed that the sun revolved around the earth. Or consider how the War in the Pacific might have progressed if half of Congress had still thought the world was flat. Or whether polio would have been eradicated if half of Congress insisted that the best cure was bleeding using leeches. Unfortunately, this was the situation the United States in January 2009, when Barack Obama assumed the presidency. The nation was trying to climb out of the deepest economic hole since the Great Depression, but the Republican Party had about as scientific an approach to the economy as medieval alchemists did to the periodic table.
Sometimes, mistaken ideas can be harmless or even humorous. But in a crisis, they can be downright dangerous. By the time Obama took office, Lehman Brothers had failed, and the Treasury was already trying to prop up banks and other financial institutions to prevent a complete collapse of the economy. In addition, the nation had undergone a tremendous fiscal transformation. Back in 2000, the United States had expected to rack up more than $4 trillion in budgetary surpluses over the coming eight years, but the Bush administration enacted tax cuts that brought the tax burden for upper-income Americans down to the lowest levels since the 1940s. These cuts, combined with two expensive wars and a short recession, sent the nation into deep deficits. The new president faced an enormous task to revive the economy -- one that he could not complete without Congress's help. Together, they would have to protect Americans from a prolonged economic slump while attempting to chart a course toward a more fiscally responsible future.
Not everyone in Congress was in a mood to cooperate. Stung by their electoral defeats and facing Democratic domination of both houses, the Republicans did everything they could to slow the new president's agenda, from filibusters and procedural votes to delayed appointments and partisan bickering. Clearly, the election campaigns of 2010 and 2012 had already begun, and Republicans were determined to stop the new president from keeping his promises. But in the early days of the financial crisis that began in September 2008, the Republicans knew that they had to seem like they were doing something about the economy, too.
So when Obama cast himself as a compromiser ready to temper the legislative proposals of the Democrats in Congress, the Republicans got whatever they could from him -- often while Obama's supporters cried foul -- and made sure to water down his proposals as well. It started with the first stimulus package. In January 2009, Obama announced his proposal for a combination of tax cuts and new spending worth $825 billion over the coming decade, including more than half a trillion dollars in the first two years. By this point, the value of the economy's annual output of goods and services had already shrunk by about five percent, adjusted for changes in prices, since its peak in the fourth quarter of 2007. This was a big hole to fill, easily worth half a trillion dollars a year. The stimulus wouldn't replace all that had been lost, but it might prevent a bad situation from lasting longer and getting worse.
In the end, Congress agreed to $787 billion in stimulus spread over 10 years. Would it be enough? Some economists already had their doubts. Even Christina Romer, who would soon chair the president's Council of Economic Advisors, had pushed Larry Summers, a former Treasury secretary and Obama's top economic advisor, to recommend $1.8 trillion in stimulus to Obama in December 2008. Across the Pacific, China had just announced its own stimulus package of $586 billion over just two years -- and that was for an economy only a third the size of the United States that had no deficits problems and was still expected to grow quickly for many years. If the American economy still stood on the brink of a new recession a year or two years hence, the president and Congress would have to consider another attempt. After all, Americans would be suffering the pain of joblessness, foreclosure, and bankruptcy until the economy returned to strong growth.
As they girded for each fight against a president they were determined to defeat, the Republicans fell back on the basic tenets of their economic philosophy. Unfortunately for the American people, those tenets were myths. Each one of the economic concepts that the Republicans held dear simply wasn't true, as qualified economists from around the political spectrum agreed.
The time is running out to repudiate these myths. The unemployment rate is still at 8.2 percent, and the nation added a scant 80,000 jobs in June. Meanwhile, 49 percent of Americans polled this month by the New York Times and CBS said that they thought Mitt Romney, the presumptive Republican nominee, would do a better job with the economy as president, compared to 41 percent for Obama. If Romney were to follow Republican orthodoxy, however, his economic policy would be dangerously reliant on these five myths: