The limits of Obaman economics is perfectly anatomized by Krugman today. "Bailouts for Bunglers?" Yes. Because even in the new administration private-sector executives must be in charge of the economy - no matter how terrible they are, how completely their ideas have failed, or how many GDPs of whole countries they manage to lose.
Meanwhile, a Washington Post report based on administration sources says that Mr. Geithner and Lawrence Summers, President Obama’s top economic adviser, “think governments make poor bank managers” — as opposed, presumably, to the private-sector geniuses who managed to lose more than a trillion dollars in the space of a few years.The job cut bloodbath continues - 7000 down at Macy's. One story begins, "Macy’s Inc. plans to cut 7,000 jobs in a corporatewide restructuring that will centralize its operations and reduce expenses in one of the most difficult economic environments the retailer has faced." What is equally true is that they and thousands of other companies are creating the environment to which they "react." Every section of crew tossed over the side makes the ship sink that much more.
Same for Disney's announcement that it would lay off 5% of its workforce. ""Change is never easy and becomes even harder to embrace during times of turbulence and uncertainty," Anne Sweeney, president of the Disney/ABC Television Group, said in an e-mail to staff members." This is completely wrong. Bad change is never easy. Good change is a lot of fun. Firing, dissolution, forced resuffling, and a speed-up - why should anybody like that?
One classical issue here involves the mythical invisible hand. Since it does not exist, itcannot magically coordinate millions of private agents trying to save their skins with the traditional self-interested management reflex of firing 5-10% of the staff. The government tries to stimulate spending. Each business tries to decrease its spending. The government needs to win this battle, and needs to take power away from the private sector in order to do it.