This was not a good week for the Obama administration's Middle East peace efforts. Speaking alongside Israeli Prime Minister Netanyahu in Jerusalem last Saturday, Secretary Clinton seemed to be praising the distinctively partial limitations that Israel was willing to implement on settlement non-expansion. During the following days in Morocco and Cairo, she walked those remarks back, but the damage had been done.

By Thursday, the American-sponsored Palestinian President Mahmoud Abbas was sufficiently exasperated to announce that he will not be standing for re-election, and all week the media and political commentary on the U.S. approach was scathing about America's efforts--even by Middle East standards.

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Yesterday the National Jewish Democratic Council's (NJDC) President, David A. Harris, released a statement outlining the outrageous behavior of the crowd at the Tea Party "press conference" sponsored by the GOP House leadership. The crowd held signs noting that "Obama takes orders from the Rothchilds" [sic] and likening the Democratic health care legislation to Nazi Health Care as represented by corpses at the Dachau concentration camp. Contained in NJDC's release was a call to House Minority Leader John Boehner (R-OH) and House Republican Whip Eric Cantor (R-VA) to rid Republican events of these inappropriate Holocaust comparisons and outright anti-Semitic messages, and to clearly condemn them once and for all.

The House Republican Leader's press spokesperson replied, "Leader Boehner did not see any such sign. Obviously, it would be grossly inappropriate."

This morning The Washington Post's Dana Milbank reported that these signs and other comparably disgusting ones could not possibly have been missed by Boehner and other GOP members of Congress because they were right in front of the GOP speakers. Moreover, Milbank highlighted the comments of other GOP-sponsored speakers speaking about Reverend Wright brainwashing President Barack Obama to "damn America" and fuming about "death panels."

Boehner and the other GOP members present -- including GOP House Whip Eric Cantor, and Representatives Bachman (MN), Foxx (VA), Hensarling (TX), King (IA), Broun (GA), Schmidt (OH), Cassidy (LA), Akin (MO), and Carter (TX) -- can no longer hide behind weasel words like that they "did not see any such sign." This was their press conference and the signs were right in front of their faces. The spelling-impaired "Rothchilds" sign-holder was spouting nonsense about a "Jewish plot to introduce the anti-Christ." These were their own speakers spouting outright lies. This was their political base. These types of disgusting, inappropriate Holocaust comparisons and hate filled, paranoid messages have been a part of GOP and conservative events since the carefully planned town hall meetings of last summer.

So we call upon these Republican Congressional leaders to listen to morality and their conscience and cut this language out. It is offensive and it is corrosive to a democratic society. Make it clear that anyone who uses Holocaust comparisons is not welcome under the GOP tent. Make it clear that outright anti-Semitism has no place at any GOP event.

If appeals to conscience are not enough then we are making an appeal to their political self-interests: if these GOP congressional leaders don't call out this behavior now and in the future, the NJDC promises to "stick it in your ear" in the coming electoral cycle. We will take GOP Holocaust comparisons and anti-Semitic statements to the Jewish electorate and to other fair-minded American voters and paint you as the party of bigotry and insensitivity toward the Holocaust. You can count on it.

Here is a scary thought. The Pareto Principle in economics says that 80% of the effects come from 20% of the causes. In practical terms it might mean that 20% of your movies at Warner Bros. would generate 80% of the revenue. Pareto himself noted that 80% of the wealth in Italy was held by 20% of the people.

This morning unemployment hit 10.2%, a 26 year high. Yesterday the Labor Department reported that productivity surged to 9.5%. The U.S. has worked hard to transform itself into a knowledge economy and companies like Google and Goldman Sachs record record revenues per worker. What if some version of the Pareto Principle begins to apply itself to employment--20% of the workers produce 80% of the GDP? Dan Greenhaus of Miller Taback & Co has the grim reality of our future.

We have argued and continue to argue that another jobless recovery is materializing and if our estimates for G.D.P. growth going forward materialize, the unemployment rate will remain at elevated levels for several years. Nearly 16 million people are unemployed right now while another 9 million are working part-time jobs because they cannot get a full-time job.

So here is the reality of life for the bottom 40% of America's families. After they pay for food, housing and transportation they have $1200 per year to spend on "discretionary items" like clothing, medicine and doctors. Never mind telephone, Internet or cable TV which are supposed to be middle class entitlements. I don't believe the 25 million underemployed people in this country are not going to sit on their hands passively zoned out in front of the TV set in the next two years, especially when they see Hedge Fund managers taking home $100 million bonuses for successfully taking down companies like Abitibi-Bowater, CIT, General Growth Properties, Six Flags and even General Motors with their brilliant government subsidized Credit Default Swaps and bond packages that forced the companies into bankruptcy.

In earlier times we had outsider artists who could articulate the rage like Woody Guthrie in the Depression.

Yes, as through this world I've wandered

I've seen lots of funny men;

Some will rob you with a six-gun,

And some with a fountain pen.

I believe it's going to take a new renaissance of rebellious artists, spiritual leaders and politicians to wake up the public to the reality of the real America. Glenn Beck has no solutions but to retreat to a fantasy world of the 1950's. The truth is that for more than half a century Republicans and Democrats alike have been prisoners of the conventional wisdom propounded by Wall Street bankers, military contractors, the Chamber of Commerce and their academic neoclassical economics enablers. The result is a hollowed out economy with no manufacturing base for exports except in making weapons of mass destruction, dependent on financial bubbles to keep the party going. Well, the party is over. Anyone who thought that just electing Barack Obama was the solution to our problems, misunderstood the institutional power of the Establishment and their conventional wisdom.

As I have said before, we are in an Interregnum where the old is dying, but the new cannot be born. Obama's election was just the start of what needs to be a new age of reform. Writing of the Progressive Era 100 years ago, Richard Hofstadter noted that the reform movement "was the effort to restore a type of economic individualism and political democracy that was widely believed to have existed earlier in America and to have been destroyed by the great corporation and the corrupt political machine."

Of course the task of Teddy Roosevelt, Upton Sinclair and the Muckrakers of 1904 was a lot easier than the task of Barack Obama. America was entering a period of technological mastery and export superiority. Jobs were plentiful. What TR had to do was break up the monopolies and end the corruption and greed in industries like meat packing and coal mining. Obama will have to do all of that (break up the Big Banks and reform the food and energy businesses), but his task will be far greater because he has to help create 30 million new jobs in the next few years. To do that we will need to remake our industrial base, because it's clear these jobs are not going to come from the existing knowledge and service economy that gets more productive by the day.

Each month when I get the official unemployment figures from the US government, I quickly search in my inbox for a note from former cable network CEO and senior economic adviser in the John Edwards and Barack Obama campaigns Leo Hindery who sends me the "effective unemployment" figures that many economic commentators from Joseph Stiglitz to Mort Zuckerman to Bob Herbert are begninning to use.

Official unemployment surged to 10.2% according to an announcement today.

Here is the Hindery Report on Effective Unemployment:

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There have been some mathematical corrections to this post discussed in the comments. My pencil notes had the numbers right. By the time I got to writing it out errors had entered. Sorry.

Fannie Mae just put out awful looking results based primarily on massive (and increasing) credit loss provisions. Indeed their provisions this quarter were the largest thus far in the cycle.

Its worth looking a little closer because - like it or not - all Americans are owners of Fannie - both the downside (their current book) and the upside (if any) through taxpayer ownership of the common stock.

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It has become increasingly clear that President Obama's term is going to be a very difficult slog. We live at a time when Congress no longer believes -- and that includes much of the President's own party -- that a landslide election victory by a Presidential candidate means that the new President has a mandate to enact the program he ran on.

I think Obama will be able to get the key elements of his program enacted, not all of it, but enough of it to make him a successful President. Of course, nobody knows.

In any case, either in 2010 (God forbid) or 2012 (more likely), the Republicans will be back. And, when they return, they will be worse than ever -- especially now with the Christianist bigots running the party.

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The Senate just voted unanimously for extending unemployment compensation. The bill also included an $8,000 handout of taxpayer dollars to some people who buy homes (first time buyers and long-time homeowners). This $8,000 credit is not chump change. It is more than twice what it costs to pay for health care for a child for a year on the State Children's Health Insurance Program. It is about 50 percent higher than the average cash grant to a family on the much-maligned Temporary Assistance for Needy Families program (i.e. welfare).

The tax credit is noteworthy not only because it is an incredibly bad use of tax dollars. It is a great example of how so-called free market, anti-government conservatives are perfectly happy to use tax dollars to help people they like, specifically realtors, builders, bankers and the relatively affluent people who will be the primary beneficiaries of this tax credit.

This is not free market fundamentalism; it is crony capitalism. It is redistribution. It is "spreading the wealth around." However, the direction is upward. This should be obvious, but yet many progressives insist on denouncing free market fundamentalists. They should get paid by conservatives for these denunciations.

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A lot of folks are declaring Obama -- who wasn't on the ballot -- the loser of the night based on two state elections, but the defeat of three anti-tax initiatives that were on the ballot in Washington State and Maine should emphasize that Grover Norquist and the anti-tax movement were big losers of the night -- and this just continues a multi-year roll of defeats.

In both states, voters rejected so-called TABOR ("Taxpayer Bill of Rights") initiatives that would have created rigid tax raising formulas that would have crippled those states' capacity to provide services like education, health care, emergency services, and public safety. Voters in Maine also rejected a proposal to slash the excise tax on new and hybrid cars, which would have undermined local revenue around the state.

Across the country, over thirty state legislatures raised taxes to deal with deficits this year and a number have specifically targeted tax increases on the wealthy - a bugaboo of the rightwing. And at the ballot, the anti-tax right has just lost and lost.

Back in the early 90s, the rightwing managed to pass a TABOR system in Colorado at the ballot box, which led to  terrible results, including large declines in K-12 funding, higher education tuition rates, and hindering the state's ability to address the lack of medical insurance coverage for many children and adults (see a PSN Dispatch on "TABOR's Disastrous Record in Colorado").  Voters partially repudiated TABOR at the ballot in 2005; when the rightwing tried to enact TABOR-like initiatives in states across the country in 2006, progressives highlighted fraud in signature collecting in multiple states and issue was thrown off the ballot in Michigan, Montana, Nevada, Oklahoma and Missouri. On Election Day, voters in Maine, Nebraska and Oregon finished the job in voting down the remaining TABOR initiatives.  And in 2008, anti-government tax measures were defeated overwhelmingly in Massachusetts, North Dakota and Oregon.

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Job figures are lagging indicators but nobody feels reassured right now. It is hard to imagine Americans returning to something like the full employment of the 1980s and 1990s without new industries like telecom and computers engendering a vast new ecosystem of entrepreneurial businesses; companies in which American technological talent can distinguish itself; companies that either require local workers for infrastructure projects, or, design and manufacture products and components whose labor content is too small for managers to consider outsourcing to the Far East.

The good news is that the electric car is around the corner. The bad news--which is the best news of all for the economy, ironically--is that the electric grid cannot begin to cope with the electric car's demands and possibilities. Layering in all the network technology that will smarten the grid, and preparing electric cars to communicate with it (and each other), will transform our economic and physical landscape. These changes will require a new role for government--something the Obama administration seems to understand. I explore the new ecosystem and its implication in the current Inc. Magazine:

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It's 10:45 PM at the White House and I hope Barack and David Axelrod are having a beer on the second floor. One year ago they won a generational election as the anti-establishment candidate of change. Tonight, no matter how you slice it, the Democrats lost two big statehouses (New Jersey and Virginia), because they were perceived as the party of the establishment. A little more than two hours ago I read a speech by a famous investor who explained in simple terms how a Democratic Congress, in the fall of 2008 and then a Democratic administration, in the spring of 2009, got played by the oligarchs on Wall Street.

David Einhorn, who runs Greenlight Capital is a pretty smart investor. I don't always agree with him, but he gave a speech a couple of weeks ago that I hope will eventually reach the desk of our President. Einhorn's belief, like mine, is that much of the backlash flowing around the health care debate (or even tonight's election) is not really about healthcare--but more about a general sense that the average citizen is a pawn in a rigged game run by corporate special interests and a clueless Congress. The real root of the populist anger was in the bailout of the banks.

In the context of the recent economic crisis, a highly motivated and organized banking lobby has demonstrated enormous influence. Bankers advance ideas like, "without banks, we would have no economy." Of course, there was a public interest in protecting the guts of the system, but the ATMs could have continued working, even with forced debt-to-equity conversions that would not have required any public funds. Instead, our leaders responded by handing over hundreds of billions of taxpayer dollars to protect the speculative investments of bank shareholders and creditors. This has been particularly remarkable, considering that most agree that these same banks had an enormous role in creating this mess which has thrown millions out of their homes and jobs.

The critical line here is, "but the ATMs could have continued working, even with forced debt-to-equity conversions that would not have required any public funds". In other words, Goldman Sachs, Citibank, JP Morgan Chase, Morgan Stanley and Merrill Lynch bondholders might have had to convert all their debt to equity, but the system would have survived without the $700 billion tax-payer bailout. But what is Geithner proposing now?

On the anniversary of Lehman's failure, President Obama gave a terrific speech. He said, "Those on Wall Street cannot resume taking risks without regard for the consequences, and expect that next time, American taxpayers will be there to break the fall." Later he advocated an end of "too big to fail." Then he added, "For a market to function, those who invest and lend in that market must believe that their money is actually at risk." These are good points that he should run by his policy team, because Secretary Geithner's reform proposal does exactly the opposite.

The financial reform on the table is analogous to our response to airline terrorism by frisking grandma and taking away everyone's shampoo, in that it gives the appearance of officially "doing something" and adds to our bureaucracy without really making anything safer. With the ensuing government bailout, we have now institutionalized the idea of too big- to-fail and insulated investors from risk.

And Einhorn also points out that the problem of Credit Default Swaps has not gone away, it's merely been subsidized by the taxpayers while the vultures throw more companies into bankruptcy (CIT yesterday, GMAC maybe tomorrow).

The proposed reform does not deal with the serious risks that the recent crisis exposed. Credit Default Swaps, which create large, correlated and asymmetric risks, scared the authorities into spending hundreds of billions of taxpayer money to prevent the speculators who made bad bets from having to pay. CDS are also highly anti-social. Bondholders who also hold CDS make a bigger return when the issuing firms fail. As a result, holders of so-called "basis packages" - a bond and a CDS - have an incentive to use their position as bondholders to force bankruptcy triggering payment on their CDS, rather than negotiate traditional out of court restructurings or covenant amendments with troubled creditors. Press accounts have noted that this dynamic has contributed to the recent bankruptcies of Abitibi-Bowater, General Growth Properties, Six Flags and even General Motors. They are a pending problem in CIT's efforts to avoid bankruptcy. The reform proposal to create a CDS clearing house does nothing more than maintain private profits and socialized risks by moving the counter-party risk from the private sector to a newly created too-big-to-fail entity. I think that trying to make safer CDS is like trying to make safer asbestos. How many real businesses have to fail before policy makers decide to simply ban them?

Larry Summers and Tim Geithner and even Rahm Emanuel, have been so inside the Wall Street game for so long that they have no idea of the level of anger directed at the capitalists who have managed to scam a few trillion out of the public coffers with phrases like "without the banks, we would have no economy". President Obama needs to listen to other voices on the economy or else the pitchfork brigade may show up outside the White House next November. We did not elect him to bring us more of the same--more dominance of our national policy by the military industrial complex, the Big Banks, Big Pharma, Big Insurance and Big Oil.

The irony is that if Obama started kicking ass and taking names with the syncophants of the Fortune 500 that sit in Congress, I bet a lot of Glenn Beck's audience might even take notice. And surely, Axelrod doesn't plan to run the 2010 campaign without the youth vote, which was totally absent tonight. This is a teaching moment. Let's hope the President understands this.

The Administration's biggest economic mistake so far was to badly underestimate last January how bad the employment situation would become by Fall. As a result, it low-balled the stimulus -- settling for a plan that, while avoiding even worse job losses, didn't go nearly far enough.

Obama has to return to Congress, seeking a larger stimulus.

Yes, I know. We're already in the gravitational pull of the midterm elections (look at the bizarre attention given to gubernatorial elections in New Jersey and Virginia, and even to a congressional election in the 23rd district of New York, as supposed harbingers of voter behavior a year from now!) so it will be even harder to round up the needed votes from Blue Dog Dems fretting over the deficit. And you can forget the Republicans.

And yes, I know: Only about half the current stimulus has been spent, so it will be awkward to make the case that we need a larger one.

But here's the problem. Everything else on the table -- a new jobs tax credit, more loans to small businesses, more help to troubled homeowners, another extension of unemployment insurance, another round of subsidies to first-time home buyers -- are small potatoes relative to the importance and likely effect of a larger stimulus. Some of these initiatives may do some good, but even combined they'll barely make a dent in the growing numbers of jobless Americans.

Meanwhile, the states are slicing their budgets, laying off workers, and ratcheting up taxes. That's because state tax revenues are falling off a cliff, and almost every state is barred by its constitution from running a deficit. That means the states are actively implementing an anti-stimulus plan.

Let's be clear about this. The national rate of unemployment will almost surely hit 10 percent; we'll know Friday whether it already has. This is more a psychological and political threshold than an economic one (it doesn't include everyone who's too discouraged to look for work, or working part time who'd rather be working full time, or working fewer hours in an ostensible full-time job, or otherwise fully employed but being paid less; the Bureau of Labor Statistics' payroll survey, also due Friday, provides a more accurate picture). But it nonetheless represents a degree of hardship this country hasn't seen in decades.

Public approval of Obama’s handling of the economy has slipped to 46 percent in an Oct. 30-Nov. 1 CNN poll, from 59 percent in March. Remember, Obama was elected in part because the public didn't have confidence in McCain's ability to manage the economy. In exit polls last November, almost two-thirds of voters listed the economy as the nation's top issue. If the job numbers don't start moving in the right direction, not only will Obama's poll ratings continue to drop but congressional Dems will all be in trouble.

That should be Obama's selling point to the Blue Dogs. He should tell them the economy needs a bigger stimulus in order to show improved job numbers by the mid-term elections. And he should make sure they understand that they're more politically endangered next November if the the job numbers aren't moving in the right direction by then than if they vote for a larger stimulus now.

I must say I'm worried that the Democrats are setting a trap for themselves on Health Care Reform by not really confronting the issue of cost inflation. Why does a CT Scan in America cost so much more than any other country. And it's not just scans, it's the whole range of services. Although it's very hard to find, there is certain anecdotal evidence that part of the problem is an oversupply of hospitals and medical technology providers. Take Washington, DC for example.

The Washington, D.C., hospital sector has an excess of hospital beds and a concentration of services at the high end. Four community hospitals; three academic medical centers; a large, nonacademic tertiary care hospital; five specialty hospitals; and a public general hospital all compete to serve a city with a population of only 500,000. In addition, there are two military facilities. Forty percent of patients in this market are drawn from the adjacent Maryland and Virginia suburbs.

In the Libertarian's "perfect market" pipe-dreams, an oversupply should drive down costs of individual services. But that's not what happens. Each hospital that has invested millions in buying CT Scanners must amortize the cost over fewer patients by raising the cost of each scan. The same problem is plaguing Pittsburgh.

The region's hospitals are trying to add nearly 1 million square feet of clinical space between 2006 and 2009 -- a construction boom that is raising questions about a potential oversupply of costly hospital resources...

"There happens to be a lot of construction going on, but most of it deals with aging plants and the need to stay current with advances in technology," said Ms. Riefner, who helps hospitals obtain financing for capital projects. "It's not a matter of just spending money for the sake of spending money -- they truly want to deliver the best possible care that they can."

So all the region's hospitals are caught in a technology arms race. No one is trying to figure out how many CT Scanners we need in a region and normal market mechanisms that would punish hospitals or clinics for spending too much on technology don't work because we don't have single payer system that disciplines the free market in every other developed country.

So are we about to pass a big giveaway to the hospitals, insurance companies, and pharmaceutical firms without any way to control the medical technology arms race?

We'll no doubt hear too much commentary reading too much into a few elections today in a handful of states, so it's worth stepping back to recognize the deep support for progressive policies and ideas that are increasingly dominant across our nation. Obama's election as President is one indicator of that shift, but progressive gains are reflected in the underlying support for progressive policies in poll after poll, whether in demands for greater corporate accountability, health care reform, environmental sustainability or a host of other issues.

If progressives face a challenge, it's not on allegiance to our values such as rewarding work or promoting greater justice, it's a skepticism by many independents of the effectiveness of government in accomplishing the goals shared by most of the public.

However, as the rest of this post (crossposted from PSN) will detail, if we understand the public support for progressive goals, it can inform our political messaging which should embrace a clear progressive agenda, even as we recognize that trust in government needs to be rebuilt after decades of right-wing attacks on its functioning. And we should also act with confidence, knowing that younger voters are even more progressive than their parents and grandparents, so our ability to move policy forward will only grow with each election cycle as these new progressives become a larger and larger share of the electorate.

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I will answer that question right off. As far as I know (and that is all that I can legitmiately comment on) he is.

The only reason I ask the question is because Goldberg, the Atlantic blogger, has joined with the usual neocons suspects to assert with ugly vehemence that the Iranian-American scholar, Trita Parsi, is not a loyal American but an operative of the loathsome Iranian regime.

Read this by Daniel Luban. And this by Spencer Ackerman (there are now a dozen similar pieces on the web) describing precisely who Trita is, what he stands for and what the neocons (now hell bent on an attack on Iran by the end of the year) are saying about him. Why Trita? Because he is the most effective advocate for diplomacy with Iran rather than listening to the Israeli hawks and their boys here.

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I spent the day in Ramallah yesterday, attending a meeting of information technology and telecom entrepreneurs, and catching up with some of the folks I reported on in last month's Harper's: Palestinian business leaders who are, slowly but surely, laying the ground for Palestinian civil society; people fighting the limitations of occupation at every turn just to keep their businesses afloat, while the Netanyahu government boasts about "economic peace."

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A very good piece on President Obama's foreign policy worldview in yesterday's WaPo by Scott Wilson. Focusing on Obama's statements about the shared interests and responsibilities of nations, Wilson gathered assessments of the emerging Obama doctrine from many leading lights of the foreign policy world (one added source that would've been interesting is Richard Haass, whose 2005 book The Opportunity essentially previewed the shared interests approach).

The article highlights what I consider the United States' central foreign policy challenge: getting other nations moving in the direction we desire. As NSC communications strategist Ben Rhodes put it, if nations were already inclined to live up to their responsibilities, "this would be easy."

So despite being a huge fan of Lee Hamilton, I have to quibble with a description he gave of Obama's approach -- that the president is putting "a lot of faith in his persuasiveness." The narrative of persuasion is one of the great misconceptions of this debate. The diplomacy of shared interests and responsibilities isn't an attempt to overcome skepticism via mesmerizing rhetoric and the force of our arguments. The administration isn't waiting for the Iranian government to tell us "you're right, our uranium enrichment is bad for global security." In a case like Iran, the real objective of tough-minded diplomacy is to offer a stark choice between cooperation and continued pressure from a unified front of powerful nations, as Secretary Clinton stressed in rejecting Iran's attempt to reopening the nuclear deal (via Politico).

With respect to gaining the cooperation of others more broadly (including to maintain pressure on Iran), my own tack is to ask what the alternative is. If the only hope for international cooperation lies in those areas where traditional national self-interests converge, this would all be easy. More to the point, international politics as usual would leave many problems -- nuclear proliferation, global warming, poverty, Israel-Palestine -- on a very negative trajectory.

It shouldn't take a lot of enlightenment to see the enlightened self-interests on these issues. A little statesmanship is all we're asking. After all, that's why they're called world leaders.

The Obama administration came out with its first set of numbers on the jobs impact of its stimulus package. It's pretty much along the lines of what was predicted. To date, the package has created close to one million jobs. That is good news, but in an economy with more than 15 million unemployed workers, it is not nearly good enough. We need to do more, much more.

Fortunately, there is an easy and quick way to begin to get these unemployed workers back to work. It involves paying workers to work shorter hours. The mechanism can take the form of a tax credit to employers. The government can give them a tax credit of up to $3,000 in order to shorten their workers' hours while leaving their pay unchanged. The reduction in hours can take the form of paid sick days, paid family leave, shorter workweeks or longer vacations. The employer can choose the method that is best for her workers and the workplace.

If take-home pay is left unchanged as a result of the credit, then demand should be left unchanged. If workers are on average putting in fewer hours and demand is unchanged, then employers will need to hire more workers.

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When ideology trumps reality, political parties enter a dead zone where no facts can be marshalled and politicians seem to live in a truth-free world. Take Mitt Romney this morning.

Romney said on CBS's "The Early Show" that the administration's stimulus plan "didn't work" and he said the reason things seem to be ticking up in the business world is because the "private sector" has regained its equilibrium on its own.

The reality as Paul Krugman points out is the opposite of what Romney contends.

Not that long ago the U.S. economy was in free fall. Without the recovery act, the free fall would probably have continued, as unemployed workers slashed their spending, cash-strapped state and local governments engaged in mass layoffs, and more.

But now, pushed by the new found Republican fear of deficits (when did that ever stop Reagan or Bush from pushing Pentagon budgets through the roof?) and centrist Democrats lack of economic literacy, the thought is: "the recessions over, lets cut spending." But Krugman points out the fallacy.

Suppose that the economy were to keep growing at 3.5 percent. If that happened, unemployment would eventually start falling -- but very, very slowly. The experience of the Clinton era, when the economy grew at an average rate of 3.7 percent for eight years (did you know that?) suggests that at current growth rates we'd be lucky to see the unemployment rate fall by half a percentage point per year, meaning that it would take a decade to return to something like full employment.

Worse yet, it's far from clear that growth will continue at this rate. The effects of the stimulus will build over time -- it's still likely to create or save a total of around three million jobs -- but its peak impact on the growth of G.D.P. (as opposed to its level) is already behind us. Solid growth will continue only if private spending takes up the baton as the effect of the stimulus fades. And so far there's no sign that this is happening.

So the government needs to do much more. Unfortunately, the political prospects for further action aren't good.

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Presidents tend to overcompensate for the errors of their predecessors in the same party and in so doing sow seeds of their own mistakes. Bill Clinton wanted above all to avoid Jimmy Carter's fate -- losing re-election because the economy was heading south on Election Day. So Clinton made a deal with Alan Greenspan to slash the budget deficit and thereby jettison much of his ambitious campaign agenda (that was Greenspan's precondition for lowering interest rates and causing an economic boom in time for the re-election) and then Clinton took direction from Dick Morris, who told him to move to the right. The result: Clinton avoided Carter's failure and won re-election handily. But the Clinton years produced few if any major social reforms. Clinton spent so much of his initial political capital, as well as his time and energy, on deficit reduction that he didn't have enough left to enact health care in 1994.

Barack Obama came to the White House intent on not repeating Clinton's failure to enact universal health care. Did he overlearn the Clinton lesson? Obama seems to have made all the right moves to enact something he can credibly label health-care reform: Rather than spend his political capital elsewhere, he reserved most of it for health care.

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