Time for a new economic playbook

Jason Furman, deputy director of the National Economic Council, as quoted in yesterday's New York Times:

“We have undertaken some of the biggest policy actions to create jobs that any administration has ever done.”

While arguably true, the obvious problem with this statement is that these policy actions aren't working. The $800+ billion stimulus, auto bailout, massive deficit spending, promotion of "green" industries, temporary payroll tax reductions, etc. -- all straight out of the Keynesian playbook -- have failed to produce any touchdowns. Just take a look at the updated scoreboard:

Source: Dan Mitchell

There is, however, another way. During the 1990s President Bill Clinton, a confirmed Democrat, made significant strides on free trade (both NAFTA and the Uruguay round of GATT talks were ratified), cut the capital gains tax, embraced deregulation, restrained government spending and pared back the welfare state.

While Democrats are often quick to hail the performance of the US economy during this period as evidence of their acumen on economic matters, they are typically loathe to acknowledge the policy measures that produced this boom (which also coincided with developments such as the end of the Cold War and increased globalization, cheap oil, and the advent of the internet among others).

At some point our allegedly pragmatic current president needs to realize the shortcomings of his approach and the need for a change in course. I fear, however, that this is essentially asking a tiger to change his stripes.

Update: Better chart here from e21.