February 1, 2009
NEWS ANALYSIS
Stimulus Plan: Reinvention or Recovery?
By DAVID E. SANGER
New York Times
WASHINGTON — As President Obama and Congress barrel toward the latest emergency program to resuscitate the American economy, one question is looming over their search for a cure: Can the government fashion a fast and efficient economic stimulus while also seizing the moment to remake America?
For now, Mr. Obama and his aides are insisting they can accomplish both goals, following their mantra of using the urgency of the economic crisis to accomplish larger — and long-delayed — reforms that never garnered sufficient votes in ordinary times.
In fact, at various times in American history, moments like this one have been used for big programs, from integrating the armed forces to creating Social Security and, later, Medicare. So it is little wonder that everyone with a big, stalled, transformative project — green energy programs, broadband networks that reach into rural America, health insurance for the newly unemployed or uninsured — is citing the precedent of Franklin D. Roosevelt, and declaring that a new New Deal is overdue.
But the question that the Senate will begin debating Monday is whether grand ambitions are getting in the way of pulling the country out of a nose dive. And so for every comparison of this moment to Roosevelt’s first hundred days, there are warnings that much of his social experimentation did not have a big impact on America’s economic recovery, which took years.
“When you are filling a hole this big and adding to America’s debt on such a large scale, you need to make sure every dollar is aimed for the economic boost you need,” said Martin S. Feldstein, a Harvard economist who warned more than a year ago that the United States economy was about to be hit between the eyes.
Mr. Feldstein has provided the economic arguments behind Republican objections that Mr. Obama is starting a long-term expansion of government, after decades in which the United States has relied on market solutions and encouraged nations around the world to do the same.
The economic arguments mask, for some, a primal fear that this is 1933 all over again, the beginning of a 21st century liberal resurgence.
The comparisons to 1933 are sure to resound even louder in the next week. Much as Roosevelt imposed a “bank holiday” in his first days in office to stop the run on American financial institutions, Mr. Obama promised in his weekly address to the nation on Saturday that Treasury Secretary Timothy F. Geithner would soon announce “a new strategy for reviving our financial system that gets credit flowing to businesses and families.”
That is bound to revive the question of whether anything short of nationalizing some of America’s biggest banks, even briefly, can get the job done.
Taken together, the economic stimulus plan and the banking bailout have quickly melded into a bitter political and ideological clash, barely two weeks into the Obama presidency.
Some of what is going on might best be called a classic case of pent-up demand — demand by Democrats for the kinds of programs that they could never get passed during the Bush years.
After years of battling with a White House that questioned the science behind global warming, Democratic lawmakers see a chance to begin programs aimed at environmental protection, using economic justifications for efforts like developing low-emission cars. And with a Democrat in the White House, they also see an opening to push for increased spending on education.
The efforts are fueled by a liberal base that supported Mr. Obama’s promise that he would tackle the biggest issues. That same base is concerned that the long slog ahead will force a delay or an abandonment of those ambitions.
As a result, there is $54 billion in the House bill for new forms of “American energy,” a phrase with an air of nationalism, along with a series of “Buy America” requirements of dubious legality under trade treaties; $141 billion for education; $24 billion for lowering health care costs; and $6 billion for broadband service, the digital equivalent of Lyndon B. Johnson electrifying the Hill Country in Texas.
(Some critics of that effort say it is pitifully small, too small to fulfill Mr. Obama’s campaign promise that all Americans should enjoy “the highest form of broadband access.”)
To those who argue that many of the programs will take years to get rolling, their advocates have replied, “So what?”
“It’s not as if we can just fix what’s wrong and go back to normal,” said James K. Galbraith, an economist at the Lyndon B. Johnson School of Public Affairs in Austin. “Can you overdo? Maybe, but it’s easier to pull back later than to make up for the fact that you did too little.”
But the result is that a piece of “emergency” legislation that would spend heavily to stanch the killing of jobs is now transforming into a series of long-term commitments that are sure to add enormously to the national debt, and keep adding to it long after the Panic of 2008 and the recession — or worse — that it set off are consigned to history.
Republicans see a chance to do something they could do only quietly, and rarely, until President George W. Bush flew out of the city 11 days ago: protest huge deficit spending. Now, they are freer to complain — as Senator Mitch McConnell of Kentucky did on Saturday in the Republican response to Mr. Obama’s address, when he argued that “permanent spending would be expanded by about $240 billion” in the House, which would “lock in bigger and bigger deficits every year.”
(Mr. McConnell was less vocal in his opposition when President Bush declared that the combination of 9/11, a downturn and the expansion of the military budget required deficit spending.)
The Republicans have been joined by a small band of Democratic fiscal conservatives whose message does not seem to match the party’s mood.
“Because we’re doing this outside the budget process, it means no one has to talk about what the long-term effects of any of this might be,” said Alice M. Rivlin, an economist at the Brookings Institution and a former member of the Federal Reserve, who supports a major stimulus package. She testified recently in Congress about the need to separate short-term economic stimulus from a broader agenda — which embraces everything from fixing America’s schools to improving health care for children.
“We seem to be counting on the Chinese to keep investing to pay for this,” Ms. Rivlin said, referring to the huge amount of United States government debt held by China, “and we’re assuming that the rest of the world isn’t going to lose confidence once we use this moment to spend on a whole range of programs. And I’m just not sure that’s the right assumption.”
Ms. Rivlin raises what may turn out to be the most urgent question of all in a few months.
When Roosevelt took America down new roads, he financed it at home. Mr. Obama does not have that luxury: He must persuade not only Congress and the public but also world financial markets, which must decide whether — and at what interest rate — they are willing to finance his plan.
That is the three-dimensional chess game the administration must play as it tries to mount the biggest economic rescue plan in more than seven decades.
Copyright 2009 The New York Times Company
MEANWHILE PRAISE FROM OBAMA'S LEFT FLANK....
1 Obama Is a Two-Faced Liar. Aw-RIGHT!
2 Obama's Economic Recovery Plan Is Almost As Pure As
Ivory Soap
Obama Is a Two-Faced Liar. Aw-RIGHT!
by Greg Palast
www.GregPalast.com
January 29, 2009
Republicans are right. President Barack Obama treated
them like dirt, didn't give a damn what they thought
about his stimulus package, loaded it with a bunch of
programs that will last for years and will never leave
the budget, is giving away money disguised as "tax
refunds," and is sneaking in huge changes in policy,
from schools to health care, using the pretext of an
economic emergency.
Way to go, Mr. O! Mr. Down-and-Dirty Chicago pol.
Street-fightin' man. Covering over his break-your-face
power play with a "we're all post-partisan friends" BS.
And it's about time.
Frankly, I was worried about this guy. Obama's
appointing Clinton-droids to the Cabinet, bloated
incompetents like Larry Summers as "Economics Czar,"
made me fear for my country, that we'd gotten another
Democrat who wished he were a Republican.
Then came Obama's money bomb. The House bill included
$125 billion for schools (TRIPLING federal spending on
education), expanding insurance coverage to the
unemployed, making the most progressive change in the
tax code in four decades by creating a $500 credit
against social security payroll deductions, and so on.
It's as if Obama dug up Ronald Reagan's carcass and put
a stake through The Gipper's anti-government heart. Aw-
RIGHT!
About the only concession Obama threw to the right-wing
trogs was to remove the subsidy for condoms, leaving
hooker-happy GOP Senators, like David Vitter, to pay
for their own protection. S'OK with me.
And here's the proof that Bam is The Man: Not one
single Republican congressman voted for the bill. And
that means that Obama didn't compromise, the way
Clinton and Carter would have, to win the love of these
condom-less jerks.
And we didn't need'm. Nyah! Nyah! Nyah!
Now I understand Obama's weird moves: dinner with those
creepy conservative columnists, earnest meetings at the
White House with the Republican leaders, a dramatic
begging foray into Senate offices. Just as the
Republicans say, it was all a fraud. Obama was pure
Chicago, Boss Daley in a slim skin, putting his arms
around his enemies, pretending to listen and care and
compromise, then slowly, quietly, slipping in the
knife. All while the media praises Obama's "post-
partisanship." Heh heh heh.
Love it. Now we know why Obama picked that vindictive
little viper Rahm Emanuel as staff chief: everyone
visiting the Oval office will be greeted by the Windy
City hit man who would hack up your grandma if you mess
with the Godfather-in-Chief.
I don't know about you, but THIS is the change I've
been waiting for.
Will it last? We'll see if Obama caves in to more tax
cuts to investment bankers. We'll see if he stops the
sub-prime scum-bags from foreclosing on frightened
families. We'll see if he stands up to the whining,
gormless generals who don't know how to get our troops
out of Iraq. (In SHIPS, you doofusses!)
Look, don't get your hopes up. But it may turn out the
new President's ... a Democrat!
---
Greg Palast's investigative reports for BBC and Rolling
Stone can be seen at www.GregPalast.com. Palast is the
author of New York Times bestsellers The Best Democracy
Money Can Buy and Armed Madhouse.
===
Obama's Economic Recovery Plan Is Almost As Pure As
Ivory Soap
CAF STAFF
By Bernie Horn
January 27th, 2009
http://www.ourfuture.org/blog-entry/2009010527/obama-s-economic-recovery-plan-almost-pure-ivory-soap>
There's been a lot of bitching and moaning in the
progressive blogosphere about the huge business tax
cuts that are supposed to be contained in President
Obama's economic recovery plan.
In fairness to all, the negotiations took place behind
closed doors, leaving us little solid information on
which to base opinions. And over the years, we've had
good reason to be wary of backroom deals in Congress.
But there's good news. The American Recovery and
Reinvestment Act is a remarkably "clean" bill. Only
between 1½ and 3 percent is being wasted on tax cuts
for business. Put another way, the bill is about 98
percent pure-money dedicated to good, progressive
causes.
The Congressional Budget Office (CBO) analysis,
released Monday, says the business tax cuts will cause
"a net revenue loss of $13 billion over the 2009-2019
period." See the discussion on pages 11-12 of this
document.
The figure of $13 billion is confirmed and explained by
the House Ways and Means Committee on pages 2-3 in this
document. There are only three business tax provisions
that have a significant price tag. First, the extension
of bonus depreciation enacted last year, allowing
businesses to depreciate capital costs faster than the
ordinary schedule, will cost $5 billion. Second, the 5-
year carryback provision, allowing businesses to deduct
net losses from the last five years instead of the last
two, will cost $15 billion. Third, the repeal of a Bush
Treasury Department ruling that unjustly benefits the
purchasers of certain companies will increase revenues
by $7 billion. So $20 billion in business tax cuts are
offset by a $7 billion tax increase, leaving a total of
$13 billion in benefits.
As you probably know, the Senate Finance Committee
intends to make larger business tax cuts than the House
bill has. The analysis of the Finance Committee's
markup, evaluated by the Congressional Joint Committee
on Taxation, is on page 3 of this document. The Senate
version includes both the bonus depreciation and 5-year
carryback provisions, but the Joint Committee estimates
these will cost a total of $22.5 billion instead of the
House's $20 billion. The Senate does not include the $7
billion tax increase and adds a bit more than $2
billion more in tax breaks for a total of $24.9 billion
in business tax benefits.
The CBO tells us that the whole bill costs $816
billion. So if the Senate version is adopted, only 3
percent of the spending is for business tax breaks.
(That percentage is about the same with or without the
recent Alternative Minimum Tax provision.) If the House
version is adopted, it's only 1½ percent. Either way,
this is a bill that is between 97 and 98.5 percent
targeted toward good causes.
In our nation's capital, no major bill ever passes
without a "sweetener" for the special interests you may
oppose. By Capitol Hill standards, this is an
exceptionally modest sweetener. And don't think it's
necessarily being done to gain Republican votes-key
Democrats want these too.
The bottom line: This is the biggest and boldest
progressive legislation in 40 years. By all means,
register your complaints against the business tax cuts.
But don't let that dampen your enthusiasm for the
overall measure. If you live in a state with a
Republican or less-than-liberal Democratic Senator,
call them today and urge them to support this bill.
You'll be sorry if you don't help out, because this is
history in the making.
The writer is a Senior Fellow at Campaign for America's
Future and author of the recent book, Framing the
Future: How Progressive Values Can Win Elections and
Influence People.
_____________________________________________
Portside aims to provide material of interest
to people on the left that will help them to
interpret the world and to change it.
