Obama and Stimulus: An Opportunity Deferred

This will be a short post.  The National Gallery is open 11am - 6pm Sundays, and I intend to get there with time to spare.

The Stimulus was a missed opportunity for Obama to lead his own party while attempting to lead the nation.  That said, Republicans miscalculate by nearly categorically rejecting it.

The mistake Obama made came early, before he was President, when he signaled that he wanted (would want) a stimulus plan ready and waiting for him on day one of his presidency.  Then, once he was elected, but before he was inaugurated, he reiterated that statement with greater clarity and urgency.  Since the clarion call for a stimulus was made before Obama was ready (both in terms of being elected, and once elected, having his financial team together and ready to go), its construction was necessarily left to others, in this case to Nancy Pelosi (since all appropriations bills, under the Constitution, must start in the House), someone President Obama knows leads the left wing of the Democratic party (not the center wing Bill Clinton developed and enlarged) and would surely draft a bill left of what he wanted and the American people wanted, since the American center is right of the Democratic center, though not by much.  That's a long sentence, I realize, but its message is one nuclear thought - that Barack Obama, as he has told us many times, and I for one now believe him, wants to govern effectively and well from the American center, that his administration does and will not take ideological stands, but govern from the standpoint of what works, that he expects intermim results of his policies to be graded, and if not succeeding, then other policies to replace them, and that he does not care where those policies come from, or traditionally whether they fall into a Republican or Democratic camp.  He's approaching it like a basketball game - he wants to win.  He wants this country to win.  He doesn't want to play some elegant or theoretical strategy that loses.  And yet in Round One - the Stimulus - he handed over the head coaching job to Nancy Pelosi, and the Stimulus bill and Mr. Obama's presidency, and along with that, the country, are the worse off for it.

That said, the Stimulus is not an utter travesty, and Republicans should have supported it in greater numbers.  They acted petulantly to the fact that Nancy Pelosi drove the process.  Hello! - She's Speaker - and she's Nancy Pelosi!  What did they expect her to do?  Be inclusive?  And to flip back to the key message of the previous paragraph, this is the key opportunity Barack Obama missed, and I think he missed it in a way which was perhaps unavoidable for the reasons I mentioned (not yet being President, etc, when events in the economy made it necessary for him to recommend and call for a significant stimulus bill).  But the opportunity missed is this, and no one knows this better than Bill Clinton, that the Democratic caucus is currently left of him and left of the country, and that he will need to confront Nancy Pelosi and Harry Reid most specifically, and the left in his party more generally, as Bill Clinton had to when faced with the same problem, and bring them kicking and screaming if necessary in line with himself.  And if he does not, if he does not confront them, and if necessary threaten both Nancy Pelosi and Harry Reid with presidential vetoes should they craft important legislation which is left of him and left of the country, then he will not be a great president, he will not match much less surpass Bill Clinton, and he will very likely inhabit the White House for only one term.  All during the presidential campaign, Congress had approval ratings best described as on life-support, even lower than President Bush's.  People did not go to the polls and the Nationial Mall on inauguration day in record numbers to show their enthusiastic support for the Congress; rather, for Barack Obama.  If, in four years, the American people feel as though he ceded leadership at too many turns to the Congress, if he allows what's happened with the Stimulus bill to be replayed on too many other issues and too many other occasions, then he will not be re-elected, and his approval ratings over time will move towards those for Congress.

Finally, the reason why Republicans are super dumb (I know, sophisticated of me, but dumb begets dumb) for not supporting this bill is that economists right, left, and center are saying there is a time-criticality to our current economic woes, and they look through a great body of historical economic evidence both in the U.S., Europe, and Asia, particularly Japan, in making that claim.  Yes, there are individual detractors.  The Congressional Budget Office, for one, but even there you have to understand clearly what they said.  They said the current Stimulus would have an initial stimulative effect and add jobs, but that in ten years time the net effect would be negative due to the increase in the deficit and its crowding out of investment, other spending, etc.  This is because they have to grade the bill as is.  But the Obama administration will not be standing still during that ten years.  If they do as they said during the campaign, and with red pen go through the federal budget line by line, and once economic disaster has been averted begin deep cuts in government spending, and a raising of certain tax rates so long as the economy is strong enough to withstand that, and use all of those savings and increased revenues to offset and pay down the deficit, and ultimately the debt (which obviously can't happen until we return to annual budget surpluses...if we return...Lord help us...), then the game will have changed, and with that, CBO's predictions.

Where Republicans are particularly cynical and have no credibility is that discretionary spending skyrocketed with a Republican President, and right up until they lost their majority in the House in 2006.  On top of that, they spent like any defense contractor would ever want or hope for them to on two wars in Iraq and Afghanistan funded entirely by us!  Do you know what our bill was from the first Gulf war?  Zilch!  We provided the manpower and other countries picked up the tab.  That's the benefit you get when you don't go it alone.  President Bush didn't have time for forging those kinds of relationships and commitments.  Besides, you let someone pay for something, pretty soon they want a voice in what's happening on the ground (no one knows this better than the government), and he, Cheney, the generals, and others didn't want to be bothered with that.  Too much hard work for them?  Yes, in a way.  It's all in what hard work appeals to you.  Bush, Cheney and company took on the very hard work of fighting a war in Iraq, but ignored the hard diplomatic work required which just might have saved this country billions of dollars in debt now and over several decades (if you include VA bills and interest).  And, in the midst of all of it, knowing he was about to spend billions, he cut taxes by $2 trillion dollars WITHOUT cutting a dollar from the budget.  Translation:  He and the Congressional Republicans who supported him, and en masse did not support this stimulus, many, principly, because it raises the debt, knowingly added $2 trillion to the national debt in one tax-cut bill!... and $6 trillion over his presidency!  And now these same Republicans are crying about the effects of the Stimulus on the deficit during a time of economic crisis.   It's cynical and it's wrong.

The Stimulus bill could be better but it is good enough.  Folks acknowledge the formula for a good stimulus is a mix of things, but in that mix, these:  (1) an injection of cash right into the economy to jump-start consumption - tax cuts are good for this, and 40% of the Stimulus is tax cuts (and still Republicans don't support it); (2) short-term government spending to jump-start job creation and also consumption - 30% of the spending is short-term, and the reason why it's not more is two-fold, (a) it's actually difficult to spend too large a sum of money too quickly, and (b) you don't want short-term spending to be too large, because it generates jobs which likely only exist for the period of the spending, then go away, so they are not a good long-term investment; and (3) long-term government spending on infrastructure, technological research, and education - the remaining 70% of the spending; note that it takes years to build a bridge or a road or develop a brand new technology or educate our children and the next great minds, but these things push out the production possibilities curve (in economists' speak) and lay the groundwork for a larger, wealthier, more competitive economy, with rising wages.  So the bill gets those proportions just about right - 40% tax cuts, 30% short-term spending, 70% long-term spending.  Does it have some sidebar crap in it?  YES!  If Barack Obama had driven the process from the start, would it still?  Hopefully NOT!  But the bill is good enough.  And if economists are right, and time is critical to avoid Japan, avoid the 1930s, then this billed needed to pass, and Republicans needed to support it.  It's to their continuing demise that they did not.

Comments

[Javier Plumey]

LOL, short post.

I think for some things you're right on, especially on President Obama's failure to control his own party. President Obama was too hands off during the processing of the bill in both the House and the Senate. Had he shown the kind of leadership he promised us, I think we would have seen a much leaner bill. As it stands the bill has too much pork, too much social engineering, and not enough in the areas that are going to be the most effective, specifically, shovel-ready projects, tax cuts, and technological investments in areas where America has fallen behind the rest of the world.

I also think he made a mistake in the way he handled the Republicans. All of the Democrats involved made mere token efforts at bipartisanship. Essentially, they said that Republicans should take what they offered because "I won", I, of course, being the president, and those words being the words he used to describe why Republicans should not expect too much from their suggestions.

The Republicans are not dumb, but they certainly play the defeatist party very well. There is overwhelming evidence that the bill is not popular, even among core Obama constituents. The Republicans had fundamental issues with the bill, and rightly so, and had every right to want more debate and not to simply be dragged along for the ride. They were bullied and man-handled, but hey, they lost, right?

If the democrats had made just minor tweaks to the bill they would have had overwhelming support among the Republicans. But no, they need to return the favor to their voting constituency and stick to their far-left agenda. I agree that President Obama needs to reign in that "leftness" and prove that he can be leader, because if he can't, his presidency has already failed and the change he sought to bring to Washington will have evaporated in a cloud of leftist smoke.

I for one am not counting on the Obama administration to make good on the promises he made to the American people regarding the line-by-line bit. Had he truly wanted to do that he would started with this bill. Plus, he said he would not sign any bill until the American people have had five days to review it. Yet every bill has been signed with such expediency and, to a certain degree, secrecy, that one might think he was afraid the bill was written in vanishing ink.

And I find it a little childish to sit here and justify this massive spending bill because of what happened in the past. If it was such a bad idea, why repeat history? Let's learn from the past and stop pointing fingers. Both parties have been guilty of defecit spending, right or wrong.

I would have loved to see a bill with better tax cuts ($8.00 a paycheck and no cuts for those that own businesses--how "dumb" is that) and more shovel-ready projects. The bill is not quite "good enough". I hope it's effective but my gut instinct tells me we'll be looking at Version 2 of this document in the near future.

[Joe Intili]

Hmm. What an excellent comment. Makes me go, "Hmm...." And that's how I know.

Yes, well, it's a point open to debate whether or not the bill was "good enough", and I respect and appreciate the view that this bill was not.

Most of the points in this comment are inarguable, from this blogger's perspective, and that's why I like it, and largely agree with. The key point of disagreement is on the "good enough" question. I'm in agreement with the notion that we are in the midst of a shrinking window of time for stemming a deflationary spiral and rising tide of unemployment. This comment believes the bill was flawed enough for it to have been voted down, and the process of writing a proper bill iterated one more time. Certainly a place where, as they say, reasonably minds can differ.

The commentor also knows some fine details I did not, such as the tax cut only amounting to $8 a pay, and no cuts for business. If correct, and I have no reason to believe they are not, then, truly, that is fairly dumb. I heard and read time and again, though, that 40% of the cost of the stimulus bill was tax cuts, up from what the House initially included, due to input from the White House which devolved from discussions with House and Senate Republicans. It's an $800 billion stimulus. So that's a $320 billion tax cut. Pretty damn big. If it's not a cut in income or payroll taxes (a paycheck reduction) or in business taxes, then I would like to know, and will be looking into who is getting the $320 billion.

And this is a good paragraph: "And I find it a little childish to sit here and justify this massive spending bill because of what happened in the past. If it was such a bad idea, why repeat history? Let's learn from the past and stop pointing fingers. Both parties have been guilty of defecit spending, right or wrong." Point well-taken, there. It's certainly not a good idea (or helpful) to criticize Republicans for not voting for something now on the basis that it adds dramatically to the debt, simply because they have voted as recently as the previous presidency for far larger debt-inducing measures, like the $2 trillion tax cut. It's not helpful, but it's veeeery hard to resist this. One commentator on the Sunday talking head shows referred to this as, "Pot, meet kettle." But I shall try harder.

It was also a phenomenally good point, and one I attempted to make in some measure in my post, that Obama missed a fundamental opportunity to demonstrate that he means what he said during the campaign about being a deficit hawk and going through the budget line by line looking for cuts. THIS BILL was the PERFECT opportunity to demonstrate he was serious. His team could have taken an extra week to comb through the bill identifying line items which could and must be removed before he would sign the bill. The symbolism of doing such a thing on his very first appropriations bill would have been stunning, and I believe the markets would have responded favorably to it.

So, great comment. The biggest lesson for me in this comment is to stop playing "pile on" on the efforts of Republicans to be deficit hawks under this President when they were not under the previous one from their party. It's very hard not to react and respond cynically to such a thing. It would aid me in this, if Republicans themselves, their leadership, and others, when in front of the mic would acknowledge their earlier mistakes, and state publicly for the record, as Alan Greenspan has regarding certain mistakes he made leading up to this financial crisis, that their support for $2 trillion in tax cuts in the face of no offsetting budget cuts (i.e. a baldfaced addition to the debt of $2 trillion) was a mistake to the economy and to the nation, and especially to the future taxpayers who will pay it back - every cent. To poke at Republicans after such an admission would be truly petty and childish. In the absence of such admission, such pokes are perhaps a futile attempt to provoke such an admission, and, overall, unhelpful in the attempt. However I believe the benefits of such an admission could be truly stunning in desiccating, or helping to, the entrenched partisan atmosphere in Washington, and retarding the tendency of both parties to deficit spend.

[Harold]

What strikes me about this post is that it pits left against right, Republican against Democrats. If you did not have the money and were heavily in debt, would you recommend borrowing? Bend over, America. They are printing like never before. Regardless of party, we will all pay for this.

[Joe Intili]

Does it pit left against right? Does it describe how left and right pit against each other, and recommend a different course?

[Jim Gordon]

Our country voted for Socialism: if you want to call it that, I do not. As much as anyone can have a mandate, Obama got one.
Last I checked, monopolies are illegal, - but don't tell that to the remnants of the Bush-ites, - who've put this country in the toilet by setting up the very monopolies that we need to tear down. A bamboozled populace sits around and buys the fact that we have to "bail-out" AIG. "Right, lets give them more money, so that they can get that 1.5 million dollar 2nd quarter bonus to their mid-level-managers. (Forget about breaking up the company into smaller, customer focused entities).
The fact remains, (and no matter how much the republicans try to deny it), The new deal worked, and we need another one.

Stimulus equals spending. A stimulus bill is a spending bill. The citizens of the USA have voted for TAX INCREASES. The citizens of the USA have voted for a change away from privelege, and tax cuts. Trickle down Reaganomics DOES NOT WORK!!
It's unfortunate that the big banks and insurance companies were not regulated enough to prevent them from becoming too big to fail, and too big to vote against. Citibank, JPMorgan, and their ilk have dumped so much money into both parties: tearing them apart is going to be really hard. At the top of the pile of crap sits Tim Geitner, working against the people of our country.