House and Senate Pass the Economic Stimulus Package

Yesterday President Barack Obama earned his first major victory with the passing of the $787 billion economic stimulus package. The news commentators are marking this as a "major milestone on our road to recovery."

The House voted 246-183 to pass the economic recovery plan, again with zero Republican votes.

Then Senator Sherrod Brown of Ohio rushed back to Capitol Hill last night, to give the economic stimulus bill its 60th vote.

The package is now on the way to the White House.

Speaking in his weekly radio and Internet address, President Obama said, "I will sign this legislation into law shortly, and we'll begin making the immediate investments necessary to put people back to work doing the work America needs done."

Watch President Obama's Internet address here:

2/14/09: Your Weekly Address from White House on Vimeo.
LibertyAir Blog

Paul Krugman: Bad Faith Economics Failure to Rise

Paul Krugman really has become one of the main voices of the liberal movement. He this week has another outstanding editorial on the stimulus package.

Failure to Rise
By Paul Krugman

By any normal political standards, this week’s Congressional agreement on an economic stimulus package was a great victory for President Obama. He got more or less what he asked for: almost $800 billion to rescue the economy, with most of the money allocated to spending rather than tax cuts. Break out the Champagne!

Or maybe not. These aren’t normal times, so normal political standards don’t apply: Mr. Obama’s victory feels more than a bit like defeat. The stimulus bill looks helpful but inadequate, especially when combined with a disappointing plan for rescuing the banks. And the politics of the stimulus fight have made nonsense of Mr. Obama’s postpartisan dreams.

Let’s start with the politics.

One might have expected Republicans to act at least slightly chastened in these early days of the Obama administration, given both their drubbing in the last two elections and the economic debacle of the past eight years.

But it’s now clear that the party’s commitment to deep voodoo — enforced, in part, by pressure groups that stand ready to run primary challengers against heretics — is as strong as ever. In both the House and the Senate, the vast majority of Republicans rallied behind the idea that the appropriate response to the abject failure of the Bush administration’s tax cuts is more Bush-style tax cuts.

And the rhetorical response of conservatives to the stimulus plan — which will, it’s worth bearing in mind, cost substantially less than either the Bush administration’s $2 trillion in tax cuts or the $1 trillion and counting spent in Iraq — has bordered on the deranged.

It’s “generational theft,” said Senator John McCain, just a few days after voting for tax cuts that would, over the next decade, have cost about four times as much.
It’s “destroying my daughters’ future. It is like sitting there watching my house ransacked by a gang of thugs,” said Arnold Kling of the Cato Institute.
And the ugliness of the political debate matters because it raises doubts about the Obama administration’s ability to come back for more if, as seems likely, the stimulus bill proves inadequate.

For while Mr. Obama got more or less what he asked for, he almost certainly didn’t ask for enough. We’re probably facing the worst slump since the Great Depression. The Congressional Budget Office, not usually given to hyperbole, predicts that over the next three years there will be a $2.9 trillion gap between what the economy could produce and what it will actually produce. And $800 billion, while it sounds like a lot of money, isn’t nearly enough to bridge that chasm.

Officially, the administration insists that the plan is adequate to the economy’s need. But few economists agree. And it’s widely believed that political considerations led to a plan that was weaker and contains more tax cuts than it should have — that Mr. Obama compromised in advance in the hope of gaining broad bipartisan support.

We’ve just seen how well that worked.

Now, the chances that the fiscal stimulus will prove adequate would be higher if it were accompanied by an effective financial rescue, one that would unfreeze the credit markets and get money moving again. But the long-awaited announcement of the Obama administration’s plans on that front, which also came this week, landed with a dull thud.

The plan sketched out by Tim Geithner, the Treasury secretary, wasn’t bad, exactly. What it was, instead, was vague. It left everyone trying to figure out where the administration was really going. Will those public-private partnerships end up being a covert way to bail out bankers at taxpayers’ expense? Or will the required “stress test” act as a back-door route to temporary bank nationalization (the solution favored by a growing number of economists, myself included)? Nobody knows.
Over all, the effect was to kick the can down the road. And that’s not good enough. So far the Obama administration’s response to the economic crisis is all too reminiscent of Japan in the 1990s: a fiscal expansion large enough to avert the worst, but not enough to kick-start recovery; support for the banking system, but a reluctance to force banks to face up to their losses. It’s early days yet, but we’re falling behind the curve.

And I don’t know about you, but I’ve got a sick feeling in the pit of my stomach — a feeling that America just isn’t rising to the greatest economic challenge in 70 years. The best may not lack all conviction, but they seem alarmingly willing to settle for half-measures. And the worst are, as ever, full of passionate intensity, oblivious to the grotesque failure of their doctrine in practice.

There’s still time to turn this around. But Mr. Obama has to be stronger looking forward. Otherwise, the verdict on this crisis might be that no, we can’t.

I think it’s worth revisiting one point made by Professor Krugman that I have not heard any other comentator or pundit make:

[Obama's stimulus] costs substantially less than either the Bush administration’s $2 trillion in tax cuts or the $1 trillion and counting spent in Iraq.

Seriously, the Bush Administration has taken $3 trillion dollars out of the economy, how did we let this happen? And why can't the media point that out when they are talking to Republican whiners? The Bush Administration created a huge hole, and it is going to take a huge response. The trouble is the plan that came out of the Senate is probably to weak.

My only hope is that Obama and his people are actually competent, and that more will be coming down the pike.

Agreement on the Stimulus

This happened a lot faster than I thought it would. Yesterday, the House and Senate had ironed out the differences between their two recovery packages to agree on a $789 billion bill. Senate Majority Leader Reid went out in front of the television cameras to boast:

“The middle ground we’ve reached creates more jobs than the original Senate bill and spends less than the original House bill.”

The Washington Post noted that, after all the negotiating and compromising, “the bill followed remarkably closely to the broad outline that Obama had painted more than a month ago,” with a roughly 60-40% split between spending and tax breaks. That is still a terrible split. At best it should have been a 70-30% or even better a 75-25%.

That said the compromise between the House and the Senate did make vital improvements to the Senate version, which would have created 9 to 12 percent fewer jobs than the version passed by the House while costing $17 billion more.

The new compromise cuts out big business giveaways, restores education funding, and raises funding for science research, among other improvements to the Senate bill:

– Eliminates big business tax giveaway. The compromise cut a provision from the
Senate bill that allowed companies of any size to claim an estimated $67.5 billion in tax refunds this year and next, by allowing companies to write off losses from 2008 against taxes paid over the last five years.
– Restores House funding of food stamps. The Senate had granted $16 billion in food stamp aid, but the new compromise expands that to the House’s full $20 billion funding.
– Removes nuclear loans. The $50 billion in loans for the nuclear industry, which were snuck into the Senate bill by “budget gimmickry” and which would not have created a single job for many years, were completely eliminated by the conference committee.
– Slashes tax cut for rich homeowners. The Senate bill granted a $15,000 tax cut to new home buyers, a provision Nobel Prize winner Paul Krugman called a “bonus to affluent people who flip their houses.” The new compromise “drastically reduced” the tax credit, cutting the overall cost from $35 billion to about $5 billion.

The compromise bill allocates $30 billion for smart grid technology and energy efficiency measures and nearly $46 billion to fund education and modernize schools, which is considerably higher than the Senate’s $39 billion total.

The Wall Street Journal also notes that the compromise significantly “expands federal aid to an array of programs aimed at the poor and jobless, with billions of dollars for health care, unemployment insurance, food stamps and other programs.”

Though the compromise bill is an improvement over the Senate version, it's too small and still includes non-stimulative tax breaks. The spending in the bill, the most stimulative component, fell from $604 billion as introduced in the House to $637 billion when later passed by the House, falling again to $545 billion in the Senate-passed version. The final compromise has only $513 billion in spending, with $276 billion in tax breaks.

One of the most egregious problems with the compromise is the tax breaks. Some of these tax breaks, such as the credit for new home buyers, are particularly non-stimulative, and the largest tax break is the $70 billion to spare millions of Americans from paying the alternative minimum tax. I am still not sure why the AMT is in there; the AMT has nothing to do with recovery. The AMT will offer no stimulus to the economy, and it would have been taken care of later in it's own bill, as has happened every year for over a decade. This was a wasted $70 billion. That $70 billion could have really helped the states, or gone into infrastructure investment.

Though President Obama admitted this week that “the plan is not perfect,” it’s clear the congressional compromise is a dramatic improvement over the Senate bill passed earlier this week. The final bill, after passing both houses of Congress, is expected to arrive on Obama’s desk no later than Monday.

Key Stimulus Motion Passes 61-36 In Senate

Senate Democrats on Monday advanced the $838 billion economic stimulus bill past Republican filibusters. The Senate Democrats were able to pass the vote, by 61 to 36, to close debate on the stimulus, gaining 3 Republican votes. The final roll call is online, and as expected Republican's Collins, Specter, and Snowe were the only senators to break party ranks. Interesting note that Senator Cornyn of Texas, who was a major opponent of the stimulus plan, did not vote.

If the Senate approves the measure tomorrow, as expected, negotiations to resolve differences with the $820 billion bill passed by the House are expected to focus in part on the Senate's decision to cut $40 billion from a state stabilization fund.

Another interesting fact was that Ted Kennedy was on the floor for the vote. For the first time since Inauguration Day, where he collapsed. He left the chamber soon after his "Aye" vote was recorded.

Senate Democrats got a victory, but it was at a cost.

Last night Rachel Maddow had Senator Ben Nelson of Nebraska on her MSNBC show to discuss the stimulus package. Senator Nelson was one of the lead "centrists" who worked out the deal in the Senate. His argument with Rachel was that if there were no cuts, than there would be no Senate bill. He argued that spending on schools was still in the bill, and would be in other bills. He made a passioned argument, I just don't believe he made a compelling argument, though I do believe his work did get the 3 moderate Republican votes.

Watch it here:

Visit msnbc.com for Breaking News, World News, and News about the Economy

Cluster F#@k to the Poor House

Just for fun, the Daily Show's take on the debate over the stimulus plan.

Watch it here:

The Daily Show With Jon StewartM - Th 11p / 10c

Clusterf#@k to the Poor House - Economic Recovery Plan

Daily Show Full Episodes
Important Things With Demetri Martin

Funny Political News
Joke of the Day

LibertyAir Blog

Rachel Maddow to the GOP: Get out of the way.

I am sure over the past two weeks you have seen assessments of both the stimulus and the debate over the stimulus, but if you did not see Rachel Maddow's take on Friday night then you missed the best. She plainly and clearly points out that Republicans are not trying to come up with an effective stimulus plan. Personally I believe they are trying to make the situation worse.

Watch it here:

Visit msnbc.com for Breaking News, World News, and News about the Economy

She rightly points out that it is completely idiotic to cut food-stamp funding from an economic stimulus package during a recession. Food-stamps are one of the best ways to get money into the economy quickly, and are spent fast. She states correctly that a whopping proportion of the Republican rhetoric about stimulus is just wrong, and it is time for Republicans to get out of the way of the people who are actually trying to save the country.

Paul Krugman: On the Edge

Paul Krugman nails the absurdity of the current situation:

A not-so-funny thing happened on the way to economic recovery. Over the last two weeks, what should have been a deadly serious debate about how to save an economy in desperate straits turned, instead, into hackneyed political theater, with Republicans spouting all the old clichés about wasteful government spending and the wonders of tax cuts.

It’s as if the dismal economic failure of the last eight years never happened — yet Democrats have, incredibly, been on the defensive. Even if a major stimulus bill does pass the Senate, there’s a real risk that important parts of the original plan, especially aid to state and local governments, will have been emasculated.

Somehow, Washington has lost any sense of what’s at stake — of the reality that we may well be falling into an economic abyss, and that if we do, it will be very hard to get out again.

It’s hard to exaggerate how much economic trouble we’re in. The crisis began with housing, but the implosion of the Bush-era housing bubble has set economic dominoes falling not just in the United States, but around the world.

Consumers, their wealth decimated and their optimism shattered by collapsing home prices and a sliding stock market, have cut back their spending and sharply increased their saving — a good thing in the long run, but a huge blow to the economy right now. Developers of commercial real estate, watching rents fall and financing costs soar, are slashing their investment plans. Businesses are canceling plans to expand capacity, since they aren’t selling enough to use the capacity they have. And exports, which were one of the U.S. economy’s few areas of strength over the past couple of years, are now plunging as the financial crisis hits our trading partners.

Meanwhile, our main line of defense against recessions — the Federal Reserve’s usual ability to support the economy by cutting interest rates — has already been overrun. The Fed has cut the rates it controls basically to zero, yet the economy is still in free fall.

It’s no wonder, then, that most economic forecasts warn that in the absence of government action we’re headed for a deep, prolonged slump. Some private analysts predict double-digit unemployment. The Congressional Budget Office is slightly more sanguine, but its director, nonetheless, recently warned that “absent a change in fiscal policy ... the shortfall in the nation’s output relative to potential levels will be the largest — in duration and depth — since the Depression of the 1930s.”

Worst of all is the possibility that the economy will, as it did in the ’30s, end up stuck in a prolonged deflationary trap.

We’re already closer to outright deflation than at any point since the Great Depression. In particular, the private sector is experiencing widespread wage cuts for the first time since the 1930s, and there will be much more of that if the economy continues to weaken.

As the great American economist Irving Fisher pointed out almost 80 years ago, deflation, once started, tends to feed on itself. As dollar incomes fall in the face of a depressed economy, the burden of debt becomes harder to bear, while the expectation of further price declines discourages investment spending. These effects of deflation depress the economy further, which leads to more deflation, and so on.
And deflationary traps can go on for a long time. Japan experienced a “lost decade” of deflation and stagnation in the 1990s — and the only thing that let Japan escape from its trap was a global boom that boosted the nation’s exports. Who will rescue America from a similar trap now that the whole world is slumping at the same time?

Would the Obama economic plan, if enacted, ensure that America won’t have its own lost decade? Not necessarily: a number of economists, myself included, think the plan falls short and should be substantially bigger. But the Obama plan would certainly improve our odds. And that’s why the efforts of Republicans to make the plan smaller and less effective — to turn it into little more than another round of Bush-style tax cuts — are so destructive.

So what should Mr. Obama do? Count me among those who think that the president made a big mistake in his initial approach, that his attempts to transcend partisanship ended up empowering politicians who take their marching orders from Rush Limbaugh. What matters now, however, is what he does next.

It’s time for Mr. Obama to go on the offensive. Above all, he must not shy away from pointing out that those who stand in the way of his plan, in the name of a discredited economic philosophy, are putting the nation’s future at risk. The American economy is on the edge of catastrophe, and much of the Republican Party is trying to push it over that edge.

President Obama would do well to listen to Paul Krugman right now. Krugman and other economists have for a long time been saying that the stimulus must have more spending, and be larger.

How will Obama respond?

Now that the Republicans have shown President Obama the back of their hand, and have proven to be a bunch of whiney children, what will he do? Will Obama continue to work for bipartisanship as an end in itself? Will he agree to more GOP modifications just to buy a few votes?

I really do not know.

I understand the want for bipartisanship, but at what cost? At what point should Obama push for a real progressive stimulus package, knowing that success will bring Republican support after the fact?

I just don't know.

The public overwhelmingly supports President Obama, so at what point does he have to stop waiting for Republicans to act in good faith, and instead move forward?

At the end of the day some sort of stimulus package will inevitably make it into law. But whether it passes with meaningful support from Republicans, or is a meaningful package, is the first test of Obama's administration.

Democrats Cave Again

House Democrats again proving that they will back down at the slightest whine by Republicans have removed a provision from their stimulus bill that would exempt states from the need to get waivers for covering family planning under Medicaid. The family-planning aid has been the subject of repeated Republican attacks over the past few days, and health care advocates were dismayed by the Democrats' decision to give in on its removal.

The Medicaid Family Planning State Option was a common-sense provision which would have expanded basic health care for millions of women, many of whom have lost their jobs in the current economic crisis, was a victim of misleading attacks and partisan politics by cry-baby Republicans.

White House spokesman Robert Gibbs addressed the removal of the Medicaid provision, which occurred at Obama's request, during today's press briefing:

The president called Chairman Henry Waxman yesterday and said that, while he believed the policy of increased funding for family planning was the right one, that he didn't believe this bill was the vehicle to make that happen.

The one bright spot is that the House's move doesn't necessarily mean that the family-planning aid is dead. There have been suggestions out of the White House that it could be added to a comprehensive Healthcare bill. Senator Debbie Stabenow has also stated publicly that she would focus on how to attach the family-planning aid to another Senate bill coming down the pike.

What’s up with the Republicans?

New York Times columnist Bob Herbert asks the question, why is anyone even listening to the Repuglicans?

I would like to know too.

The Same Old Song
By Bob Herbert

What’s up with the Republicans? Have they no sense that their policies have sent the country hurtling down the road to ruin? Are they so divorced from reality that in their delusionary state they honestly believe we need more of their tax cuts for the rich and their other forms of plutocratic irresponsibility, the very things that got us to this deplorable state?

The G.O.P.’s latest campaign is aimed at undermining President Obama’s effort to cope with the national economic emergency by attacking the spending in his stimulus package and repeating ad nauseam the Republican mantra for ever more tax cuts.
“Right now, given the concerns that we have over the size of this package and all the spending in this package, we don’t think it’s going to work,” said Representative John Boehner, an Ohio Republican who is House minority leader. Speaking on NBC’s “Meet the Press,” Mr. Boehner said of the plan: “Put me down in the ‘no’ column.”

If anything, the stimulus package is not large enough. Less than 24 hours after Mr. Boehner’s televised exercise in obstructionism, the heavy-equipment company Caterpillar announced that it was cutting 20,000 jobs, Sprint Nextel said it was eliminating 8,000, and Home Depot 7,000.

Maybe the Republicans don’t think there is an emergency. After all, it was Phil Gramm, John McCain’s economic guru, who told us last summer that the pain was all in our heads, that this was a “mental recession.”

The truth, of course, is that the country is hemorrhaging jobs and Americans are heading to the poorhouse by the millions. The stock markets and the value of the family home have collapsed, and there is virtual across-the-board agreement that the country is caught up in the worst economic disaster since at least World War II.

The Republican answer to this turmoil?

Tax cuts.

They need to go into rehab.

The question that I would like answered is why anyone listens to this crowd anymore. G.O.P. policies have been an absolute backbreaker for the middle class. (Forget the poor. Nobody talks about them anymore, not even the Democrats.) The G.O.P. has successfully engineered a wholesale redistribution of wealth to those already at the top of the income ladder and then, in a remarkable display of chutzpah, dared anyone to talk about class warfare.

A stark example of this unholy collaboration between the G.O.P. and the very wealthy was on display in the pages of this newspaper on Jan. 18. The Times’s Mike McIntire wrote an article about the first wave of federal bailout money for the financial industry, which was handed over by the Bush administration with hardly any strings attached. (Congress, under the control of the Democrats, should never have allowed this to happen, but the Democrats are as committed to fecklessness as the Republicans are to tax cuts.)

The public was told that the money would be used to loosen the frozen credit markets and thus help revive the economy. But as the article pointed out, there were bankers with other ideas. John C. Hope III, the chairman of the Whitney National Bank in New Orleans, in an address to Wall Street fat cats gathered at the Palm Beach Ritz-Carlton, said:

“Make more loans? We’re not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans.”

How’s that for arrogance and contempt for the public interest? Mr. Hope’s bank received $300 million in taxpayer bailout money.

The same article quoted Walter M. Pressey, president of Boston Private Wealth Management, which Mr. McIntire described as a healthy bank with a mostly affluent clientele. It received $154 million in taxpayer money.

“With that capital in hand,” said Mr. Pressey, “not only do we feel comfortable that we can ride out the recession, but we also feel that we’ll be in a position to take advantage of opportunities that present themselves once this recession is sorted out.”
Take advantage, indeed. That, in a nutshell, is what the plutocracy is all about: taking unfair advantage.

When the G.O.P. talks, nobody should listen. Republicans have argued, with the collaboration of much of the media, that they could radically cut taxes while simultaneously balancing the federal budget, when, in fact, big income-tax cuts inevitably lead to big budget deficits. We listened to the G.O.P. and what do we have now? A trillion-dollar-plus deficit and an economy in shambles.

This is the party that preached fiscal discipline and then cut taxes in time of war. This is the party that still wants to put the torch to Social Security and Medicare. This is a party that, given a choice between Abraham Lincoln and Ronald Reagan, would choose Ronald Reagan in a heartbeat.

Why is anyone still listening?

Republicans have decided to "rule by hissy fit" as Atrios calls it. It is time to stop listening to them. After all the damage that John Boehner, Mitch McConnel, George W. Bush, Dick Chenney and all the GOP have done to our nation, they need to be relegated to the back of the closet. Democrats need to step up and take charge. Republicans are now lead by children who need to not be heard from.

Paul Krugman: Bad Faith Economics

Professor Paul Krugman argues today in his column that the House GOP isn't interested in acting in good faith, or helping the economy, and in fact they reject the very idea of an economic stimulus package. Professor Krugman points out that Republicans are lying to make their arguments. That they have a habit of "zeroing in on the least-defensible possible position," including opposition to state aid and Medicaid expansion.

Bad Faith Economics
by Paul Krugman

As the debate over President Obama’s economic stimulus plan gets under way, one thing is certain: many of the plan’s opponents aren’t arguing in good faith. Conservatives really, really don’t want to see a second New Deal, and they certainly don’t want to see government activism vindicated.

So they are reaching for any stick they can find with which to beat proposals for increased government spending. Some of these arguments are obvious cheap shots. John Boehner, the House minority leader, has already made headlines with one such shot: looking at an $825 billion plan to rebuild infrastructure, sustain essential services and more, he derided a minor provision that would expand Medicaid family-planning services — and called it a plan to “spend hundreds of millions of dollars on contraceptives.”

But the obvious cheap shots don’t pose as much danger to the Obama administration’s efforts to get a plan through as arguments and assertions that are equally fraudulent but can seem superficially plausible to those who don’t know their way around economic concepts and numbers. So as a public service, let me try to debunk some of the major antistimulus arguments that have already surfaced. Any time you hear someone reciting one of these arguments, write him or her off as a dishonest flack.

First, there’s the bogus talking point that the Obama plan will cost $275,000 per job created. Why is it bogus? Because it involves taking the cost of a plan that will extend over several years, creating millions of jobs each year, and dividing it by the jobs created in just one of those years.

It’s as if an opponent of the school lunch program were to take an estimate of the cost of that program over the next five years, then divide it by the number of lunches provided in just one of those years, and assert that the program was hugely wasteful, because it cost $13 per lunch. (The actual cost of a free school lunch, by the way, is $2.57.)

The true cost per job of the Obama plan will probably be closer to $100,000 than $275,000 — and the net cost will be as little as $60,000 once you take into account the fact that a stronger economy means higher tax receipts.

Next, write off anyone who asserts that it’s always better to cut taxes than to increase government spending because taxpayers, not bureaucrats, are the best judges of how to spend their money.

Here’s how to think about this argument: it implies that we should shut down the air traffic control system. After all, that system is paid for with fees on air tickets — and surely it would be better to let the flying public keep its money rather than hand it over to government bureaucrats. If that would mean lots of midair collisions, hey, stuff happens.

The point is that nobody really believes that a dollar of tax cuts is always better than a dollar of public spending. Meanwhile, it’s clear that when it comes to economic stimulus, public spending provides much more bang for the buck than tax cuts — and therefore costs less per job created (see the previous fraudulent argument) — because a large fraction of any tax cut will simply be saved.

This suggests that public spending rather than tax cuts should be the core of any stimulus plan. But rather than accept that implication, conservatives take refuge in a nonsensical argument against public spending in general.

Finally, ignore anyone who tries to make something of the fact that the new administration’s chief economic adviser has in the past favored monetary policy over fiscal policy as a response to recessions.

It’s true that the normal response to recessions is interest-rate cuts from the Fed, not government spending. And that might be the best option right now, if it were available. But it isn’t, because we’re in a situation not seen since the 1930s: the interest rates the Fed controls are already effectively at zero.

That’s why we’re talking about large-scale fiscal stimulus: it’s what’s left in the policy arsenal now that the Fed has shot its bolt. Anyone who cites old arguments against fiscal stimulus without mentioning that either doesn’t know much about the subject — and therefore has no business weighing in on the debate — or is being deliberately obtuse.

These are only some of the fundamentally fraudulent antistimulus arguments out there. Basically, conservatives are throwing any objection they can think of against the Obama plan, hoping that something will stick.

But here’s the thing: Most Americans aren’t listening. The most encouraging thing I’ve heard lately is Mr. Obama’s reported response to Republican objections to a spending-oriented economic plan: “I won.” Indeed he did — and he should disregard the huffing and puffing of those who lost.

President Obama deserves credit for trying to deal in good faith with the Republicans in Congress. He made a honest effort to earn the support of conservative Republican House members and Senators to create a comprehensive economic stimulus package. Obama negotiated with them, compromised with them, and even included a whole lot of tax cuts to win them over.

But it was all for not. Republicans will not compromise, and will not negotiate honestly. John Boehner has announced that the GOP should vote against stimulus, even as President Obama is going to the Capitol to speak directly with congressional Republicans.
I can appreciate the political dynamic here, and that the Obama White House wants to get at least some bipartisan support for an economic stimulus package. But since it is not there, Obama should instead push for the most liberal progressive bill he can. First I think the progressive plan will work, second Republicans have to be shown that there is no benifit to being obstinate. There's no point in Democrats offering unwelcome enticements to the Repuglicans who are bound and determined to remain obstinate. I believe there is great advantage to showing the Republicans that there will be a cost for not working in good faith. Pull the enticements and let the Democratic party do the right thing.

Spending Is Stimulative

Last week, House Democrats released an $825 billion economic recovery package, which consists of $550 billion in government spending and $275 billion in tax cuts. Personally I hate this package, because while I believe a stimulus package is necessary, I do not believe the tax cuts should be such a large percentage of the package. Traditionally government spending results in more significant value for the dollars spent than tax cuts do. Still the provisions of the plan were put forward and have been examined and marked up by various congressional committees. The goal of House Democrats was to pass a full stimulus package sometime in mid-February.

Though Republicans at first voiced some support for the stimulus package when President Obama initially laid it out, now they are beginning to snipe and stab.

Conservatives are claiming that they are balking at seeing the size of the bill that emerged from the House. Cry baby, I mean Minority Leader John Boehner made his opposition known by simply saying "Oh. My. God."

Now conservatives are coalescing around "alternative" stimulus proposals like one crafted by the Republican Study Committee (RSC). But as usual in voicing their opposition, conservatives have started to push several lies and myths about the stimulus and its potential effect on the economy.

First and foremost the conservatives on the House Budget Committee released a report stating that the proposal "pours taxpayers' money" into projects, "many of which may be worthy in themselves, but have little to do with 'stimulating' the economy."

Harvard professor Robert Barro derided the plan as "voodoo economics," which is odd since it is actually the exact opposite of the original voodoo economics. Moon bat right-wing pundit Michelle Malkin is claiming that the stimulus will "at most be useless." Why anyone listens to that shrill harpy, I have no idea.

The truth is that an analysis by Moody’s Economy.com found that government spending results in more significant "bang for the buck." For every dollar invested in specific types of spending, the boost in real GDP is more than $1.30.

According to the analysis the most benefit comes from extending unemployment benefits ($1.64) and increasing food stamps ($1.73), but strong returns result from infrastructure investment ($1.59) and aid to state and local governments ($1.36), as well.

Furthermore, Moody's analysis also notes, "A well-timed, targeted, and temporary stimulus could in fact cost the Treasury less in the long run, since a debilitating recession would severely undermine tax revenues and prompt more government spending for longer."

Mark Zandi, chief economist at Moody's and former adviser to Sen. John McCain's presidential campaign, released his analysis of the House plan on Wednesday, and concluded that it would "provide a vital boost to the flagging economy," without which full employment would not return until 2014.

Minority Leader Boehner is also trying to come out and claim, "When it comes to slow-moving government spending programs, it's clear that it doesn't create the jobs or preserve the jobs that need to happen." Former Massachusetts governor Mitt Romney has said that "even if consumption were to bump up, it would not lead businesses to expand and to add jobs."

Former Secretary of Labor Robert Reich shoots down these talking points. Earlier this week Reich argued that, "The stimulus plan will create jobs repairing and upgrading the nation's roads, bridges, ports, levees, water and sewage system, public-transit systems, electricity grid, and schools."

It stands to reason that investing in infrastructure is going to lead to job creation, as someone needs to be hired to actually complete the various projects. By investing $100 billion in clean energy infrastructure alone, the Center for American Progress has estimated that 2 million jobs can be created in the next two years. Aid to states through bolstering Medicaid also "generates business and gets people into jobs," as a recent report by Families USA showed: "The new dollars pass from one person to another in successive rounds of spending, generating additional business activity, jobs, and wages that would not otherwise be produced."

Council of Economic Advisers Chairman Christina Romer and Vice President Biden aide Jared Bernstein, meanwhile -- by using the "1% of GDP equals 1 million jobs rule of thumb" -- estimated that a stimulus plan will create or save three million jobs. According to their calculations, "30% of the jobs created will be in construction and manufacturing," while "the other two significant sectors that are disproportionately represented in job creation are retail trade and leisure and hospitality."

Republicans and conservatives are again arguing that the answer is tax cuts. The Heritage Foundation, meanwhile, proposed an "alternative" to the House stimulus: "permanent tax reductions such as the ones Congress passed in 2003."

History shows that the tax cuts that conservatives are arguing for as a stimulus for economic growth is "weak at best." An analysis by the Center for American Progress Action Fund shows that every $10 billion spent on this kind of cut would create or save just 10,000 jobs, "versus nearly 60,000 jobs which could be created or saved by extending unemployment benefits and food stamps or investing directly in energy, transportation and education infrastructure." Furthermore, permanent measures will exacerbate the long-term debt much more than temporary measures will.

On a side note the National Republican Congressional Committee has an "issues" page on their website. This website issue page includes, as expected, a page on the "Economy." (Just so you note it's the seventh issue, behind Social Security and Border Security) Why I bring this up is that the web page tells it's readers, "Thanks to Republican economic policies, the U.S. economy is robust and job creation is strong."

Yes you read that right, it actually states that "Thanks to Republican economic policies, the U.S. economy is robust and job creation is strong."

After clicking "read more," we learn all about the NRCC's message on the economy.

According to the NRCC we have Republican economic policies to thank for the state of the economy, which actually I agree with, but they think that the U.S. economy is robust and job creation is strong. According to them the Republican tax cuts are creating jobs and continuing to strengthen the economy. The NRCC's site also explains that if we stray from Republican economic ideas, we will "set back our economy."

Republicans are in another reality.

Lets hope that Democrats wake up and realize that conservatives have no real answers and push forward with a more progressive stimulus package.

More Argument For More

John Judis of The New Republic, has written a piece also arguing that Barack Obama's plan does not go far enough, and that he needs to think bigger than investing in roads and bridges.

I believe Judis is correct and that Barack Obama needs to do something massive with this stimulus package, the economic equivalent of war.

In his article, Judis writes about the need for high-speed rail, the kind they have in Europe and Japan. The Amtrak train from DC to Chicago takes 24 hours, but if we had a French-style TGV connecting the two cities, it would take less than 6 hours. We are falling behind in regards to our energy grids, use of solar and wind power, and use of the internet.

The United States is no longer number one in far too many areas. Barack Obama has an opportunity to change this, but it seems that the stimulus package being discussed will miss the boat.

Barack Obama's Radio Address: "Aggressive Growth Measures"

In his weekly radio address today, President-elect Barack Obama unveiled some of the specific ideas in his plan. Reuters calls the proposals "aggressive growth measures."

In today's address the President-elect discusses the job losses that our nation continues to endure and offers his solutions to the challenges we face. The plan he outlines is to create at least 2.5 million new jobs as part of the largest infrastructure investment since the the Eisenhower Administration. A huge part of this effort is to reduce U.S. government energy use and to expand access to high-speed Internet and modernize school buildings across the country.

As the President-elect says, "We need action -- and action now."

For more information, visit http://change.gov/.

Watch his address here:

LibertyAir Blog

Barack Obama's Economic Press Conference - 11/25/2008

President-elect Barack Obama gave another press conference today to discuss his plans for the economy and his idea's on government intervention. The President-elect stated quite clearly that some spending cuts will be needed. Mr. Obama used today's news conference to continue to define the two objectives that will guide his economic policy: properly invest the peoples money and not waste the Federal budget.

With the economy in crisis, Mr. Obama said, "Budget reform is not an option. It's a necessity."
Later he echoed Abraham Lincoln, "I will ask my economic team to think anew and act anew."

For some Obama's focus on careful federal spending is a contrast to yesterday's discussion about a stimulus package. I do not believe this is quite the contrast the talking heads will try to make it. Restoring the economy to health will be the priority over the budget deficit, but there is a lot of waste in our system. There is a lot of money that could be better targeted to help the economy.

Barack Obama's Economic Press Conference - 11/24/2008

President-elect Barack Obama came out and held a press conference today to introduce his economic team. At the press conference Obama formally named New York Federal Reserve president Timothy Geithner as the next Treasury secretary to replace current holder Henry Paulson, and tapped former Treasury chief Larry Summers as his chief White House economic advisor.

During the news conference Obama said, 'We can't allow the auto industry to vanish,' Obama says, but urges no 'blank check'

Here is video of today's press conference:



LibertyAir Blog

John Boehner Is an Idiot

Congressional Republicans seem bound and determined to prove they have no idea what they're talking about when it comes to the economy.

Republicans quickly criticized the idea of such a vast [stimulus] initiative, saying Congress should instead cut taxes to spur economic growth.

"Democrats can't seem to stop trying to outbid each other -- with the taxpayers' money," House Minority Leader John A. Boehner (R-Ohio) said in a statement. "We're in tough economic times. Folks are hurting. But the American people know that more Washington spending isn't the answer."

Actually the American people know that more Washington spending is exactly the answer the nation needs. You would think that Republicans would just shut up for a while, considering their policies drove this nation into a ditch.

Steve Benen of the Washington Monthly's Political Animal had some great advice for people during an economic crisis.

In a time of severe economic crisis, it's important that all of us -- voters, policy makers, investors -- remember to do two key things. First, keep a cool head and avoid panic. Second, pay absolutely no attention to congressional Republicans, who have no idea what they're talking about.

Luckily Barack Obama and Democrats in Congress seem to be taking this advice to heart and seem to better understand both the gravity of the circumstances this nation faces and the necessity for a remedy. While Barack Obama, during the presidential campaign, had talked about a $175 billion stimulus program, he now is looking at a stimulus package that may be four times larger.

Senator Chuck Schumer of New York told George Stephanopoulos yesterday that the stimulus should be between $500 billion and $700 billion. Schumer said:

"It's a little like having a new New Deal, but you have to do it before the Depression. Not after."

ABC News' Jake Tapper reports that Obama's transition team would like to see the stimulus package be passed by Congress and be in the Oval Office waiting for the new President literally the day of the inauguration. There are lingering concerns, though, that a Republican filibuster may scuttle the plan.

This is why we really need Al Franken to win in Minnesota, Martin to win in Georgia, and we need to pull in Collins and Snowe up in Maine to keep Republican's from interfereing. If Republicans want to offer constructive advice, or real suggestions, they should be at the table. If they are going to throw up road blocks for no other purpose than to scuttle the Democrats, then they need to be shut out of the room.