The SanityPrompt

This blog represents some small and occasional efforts to add a note of sanity to discussions of politics and policy. This blog best viewed with Internet Explorer @ 1024x768

Thursday, February 05, 2009

It's the Priorities Stupid

Between 2003 and today, the United States spent almost $600 billion dollars in Iraq and Afghanistan without anyone in Congress batting an eyelash. Most of that money went towards Iraq of course and to this day, no one can explain in an either coherent or compelling fashion what was at stake in that country and what threat it posed to the United States. But today, some in Congress such as John McCain or Susan Collins or even the Democrat's Ben Nelson can't swallow the size of the stimulus package when our entire economy is in dire trouble? The recently defeated McCain alternative to the stimulus came in well under $500 billion, far less than any economist who thinks government should work to end the recession has said is necessary.

The United States just spent a decade handing out tax breaks to the wealthiest Americans, with limited job creation and a paltry economic growth rate and now, essentially nothing to show for it. As we all painfully know, the Bush years have ended in the worst economic contraction in 60 years. And now the GOP's main objections to the stimulus are that there is not enough being spent on tax cuts and that the tax cuts need to go to,...wait for the other shoe to drop,...wealthier taxpayers. The GOP house members and Senators object that too much of the tax breaks in the bill are going to working class and lower income families.

It might seem shocking that after so many years of being told that we should wait for the rich to shower down their wealth upon the rest of us, after we watched Congress and the White House vote trillions in economic benefits for corporate America and the wealthiest taxpayers, that we are asked to believe yet again in this Golden Calf. But the capacity for shock seems to have long left the building.

The sad truth is, that despite all protestations to the contrary, the GOP isn't interested in fixing the stimulus package but in rendering it less effective. As their chief advisor, Rush Limbaugh has said, they don't want Obama to succeed. They don't want the Democrats to succeed. They have a vested interest in their failure. In fact, many on the Right feel that the recession should be allowed to run it's course so that Americans develop a proper appreciation for the fickleness of the market's awesome power. If you don't believe me, ask the several hundred Right-wing economists the CATO Institute got to sign an ad in the New York Times.

When James Carville felt that the Clinton campaign staff was failing to pay proper attention to the message that would draw the proper contrast with their opposition, he famously wrote on a board in the campaign office, "It's the economy stupid." Well someone ought to go into the bullpen, or wherever it is Democratic strategists meet these days to ponder how to counter the avalanche of duplicitous concern demonstrated by their bipartisan colleagues from across the aisle, and write upon the wall "It's the priorities, stupid."

A quick glance at the proposed cuts by the 'moderate cabal' reveals that those who confess opposition to the structure of the stimulus package aren't driven by ideology or a coherent philosophy. They certainly aren't driven by any kind of rational economic thought. State and local governments, school districts and public universities are facing drastic budget cuts that could force layoffs and will certainly be recessionary in their impact. Medicaid rolls are swelling just when states have no money to pay the tab for thousands of newly impoverished and needy enrollees. Whether taken as a layoff, a furlough or a salary reduction, a 10% reduction in state personnel costs is 10% of state payroll taken out of the economy. But the moderate cabal has proposed axing state stabilization money, dollars intended to help governments deal with the fiscal impacts of the recession, by $25 billion, and a further $15 billion in direct assistance for states.

They've proposed cutting $6 billion from education programs. At one point they were considering cutting $14 billion from Pell Grants, even though seeking education and retraining is an economically sound way for a person to deal with a layoff or a drop in employment opportunities. You might be tempted to think that transportation spending would be at the heart of any stimulus package supported by a member of Congress, regardless of Party affiliation. But the 'Moderate Cabal' has proposed cutting Transportation grants. They've taken an axe to 5.5 billion in energy efficiency programs.

After all this, the group could still only come up with $77 billion in cuts. It's become popular to decry the waste in the stimulus package and lament its composition. Liberals bemoan the pork and the pet projects that may not be stimulative. But a look at the dubious spending propositions the Moderate Cabal has left in the bill and been unwilling to cut underscores that they've been driven by expediency rather than any kind of judicious or economically informed standard.

Could the bill be improved? Certainly. Would it be preferable if we didn't have to watch the Congressional sausage fest up-close. Absolutely. But the fact is that it is impossible for our democratic institutions to tackle a challenge of this sort without allowing local politics and pet projects to creep in. It is economically impossible to almost spontaneously inject nearly $1 trillion in new government spending into the economy within 18 months in a way that doesn't occasionally raise eyebrows or cause consternation. Think of the billions that we know were wasted in Iraq. But Americans, and certainly the members of the Moderate Cabal, never let that stop them from approving the flood of dollars into that fiscally porous endeavor.

The main objective the Democrats should focus on is the difference in Republican priorities and their priorities. Republicans want to give more tax cuts to the rich; Democrats want to give direct assistance to state governments to prevent drastic budget cuts and rollbacks in services. Republicans want to spend less than any sound economist recognizes is needed; Democrats want to spend what is necessary to get the economy, and revenues for every level of government back on track as soon as possible. Republicans want the wealthy to spend. Democrats want to make lasting improvements to the physical infrastructure and capital assets of this country. Republicans want to dither, while Democrats want to act.

Economists estimate that $1-1.3 trillion is being pulled out of the economy by this recessionary collapse. Poorly conceived tax cuts won't put that money back. But soundly conceived tax cuts and large amounts of government spending are the only ways to offset this loss of money. No other entity in American Society can rise to this challenge. The Fed has tried and it has nearly exhausted its policy options. The states cannot because they cannot spend more than they raise. And the private sector, as we all know, is bereft.

Public spending of any type will flow directly into the economy and ripple through, lifting economic activity and offsetting the imminent job losses and wage cuts facing millions of Americans. This cash will be used to pay salaries and build things that will last long after the recession passes. It will help states prevent adding a further drain onto our already troubled economy. It will keep stores open and factories running and work crews humming. Economists call this the multiplier effect of public spending. Some projects have higher multipliers than others. But with so much money coming down the pipe, policy makers have to scramble to find any policy that promises to multiply its benefit across the economy and some of those will do more for job creation and capital development than others.

But only government can do this -- can help our fellow citizens and heal this nation. Americans used to know this. The Republicans and their media brethren have hypnotized them into worrying about a misspent billion or two. Americans are once again worrying that tax dollars might go to a fellow citizen who is somehow unworthy. It's up to Democrats to remind them why in November they found their faith in change and in the power of government to stabilize our lives and secure our future. And how to find it again.

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