Debating the Stimulus

Nearly three weeks into the Obama administration and we are still waiting for the profound moment when recognition will give way to knowledge for the greater good of the country.

Oracles might be settling in for a spell.

Sadly, change we can believe in is apparently on indefinite hiatus when it comes to the politics of passing a flawed stimulus bill, a bill whose popularity with the public is dropping quicker than the Dow.

Belatedly recognizing the ebbing support between morning workouts and celebrity dinners that have revitalized Washington’s restaurant industry, Obama saw fit to give Democratic House members a stem-winder at their annual retreat.

Obama railed against, “Republican policies that for the last eight years have doubled our national debt and threw our economy into a tailspin.”1 The cheering Democrats, pumped up on this political red meat, seemed oblivious that their stimulus efforts will, in one vote, add the equivalent of 20% of the “Bush debt” to the national debt.2

Scared?   Consider that the Democrats are only getting started.

In laying out his rationale, it bears mentioning that Obama somehow failed to say anything about the growth during the eight years Bush was at the helm. In fact, the US economy expanded by 27%, adding staggering wealth equal to the entire GDP of the Federal Republic of Germany to the US economy.3 That it did so through a philosophy that empowered citizens over government by providing tax and regulatory relief directly to individuals and businesses is well known, but suddenly worth repeating.

As for the cause of the crisis, only monumental hubris could keep Democrats cheering with the likes of Nancy Pelosi, Barney Frank and others in their midst; lawmakers who should have been perp-walked out of the meeting for their complicity in housing legislation that led to real estate collapse, toxic debt and ultimately to today’s credit crunch.

But as the saying goes, the “winners” get to write the history.

The need for direct presidential intervention on the stimulus bill has become more urgent as the truth concerning the bill’s make up has pierced the rhetoric of its admirers in the public’s mind. And as truth has become a liability for the bill, the candidate of hope has suddenly become the president of fear, espousing rhetoric of doom that increases exponentially as doubts about the package multiply.

On February 4th President Obama said, “A failure to act and act now, will turn crisis into a catastrophe” – perhaps irreversible. Where Roosevelt lifted spirits amid genuine economic armageddon, Obama seems willing to talk the economy down to get a flawed bill into law — and it was these same Democrats who accused Bush of feeding fear hysteria.

The truth here is that the President and congressional Democrats are making phantom arguments to justify flawed legislation.

No one is arguing against action to resuscitate the economy. With the exception Oklahoma Senator Tom Coburn (for whom no rational explanation exists) there is bipartisan consensus for concerted government action. Even conservative economists see the benefit in certain, specific government spending as a vehicle to revive the economy in conjunction with tax cuts.

No, the problem is that the Democrats are using the “stimulus package” as a Trojan horse to bypass the legislative vetting process and pass what are easily three separate and distinct bills under the umbrella narrative of quick and decisive action for the economy.

The sad fact is that while the behemoth dollar figure conveys massive action to the public, only a small portion of the total will have a direct impact on the economy.

Whether it is enough is debatable at best.

Most of the Democrats hoped-for results are based on indirect spending that is primarily designed to reconfigure and vastly expand the role of the federal government in health insurance, education and infrastructure, without the “nuisance” of public hearings, amendments and debate.

The ultimate construct of the bill lays bare the dishonest attack on the legislation’s critics as officials who oppose US economic recovery by virtue of their critique. If it were campaign season, candidate Obama would have called this, “a false choice.”

In a more deliberate and rational political world, Congress would package extended unemployment compensation, more targeted assistance for food stamps with Obama tax cuts and Senate-compromise spending to aid states as immediate stimulus. Obama would easily get large bipartisan majorities for this.  Cost: $169 billion.

Second, Congress would package the Obama infrastructure initiatives, from traditional highway construction to school renovations, upgrades to the electrical grid, capital improvements at national parks and federal buildings, as investments for indirect stimulus over the medium term. This will likely attract some Republican support, particularly if targeted tax cuts for the purchase of capital goods or increased defense spending are included. Cost:  $139 billion (from the existing bill without defense or targeted tax cuts added).

The third piece would be spending Obama and Democrats want for social investment.  Included here would be federal financial medical assistance, technology incentives for Medicare and Medicaid, a new health insurance entitlement for the unemployed, community development grants, student aid grants, child support and family assistance, additions to the Department of Health and Human Services and employment training.  Cost:  $247 billion.

The numbers make clear, however, why the Democrats won’t take this approach; two thirds of the package is simply not designed for immediate economic stimulus. To frame it otherwise requires, well, a willing suspension of disbelief. Obama’s continued use of his election victory as a club to mandate approval of this stimulus bill does not hold water when its individual elements won’t stand public scrutiny.

If the President and the Democratic leadership believe they won the election to vastly expand government, they should have the confidence to put that notion to the test on its merits.  Hiding the proposition in the window dressing of economic stimulus wastes money, damages credibility and postpones genuine recovery.

That Republicans lawmakers have not seen fit to expose this course of action – and have been sated instead by the crumbs they can gather in negotiations over size and not composition of the package – is as unsettling as the Democrats’ audacious attempt at restructuring of the federal government.

Instead of examples of bipartisanship, we seem to have a town of willing  co-conspirators.