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Congress isn't purring yet over Obama's stimulus plan

The economic climate requires action, but the political climate so far is prompting criticisms and changes.
Sen. Barack Obama. (U.S. State Department)

Sen. Barack Obama. (U.S. State Department) None

The fate of the Obama stimulus plan is pre-determined: There will be a plan, costing between $750 million-$1 trillion in tax cuts and spending increases, and it will be enacted with bipartisan support around mid-February. The content of the plan is another thing: Over this past weekend, President-elect Barack Obama invited congressional amendments to his original plan, released last week, and appeared quite flexible (perhaps too flexible) about the fine print.

I was surprised by the lack of Democratic congressional support expressed for the original plan on its release last week. I would have expected House Speaker Nancy Pelosi, Senate Majority Leader Harry Reid, and key Senate Finance and House Ways and Means Committee leaders to have been involved in development of the plan, to have been pre-briefed on the final draft's contents, and then to have made strong endorsements of the plan within minutes of Obama's unveiling of it. This did not happen. A number of Democrats have questioned, in particular, some of the tax-cut components of the plan.

Obama won a decisive 2008 electoral victory which added to Democratic majorities in both House and Senate. His approval ratings are far higher than those of the Congress. It was time for his party's congressional leaders to rally to his centerpiece proposal. Why didn't they?

First, all Democrats and Republicans are fearful of the huge price tag attached to the package which, added to the present projected federal budget deficit, will plunge us into deep red ink over the next several years. Second, they have not yet shifted gears from Executive-Congressional relationships during the eight Bush years, when Hill Democrats were wary of or outrightly hostile to White House proposals. Finally, the incoming Obama team did not sufficiently engage congressional Democrats during the formulation of the proposal but, instead, briefed them only at the last minute.

That last aspect signals to me that Obama and his team have not yet shifted their mindset from campaigning to governance. A campaign can issue a 10-point program without anything but internal consultations. A president does so at his peril — as President Clinton did after formulating his and Hillary's health-care reform plan in 1994 — if he does not involve the Congress and key interest groups in consultations beforehand.

The details of the original proposal, released only last weekend, are too complex to be understood by most in the Congress and in the electorate. They are carefully targeted both to near-term stimulus as well as to policy areas Obama wants to stress. Each of the many pieces in the proposal will present, of and by itself, a political target for one critical group or another.

To oversimplify, a more easily understood proposal would have consisted of a) a 60-day business or consumer tax holiday or short-term cuts in both personal and business taxes, across the board; and b) a program of investment in public infastructure broken into one or two categories. Instead, the proposal has many sub-divisions, involves a number of challengeable economic assumptions, and stimulates a reaction that money could be saved by just sawing off separate parts of it.

I am reminded by the proposal of a 1968 exchange among presidential candidates debating the issue of Vietnam. New York Gov. Nelson Rockefeller, seeking the Republican presidential nomination, issued a five-point plan for peace in Vietnam. Both Vice President Hubert Humphrey and Sen. Robert Kennedy, on the Democratic side, issued written critiques which amounted to five-to-ten-point plans of their own (I wrote Humphrey's). Sen. Eugene McCarthy, interviewed coming off his campaign plane, was asked about the Rockefeller, RFK, and HHH plans. His answer was a classic and, politically, the astute one. "When it comes to plans," he said, "when you get beyond three points, you cut it too thin."

The lack of political preparation, and the plan's present complexity, will be overcome, mainly because all the players have a stake in getting something done on both taxes and spending and across party lines. The economic situation requires it. But a political climate has been created in which criticisms and changes have been made more certain.


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Comments:

Posted Tue, Jan 13, 11:48 a.m. Inappropriate

The federal deficit is the least important of our immediate concerns (we can/(will?) inflate some of it away). The trade deficit was approaching a trillion per yer, until recently. An attempt to stimulate the economy without stemming a similar sized flow of value over-seas is self-defeating. The actions of the Federal government to date, and the proposed actions going forward, does not appear to alter that calculus.

I suspect an effective stimulus package would need to be several fold above current proposals to overcome out-flows. An accompanied shift away from an income tax towards a consumptive tax and fuel tax might help to cauterize the loss of value due to imported oil and consumer goods--potentially increasing the effectiveness of the stimulus. Radical, painful, and impossible, but it highlights the flawed nature of the current approach.

Anyway, it appears OPEC is actually going to make the 4 million b/d cut. Oil demand is only down 500,000 b/d from last year; gasoline demand down only 200,000 b/d. Obama may be staring a supply shock in the face. Tom Whipple, once again, has the run down at the Energy Bulletin.

Posted Tue, Jan 13, 2:30 p.m. Inappropriate

Running annual trillion+ $ current account deficits while also having major trade deficits -- at some point we will be looking at real inflation problems. It may seem a great idea today but this sets the country up for some serious problems in the future.

Anthony

Posted Tue, Jan 13, 11:56 p.m. Inappropriate

hope he is forced to listen to the blue dog demos !

this country is/has already printed too much money.

the right thing to do is to stop ANY further stimulus packages. freeze social security COLs for the next two years and immediately cut ALL social security payments by 5 percent.

next, cut ALL federal spending by 5 percent. cut ALL foreign aid by another 15 percent.

last, immediately place a 50 cent /gallon tax on gas, ALL proceeds are to pay down the fed debt ONLY. the tax decreases by 10 cents for every increase in the retail price of 50 cents, once the price of gas climbs back to 4 dollars a gallon.

debt is destroying the US !

Posted Mon, Jan 19, 11:13 p.m. Inappropriate

I love how the stimulus package is thought of as our last chance to save us. My question is who benefits big unions,wall street and political donors most likly.Who payes for it all our children and grand kids that's who.

bigdaddy

Posted Sun, Jan 25, 2:22 p.m. Inappropriate

TARP money should all be directed into unemployment insurance. Whether the person without a job is a Wall Street banker or a Main Street welder, all are owed the same -- a paycheck to put food on their table and keep the house -- and nothing more!

Bailing out companies equates to bailing out overpriced senior management at dying 20th century companies. Giving the people a chance to find new jobs in smaller more productive companies does the most good.

jabailo

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