President Obama speaks about the economy at the Brookings Institution in Washington on Dec. 8, 2009
What a difference a year makes. The first time President Obama appealed to Congress to pass a stimulus package, in January, he went with arms outstretched, seeking "solutions that advance not the interests of any party or the agenda of any one group but the aspirations of all Americans." He was, in no uncertain terms, courting Republican cooperation.
On Tuesday, by contrast, when he asked Congress for a second major stimulus effort in a speech at the Brookings Institution in Washington, he arrived ready to rumble. In place of extended arms, Obama accused Republicans of presiding "over the decision-making" that led to the financial crisis and then handing it "over to others to solve." He decried his GOP opponents for "waxing political about fiscal responsibility," adding, with an uncustomary bit of sharp sarcasm, "It's a sight to see."
This new Obama, long past his Panglossian dreams of new Beltway comity, used fighting words because, quite frankly, he is trapped in a political tight spot, wedged between sky-high unemployment and lingering public worries over government spending. Almost 10 months after signing the $787 billion stimulus, the largest such federal program in U.S. history, he announced on Tuesday that the Federal Government needed to spend even more, a prospect that polls poorly, as concern about spending and the budget deficit continue to fester.
Republicans, for their part, did not hesitate to dig in their rhetorical knives. South Carolina Senator Jim DeMint called Obama "delusional" and "out of control" in an interview on Fox News. Senate minority leader Mitch McConnell of Kentucky called the President's proposal "another spending spree." Virginia's Eric Cantor, the House Republican whip, told one conservative website, "Clearly the White House has taken the position that deficits don't matter."
But Republicans can't argue with the still precarious position of the nation's economy. The recession has officially ended, but the country remains on a sort of economic life support. Credit remains scarce, especially for small businesses. Unemployment hovers above 10%. The commercial real estate market is crashing, the foreclosure crisis is growing and many state and local governments are teetering on insolvency. It is a situation that has led many economists to call for another infusion of government spending, along the lines of what Obama proposed.
"We have to make absolutely positively sure that this recovery evolves into a self-sustaining economic expansion, and that is what this is all about," says Mark Zandi, an economist for Economy.com who has advised both Republicans and Obama. "If we go back into recession, it's going to blow out the budget, and it's going to cost the taxpayers a lot more."
Obama tried to make that point in his speech. "There are those who claim we have to choose between paying down our deficits on the one hand, and investing in job creation and economic growth on the other," he said. "This is a false choice." But as pointed as the speech was at times, it was also notable for what it did not say. Obama didn't call his new package of government spending a stimulus, which it clearly was. He didn't say how much it would cost. He gave few details of how it would be paid for, and he declined to explain exactly when it should go into effect.
"The speech was certainly very general," says Rob Puentes, an expert on infrastructure investment at Brookings, who was still trying to work out on Tuesday afternoon what Obama had meant hours earlier when he called for a "boost in investment in the nation's infrastructure."
The former economic adviser to John McCain's presidential campaign, Douglas Holtz-Eakin, who was recently invited to the White House for a jobs summit, is more aghast at the vagueness of the speech. "He did not give one dollar figure," says Holtz-Eakin. "He did not explain how anything is being paid for."
In broad strokes, Obama set out a framework for using more federal money to create jobs. In addition to the infrastructure piece, which aides said could cost as much as $50 billion, Obama proposed new incentives for consumers who retrofit their homes (a program some have already dubbed Cash for Caulkers), an elimination of the capital-gains tax for small businesses and extensions of several other programs from the last stimulus to help small businesses. He also said he would instruct the Treasury Department to use funds that have already been appropriated to increase the flow of credit to small businesses.
Though the President did not offer a cost — estimates on Capitol Hill have put the total bill at anywhere between $75 billion and $200 billion — he did justify the new spending by citing nearly $200 billion in unspent or returned funds from the Troubled Asset Relief Program, or TARP. "This gives us a chance to pay down the deficit faster than we thought possible and to shift funds that would have gone to help the banks on Wall Street to help create jobs on Main Street," he said.
The President's logic is at odds with the initial premise of TARP, which was sold to Congress as a loan program that would be mostly paid back to the Treasury, where its proceeds would be used to pay down the deficit. "The $700 billion program we have proposed is not a spending program," former Treasury Secretary Hank Paulson explained before Congress in September 2008. It didn't take long for Republicans to take that position. "The stimulus money clearly was a spending bill. TARP was a loan — a loan to be paid back. And we know that a number of the banks are, in fact, paying it back," said McConnell.
In a briefing call with reporters before the speech, a senior Administration official said that even though the unspent and returned TARP funds could not be used directly to fund the new stimulus efforts, they still created an environment in which there was "more fiscal room" for further spending. "There's other offsets over a 10-year period that one could consider as well," the official said, without providing any specifics.
Those specifics will no doubt come out over the next few weeks and months as Congress attempts to pass a series of large spending bills, which could include a number of the programs that Obama announced. "One of the central goals of this Administration is restoring fiscal responsibility," he said in his speech. But as long as the economy continues in its fragile state, that goal will remain secondary to the more immediate task at hand. Which means that Obama's calls for government spending will keep being met by Republican cries of hypocrisy.