Quotes of the Day
It's hard to take Republican leaders too seriously when they criticize recovery plans for the economy; it's sort of like those geese criticizing evacuation plans for US Airways Flight 1549. Their critiques look even goofier when you see their alternatives. They warn that President Barack Obama's stimulus package will explode the debt — and so they want to make President Bush's debt-exploding tax cuts permanent. They say Democratic spending plans are full of pork — then they propose an extra $24 billion for the Army Corps of Engineers, the federal equivalent of Oscar Meyer. Let's just say their idea bank could use a bailout.
But there are more serious critiques of the American Recovery and Reinvestment Act from more serious critics. The most compelling critique — offered by Clinton Administration budget chief Alice Rivkin and Democratic Senator Ben Nelson as well as principled conservatives like New York Times columnist David Brooks and Reagan Administration economics adviser Martin Feldstein — is that an $800 billion stimulus package ought to be all about stimulus. They're not the Hooverish partisans who are whining that the package has turned into a "spending plan," as if government spending were a preposterous strategy for jump-starting the economy. They're concerned with how the money would be spent. They're O.K. with a short-term injection of cash, but they don't think this is the time for long-term government investments. They want to focus on fighting the recession, and they don't see Pell grants, renewable energy subsidies, health-care technology and Head Start — much less a beautification of the Mall, contraception for low-income women or additional funding for the arts — as the best way to do that. "Many of them are worthy [programs], but we can have that debate another day," Brooks says. (See pictures of Obama's historic Inauguration.)
It's a legitimate point. It really does matter how the money is spent. But actually, we had that debate in November, and as the President himself reportedly said at a bipartisan White House meeting last week, Obama won.
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In fact, this crisis is an ideal opportunity for Obama to start keeping his campaign promises: providing tax relief and health security for ordinary Americans, restoring our economic competitiveness and reducing our dependence on environmentally disastrous fossil fuels that increase the power of our enemies. It's hard to imagine when he'll have a better opportunity. Nothing in the historical record suggests that when Congress has more time to deliberate — and more time to confer with the special-interest lobbyists and local-interest political advisers who dominate the decision-making of its members — it will enact fair tax policies, sustainable energy policies, wise infrastructure policies, responsible fiscal policies or any other policies tainted by long-term thinking or national-interest considerations. If Obama wants to push 21st-century change through Capitol Hill, he needs to use this emergency.
As I wrote last month, there are three questions we should ask about every provision in the package: Will it stimulate the economy quickly? Will it create long-term fiscal obligations? But also: Is it something we ought to do anyway? We need to zap the economy with a big jolt of federal dollars, and it's important that those dollars be spent in timely and temporary ways. But it's just as important that they're spent in ways that promote, and don't undermine, national priorities. Fast is good, but this downturn is likely to last awhile no matter what the feds do. So smart is better.
By these measures, some of the tax cuts in the current House and Senate plans are hard to defend. For example, both chambers included a tax credit for first-time home buyers, a classic hair-of-the-dog solution to a crisis with roots in an artificially inflated housing market; the credit wouldn't provide stimulus and it wouldn't point the country in a new direction. Similarly, as the nonpartisan Tax Policy Center pointed out, the Senate's $70 billion patch to the alternative minimum tax is "neither timely nor targeted" and "makes no sense as economic stimulus." And it's worth noting that the corporate tax cuts favored by the GOP critics who have screeched the loudest about the lack of stimulus in the stimulus happen to be lousy stimulus. But the biggest measure — a $145 billion payroll tax cut — is both good stimulus, because it targets low- and moderate-income earners who are more likely to spend it, and good policy, because it aims to start rebuilding the middle class and help ordinary families shafted by eight years of trickle-down tax policy.
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What about the spending provisions in the various plans? Again, there has been an Alice in Wonderland quality to much of the criticism, as if Keynes were a fraud and government spending couldn't possibly create jobs — especially spending on biomedical research or education about STDs or any other programs that sound vaguely liberal and exotic. But biomedical research jobs are real jobs. So are jobs beautifying the Mall and warning teenagers about herpes. So are jobs building and engineering rail lines for Amtrak, regardless of the company's current profitability. Granted, some spending proposals would work faster and better than others. But it's telling that House minority leader John Boehner keeps ridiculing programs to weatherize low-income homes — which would create jobs in a hurry, save poor people money in the long term and reduce energy waste that increases carbon emissions and empowers foreign thugs. It's a worthy program, and if anyone doesn't think so, now is the perfect time to have that debate. What's the argument in favor of heating and air-conditioning the outdoors?
Most of the recent spending debate has focused on waste — money for new weather satellites, antismoking programs and the like. But the austerity scolds haven't found many outrages; antismoking programs, for example, are a terrific way to hold down the long-term health costs that threaten the Treasury's long-term solvency. There ought to be even more money for mass transit, which reduces energy use, increases the competitiveness of metropolitan areas and helps working families, as well as freight rail, which has even greater environmental and economic advantages. Expanded unemployment benefits and food stamps would be excellent stimulus — and those are both desperately needed right now. Retrofitting federal buildings to use less energy would provide jobs now and reduce federal energy costs in the future. By contrast, professor Feldstein's proposal to beef up the military could dramatically increase both our future obligations for pensions and health-care costs for veterans. In general, most of the current proposals (though not all of them) aim to limit the new spending to the next two years.
Certainly, there's some junk in there. The Senate wants to toss as much as $50 billion into loan guarantees for nuclear plants, even though their costs have gone through the roof. And there's talk of further subsidizing home mortgages that are already tax-deductible, as if the Federal Government hasn't done enough to encourage homeownership (and in the process, it can be argued, help lay the foundation for the current crisis). But Obama has called for an earmark-free stimulus, so the legislation shouldn't have too many embarrassing waterslides, Mafia museums or cranberry subsidies. Instead, Congress would funnel hundreds of billions of dollars to states and various agencies.
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That's where the real waste is going to be. There's $30 billion for highways, which would be funneled through state transportation departments that love to build unsustainable sprawl roads to nowhere. There's $4.5 billion for the Army Corps, which loves to build water projects that destroy wetlands and induce development in vulnerable floodplains. There's $14 billion for school modernization, $2 billion for rural-business loans, $8.4 billion in "state and tribal assistance grants" — and who can say how it would all be spent?
Well, Congress could say. For example, Commerce Committee chairman Henry Waxman inserted language into the House version of the package limiting energy grants to states that give their utilities incentives to promote energy efficiency. If the Federal Government is going to spend the money, it ought to promote federal priorities. And Congress could make sure the money is spent productively — and isn't spent counterproductively — by attaching a few general strings to the stimulus dollars. For instance, there should be "fix it first" provisions to prioritize repairs to highways, levees and other infrastructure over new construction, which would create jobs while reducing future federal obligations. We do need to rescue states to prevent them from raising taxes and firing workers, but just as it was crazy to let bailed-out banks and automakers spend our money however they pleased, it's just as crazy to give carte blanche to bailed-out states.
The real question, then, is not whether Obama should push to use the stimulus to promote his long-term priorities, but whether he will. He has said repeatedly that he wants to invest our children's money wisely, but he's also anxious to blast money into the economy quickly while attracting bipartisan support and letting Congress work its will, so it's not clear how hard he'll push to fund his long-term agenda. But Obama should ignore the partisan gripes about the stimulus becoming a "Christmas tree." Congress is about to toss almost $1 trillion into the economy, which means that any stimulus is going to be a Christmas tree, no matter where the gifts are hidden. And in November, America chose its Santa. This might be his best chance to decide who gets the goodies and who gets lumps of coal.
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- Michael Grunwald
- There are valid criticisms of the economic stimulus plans, but much of the proposed package will both create jobs and serve long-term goals