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A Brief History of Spending Compromises

Submitted by Conn Carroll on Tue, 01/06/2009 - 13:46

Blogging on Obama's stimulus strategy, Jon writes:

Republicans are in a difficult situation here.

  • If they oppose the bill and it fails, they will be blamed (fairly or not) for any economic problems.

  • If they support the bill and it passes, they will share the blame for the enormous costs it will entail.

  • If they oppose the bill and it passes, the lack of policy leverage would leave the bill much worse than if they had forced potentially valuable compromises (e.g., sunset provisions and exit strategies).

I agree that Republican's face a "difficult situation here" but we should not pretend for a second that there any "potentially valuable compromises (e.g., sunset provisions and exit strategies)" on stimulus spending. As TARP shows us, once money is authorized, it will be spent and probably on items that never would have been approved of in the first place (like the nationalization of the US auto industry).

Furthermore, any "sunset provisions" or "exit strategies" can also be easily ignored or revisited down the road. Take Medicare. When conservatives caved in to George Bush and Tom DeLay on the prescription drug benefit, some votes were secured by promises that regulations would be passed that would introduce competitive bidding into Medicare's current price fixing system for buying medical supplies.

So what happened when the regulations were about to become law? The medical suppliers went crying to Democrats and big government Republicans asking them to kill the competitive bidding rule. The result? No competitive bidding in Medicare procurement and we're still stuck with the massive new prescription drug benefit.

The same fate will befall any type of fiscal responsibility measures inserted into Obama's trillion dollar stimulus. When the time comes for the measure to actually reduce spending, the left will change the law to allow the taxpayer spigot to keep flowing.

The politics and policy on the stimulus are the exact same: Republicans who hope to be future leaders in the party must say no to any stimulus that includes hundreds of billions in dollars in new spending.

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Comments

We need to explain our principles

Submitted by ebohnet on Tue, 01/06/2009 - 16:19.

One big problem that the GOP must rectify is that the American people have not heard a decent explanation of conservative policies for quite some time. We need to get busy explaining (1) that supply side policies are designed to provide incentives for productive activity; and (2) that government programs are notoriously and inherently inefficient regardless of who is running them. The basic message should be that a supply side tax cut of perhaps a couple hundred billion will do a whole lot more to stimulate the economy than a trillion dollars of new spending. Obama repeatedly mis-characterizes our position as giving money to rich people hoping that they'd spend it. We need to refute that and not try to change the subject like McCain always did.

And by "the GOP" I mean the whole party - elected officials, party structure and grass roots.

balloonpoppers.

Submitted by RisingTide on Thu, 01/08/2009 - 14:34.

it may suprise you but we have many government programs that run ontime and underbudget.

USGS, NWS, NOAA.

do you see a pattern here?

No one can figure out how to pork up these places

Submitted by Ironman on Thu, 01/08/2009 - 22:10.

or can find political hacks interested in working for them. So they are left to their own devices. 

yeah, that's true.

Submitted by RisingTide on Tue, 01/13/2009 - 12:02.

they also have a remarkably diverse workplace environment. (clustering phenomenon, not about hiring practices, as they're desperate enough to take anyone competent)

Science and pork

Submitted by chemjeff on Fri, 01/09/2009 - 02:00.

Do you really think science is immune from pork?  Then you haven't been around academic science that long.  You should ask around in your department who got their research funding via a competitive process and who got their research funding via an earmark.  (But, ask discreetly.)  You'd be surprirsed at the answer.  I sure the hell was.  Academic science is not immune from the corrupting influence of pork and earmarks.  Professors get tenure and promotion nowadays based on research funding that was not in the least competitive, but based solely on which powerful politician the professor happened to know.

yep, there's some

Submitted by Ironman on Sat, 01/10/2009 - 10:59.

but it's hard to spend megabucks doing it. Perhaps that is the impetus about overcoming the Establishment Clause to make global warming the official national religion. 

My brother works for a defense/space contractor and bemoans when political appointees try to allocate cash for projects, since he says they try and micromanage and end up funding the wrong stuff.  Most of the folks involved couldn't tell the difference between a star tracking satellite and a Plymouth Satellite.

 

hell no. but in my limited experience

Submitted by RisingTide on Tue, 01/13/2009 - 12:05.

pork comes from the military (I'm in western pa, so ... somehow Murtha's earmarking oncology research. i don't know why, nor how, but it does pay the bills. not for me, but for someone).

Every time you had supply

Submitted by In between on Thu, 01/08/2009 - 14:57.

Every time you had supply side economics (Reagan and Bush) you have had deficits. If you have tax cuts, it should be balanced by cuts in spending. In addition if you have a war, then you have to pay for it with a tax, or have no war at all.

You can fill the bucket with all the tax cuts you want, but if the bucket leaks with "free trade" and "globalization" with the loss of jobs and factories closing then your tax cuts mean nothing to me. Deal with the problems of the day and 20 years from now. Use management and not ideology.

Globalization is causing job loss, the closing of factories, wage pressures, the loss of healthcare and pensions. Also cities and states are going broke. You cannot solve one problem without jobs.

And to add, what product can be made that can't be made in China?

So, do the republicans have an answer to this?

Is it any wonder that the republicans are clueless.

budget deficits

Submitted by ebohnet on Thu, 01/08/2009 - 18:00.

The question on this post is what the Republicans should propose as an alternative to Obama's trillion dollar "stimulus" package which will likely consist of either straight government spending or tax credits that are basically government spending distributed by the IRS. A supply side tax cut could create more "stimulus" with comparatively less impact on the budget deficit that a larger package of new spending. Moreover, the history of supply side tax cuts has been that they have boosted government revenue after a few years by spurring growth. Problem has been that Republicans have had to accept tons of new spending a the price for getting their tax cuts through. And don't forget that Clinton signed a big capital gains tax cut into law - it had been the centerpiece of the GHW Bush agenda but didn't pass until the GOP gained control of Congress. That contributed quite a bit to the budget surplus a few years later.

But the big question should be: who do you want spending money: the American people or Nancy Pelosi and Harry Reid? The American people are going to make better use of the money than Congress and federal bureaucrats about 99 times out of 100.

Point well taken. I don't

Submitted by In between on Thu, 01/08/2009 - 18:24.

Point well taken.

I don't think Pelosi or Reid will be the big problem if Rahm Emmanuel has his way.

You say "the American people are going to make better use of the money." And I agree. However, we have a multitude of problems to be addressed. Among them is that we are losing our jobs to globalization. Another, and this is why Obama is so far ahead of anyone else, is we need massive research and development and science. This to put this country into the future and create jobs that we lose with globalization. Many other areas of our economy has suffered neglect as we had lived on ideology for the past 8 years. The one problem on what Obama suggests in which he is near perfect. Is that dealing with anything in government will be a maze to get anything done. 

The internet came from the government, and it has created jobs and commerce around the world. We need something just as big in the future as we have to compete with other countries.

.....................

On another note. Maybe we should put an asterisk on the phrase "the American people are going to make better use of the money." The stores are full of Chinese goods, and don't do us much good for the economy. Things change and we have globalization. And we will have to change with it. 

Action or talk?

Submitted by undoctored on Sat, 01/10/2009 - 13:17.

  The problem isn't that GOP principles need explaining.  Don't sell the American people short. They understand very well where the GOP took the country over the past 8** years (massive budget deficits, pervasive corruption, no health care reform, the catastrophe of deregulation, etc.).  The American people were able to observe on a daily basis where the real priorities of the GOP lay: tax cuts for the wealthy, public policy driven by lobbyists, an attempt to subject the social security system to the vagaries of the marketplace, hostility to science (the endless delays in addressing the dire consequences of global warming).  Actions speak louder than words.  The party will begin to recover when it acknowledges this disconnect and abandons ideology for bipartisanship and compromise. Why is the approval rating ot Congress even more dismal than that of the President?  Answer: Americans are FED UP with partisan bickering, and obstructionism,  They want action, not words.

**It was amusing to observe during the campaign the attempt of the GOP to lay blame on a "Democratic" Congress (since 2006) while forgetting the razor-thin majority held by the Democrtas, the constant filerbustering of the minority  and a totally uncooperative president (always threatening to veto progressive legislation).  That dynamic will drastically change under the new administration.

 

 

"the dire consequences of global warming"

Submitted by Ironman on Sat, 01/10/2009 - 14:27.

It's 20 degrees out and that will be balmy compared to next week. I may be shaking in my boots, but it's called shivering.

Needless to say, it will take a President born in Hawaii to impose a carbon tax on America. Bring on that "progressive" legislation, will ya! 

and YES that is a consequence of global warming.

Submitted by RisingTide on Tue, 01/13/2009 - 12:15.

so kindly go back to your books, sir, and find one that can actually explain the damn predictions.

Seattle is buried under snow.

This global warming will KILL our American Rain Forests. Glad I got a chance to see them while they still exist

The only winning move is.....

Submitted by Ironman on Wed, 01/07/2009 - 07:17.

not to play.

It's time to reintroduce the Republican party to the joys of fiscal responsibility and frugal living.

Republicans Should Oppose

Submitted by Jeff Roberts on Thu, 01/08/2009 - 14:05.

I just don't buy into the theory that Republicans will take the hit if Obama's spending spree stimilus bill fails and the economy worsens.  The Democrats control EVERYTHING right now.  The American people will know who's in charge.  If the economy gets weaker, the Democrats will be blamed, it's their baby now.

If you were really Machiavellian, you could make the case that it would be in the Republicans' best interest to do everything possible to sabotage the economy even further.

Republicans should stand on principle, and oppose Obama.  Going along with Obama will not improve the Republicans' fortunes,

 

 

 

So which is it - stand on principle or sabatoge the economy?

Submitted by NextRightNando on Thu, 01/08/2009 - 14:09.

Are you aware that when you said "you could make the case that it would be in the Republicans' best interest to do everything possible to sabotage the economy even further", you said it out loud?

 

You Misunderstand

Submitted by Jeff Roberts on Thu, 01/08/2009 - 14:19.

I'm talking about a purely political angle, not WHAT the Republicans should do.

Personally, I think Obama's stimulus package will hurt our economy further, causing massive inflation and the world fleeing from the dollar.  Do I think Republicans should support Obama's legislation, with the knowledge that it will hurt the economy further?  Of course not.

My response was to the point that Republicans will get blamed if Obama doesn't get his way.  It's a ridiculous point, and Republicans shouldn't take the bait. 

nu? what is the alternative to inflation?

Submitted by RisingTide on Thu, 01/08/2009 - 14:35.

are you suddenly a proponent of deflation?

Platform for a do-nothing party

Submitted by undoctored on Sat, 01/10/2009 - 21:42.

What are you suggesting? that we do nothing? How can you oppose legislation (the stimulus bill) that is just now in the process of being drafted?  Don't you think it would be more responsible for Republicans to become engaged and to try to do something for the middle and lower classes for a change rather than lining the pockets of the wealthy?

I remember the days when moderate Republicans joined with progressive Democrats to pass the Civil Rights Bill over the objections of die-hard conservatives on both sides. Haven't we been told by all the pundits that in the U.S. one governs from the center? Is there any chance that we could see a trend towards non-ideological Republicans willing to actually do something for their fellow citizens?I won't hold my breath. Your blind opposition to anything Obama wants to do will just make you more irrelevant than ever.

Let's party like its 1965

Submitted by Ironman on Sat, 01/10/2009 - 21:48.

Could we see a trend about people who stop trying to "help us" by suggesting we play caddy while the Democrats play golf?

We should provide all the cheerleading for the Obama economic program that the Democrats provided for the Iraq War ...actually more, while we don't think its' going to work we aren't going to suggest he be impeached over it.

I guess it is the case of the

Submitted by In between on Sat, 01/10/2009 - 22:00.

I guess it is the case of the do nothing republicans. They had their tax cuts and they are all used up, they had their war which was a quagmire and other people had to bail them out. Now, with the country down on its knees they are nowhere to be found. They have no shame. Just more laissez-faire. Total failure. 

what positive improvements did Democrats offer to Bush

Submitted by Ironman on Sat, 01/10/2009 - 22:45.

Quit Iraq so you can get the blame for losing the war? BTW, who exactly "bailed out" Petraeous? 

Guess what. Your guys won. They wanted the job. We'll let them do it. 

The sort of complaints you offer would be like insulting a Jew for not ordering pork rinds just because the other diners want to eat them.  I suppose our opinion that a trillion dollar deficit scheme is beyond repair is unworthy of respect; but then again you guys usually define "tolerance" as "agreeing with everything liberals believe".

.

I have watched Bush for 3

Submitted by In between on Sat, 01/10/2009 - 23:13.

I have watched Bush for 3 years saying "we are winning the war on terror" when he made his speeches across the country. The war was getting worse each year. You had the Iraq Study Group. And then it was the replacement of Rumsfeld and it was Bob Gates and General Petraeus who figured it out. It was a quagmire. There was not enough troops to begin with and the war was not  paid for.

Before going into the war, Bush only listened to his neocons. Bush never talked to Brent Scrowcroft, James Baker, Bob Gates, or even to his father. And when asked why he did not talk to his father, bush said "I believe in a higher authority." It became a small circle of yes men in the White House. They campaigned on the airwaves. They lied, they did everything they could to go to Iraq. And Colin Powell said "You are going to be the proud owner of 25 million people. You will own all their hopes, aspirations, and problems. You'll own it all. You break it, you own it." [Bob Woodward, Plan of Attack]  

 

It seems odd that you are so worried about deficits, when Bush ran deficits for 8 years. I guess it is okay for the republicans and not okay for the democrats. We are on the verge of a depression and deflation. You better hope we get out of this, as the government is the last resort. There is nothing the republicans have done for future prosperity. Our jobs are going overseas and you do nothing. Our money going to Iraq as our country falters. "Free trade, heck yeah, give our jobs away." We just don't need any.

I have asked in previous posts for an answer, and you guys never give any answer. Just the same song and dance of tax cuts or cut spending. Well, we seen 8 years of Bush and now we are in this mess. So what is the answer? Bush is still president for a few more days, where is he. What is the policy. More tax cuts? We had that for 8 years. Is it working?

Oh thats right, just like clockwork. Bush is working on his legacy. Just one more spin.

I would like to here a bipartisan answer. Right down the middle. Not any ideologic answer. Something pragmatic on how to fix the problems. Just remember in economics, if you do one thing, then you have to compensate to balance it.

You don't like Bush

Submitted by Ironman on Sat, 01/10/2009 - 23:28.

Got it.

And that means we ought to sign off on some half baked trillion dollar deficit scheme?

Right.

Well, come up with an

Submitted by In between on Sat, 01/10/2009 - 23:45.

Well, come up with an answer. 

Good Luck!

Submitted by undoctored on Sun, 01/11/2009 - 00:23.

 The Republicans have a hard, hard time advancing any kind of concrete plans to fix our economy or anything else.  They're experts at obstructing.  Why did they oppose Social Security and Medicare?  Why have they always opposed raising the minimum wage? Why did they oppose equal pay for equal work?  Why do they crucify labor unions?  They can pretend all they want to be for the little guy like Joe (Sam?) the (non-) Plumber but don't believe what they say; watch what they do.

well, maybe because if promoting economic growth is #1

Submitted by Ironman on Sun, 01/11/2009 - 12:03.

you might not be quite so interested in entitlement payments,  politically correct ways to influence the free labor market,  or point out some unions (i.e. UAW) ran their employers into the ground. Now if you assume business will bear any burden society thrusts upon them, sure, you ladle out the taxes and regulations and lawsuits and labor disputes and pretend it all doesn;t matter.  

You guys make more sense when you talk infrastructure, research or education; at least there's emprical and anectodal evidence to believe there's an ROI to the society from funding that stuff.

The question which you guys don;t want to do the hard work to answer is whether the ROI on spending for that stuff over a 10-30 year horizon is going to exceed the COF to the taxpayers. Assuming unlike the hard libertarians  we should be spending something on these purposes---and we are---the issue becomes marginal cost v. marginal utlity.

Oh well, it's easier to call someone names than present a credible explanation why the Obama trillion dollar adventure doesn't violate the economic version of the Hippocratic oath. 

The unions ran the automakers into the ground?

Submitted by NextRightNando on Sun, 01/11/2009 - 12:05.

That's a good one. Did you here that Toyota is furloughing its plants - in Japan? Did the UAW cause that, too?

Toyota has making money and gaining market share for years

Submitted by Ironman on Sun, 01/11/2009 - 12:13.

and GM was losing both. Jeez, can;t you tell the difference. Toyota just started having issues a few weeks ago and are infintely better positioned to regain profitability as soon as sales improve. .

And that is becasue of who is bolting the cars together?

Submitted by NextRightNando on Sun, 01/11/2009 - 12:30.

And that is becasue of who is bolting the cars together, not becasue of who is making the executive decisions?

Or is it possibly this?

But the most important reason that Toyota became America's most prestigious automaker is that this quintessentially Japanese company has been better than Detroit at reading the American car psyche. Toyota has never been a style leader. It has never created a car as iconic as, say, the Ford Mustang. But it discerned correctly that many car buyers don't need the next hot thing. They just want a trouble-free product that looks fine - and they will pay a premium for it.

 

And let's not forget that GM's biggest problem is its dealers, not its unions. From the WSJ:

GM has about 7,000 dealers. Toyota has fewer than 1,500. Honda has about 1,000. These fewer and larger dealers are better able to advertise, stock and service the cars they sell. GM knows it needs fewer brands and dealers, but the dealers are protected from termination by state laws. This makes eliminating them and the brands they sell very expensive. It would cost GM billions of dollars and many years to reduce the number of dealers it has to a number near Toyota's.

I read a book about branding a few years back. Their example of how not to do branding was American automakers, becasue their brands were basically meaningless. One of their examples was close your eyes and think of a Mercedes. Easy. Think of a BMW. Easy. Think of a Chevrolet - almost impossible becasue there isn't anything in particular that signifies "Chevroletness".

yep, and given how strong Toyota has been

Submitted by Ironman on Sun, 01/11/2009 - 12:37.

you can;t afford to pay your workers to sit around and wait for new work, like the present UAW contract calls for.  Rick Wagoner should have forced the issue years ago on work rules particularly and now the're deep in the muck. The UAW got every dime they could while there were dimes to be had. In the long run you break the mint doing that.

 

Yep you say

Submitted by NextRightNando on Sun, 01/11/2009 - 13:08.

You say yep. Does that mean you do think that it is the assembly line workers and not the executives who caused GM to loose market share to Toyota? If so, could you be so kind as to explain to me how that works?

competition....

Submitted by Ironman on Sun, 01/11/2009 - 13:14.

If buyers perceived Toyotas as better cars, GM needed to cut costs so as to be able to sell their vehicles for less and still make a profit. The UAW contract prevented that from happening. I'm not blaming the line workers and I'm sure not letting the execs off the hook. But trying absolve the UAW of responsiblity in this debacle is just silly.

Why not try to, you know, make better cars?

Submitted by NextRightNando on Sun, 01/11/2009 - 13:43.

The egos of the gentlemen running GM would never have allowed them to pursue the strategy of beating KIA at their own game.  I've never seen a shread of evidence that GM was interested in being the low-cost leader. In fact, they had to know that they couldn't do it, because of their contractual relationships with BOTH the dealers and unions. 

So If buyers perceived Toyatas as better cars, why didn't GM design more attractive models?

 

cash flow was committed to benefits

Submitted by Ironman on Sun, 01/11/2009 - 15:32.

They did paint themselves into a corner, didn;t they

They continued to find enough cash to develop new models

Submitted by NextRightNando on Sun, 01/11/2009 - 15:35.

They just failed to develop models that people wanted. More about judgement and marketing nous than cash.

Well, certainly things can

Submitted by In between on Sun, 01/11/2009 - 13:20.

Well, certainly things can get out of wack. Maybe we got paid too much considering globalization. Of course Ceo's average pay is over 200 times that of the average worker.

If employers have health care coverage, then that is a disadvantage to the U.S. employer and employee as other countries have a national health care system and they don't have to put that cost onto the product. And employers have to pay higher premiums as hospitals pad the employees insurance to pay for the guy out on the street. So we know the healthcare system we have is broken.

If we look what has been happening with globalization. We can go back 30 years with the Japanese. It was cheap labor at first, then they took market share in textiles, electronics, and autos. In the end no one can compete with such force.

Today we are witnessing what China and other countries are doing. It is cheap labor and then they take market share. You are seeing more and more products from other countries, they can undercut us with the cost of labor, no healthcare, no pensions, no social security, and no OSHA standards. Now all this takes away from the middle class. If you don't like democrats, then fine. The fact is we are losing the middle class. It has been a stable working force and we are losing that. It will create an upheaval of some sort. We have many problems in this country. Cities and states are going broke as they do not get enough revenue as the factories close. The middle class purchased the cars and houses to drive the economy. 

You worry about the Obama spending, but we have had 8 years of spending by Bush that did no good and drove this country down. It was Cheney who said "deficits don't matter" so that is where we are at today. We have seen 8 years of borrowed money for tax cuts and we are back into a recession. We have had a stimulus package one year ago and that didn't do anything, now we have the banking/housing crisis that will take money, we have two wars that will take money, and the list goes on.

None of the above has dealt with real problems or headed of real problems. You want economic growth, but you don't want to pay for the war, you don't want to pay for the Bush deficits, your tax cuts did not create growth. As it was just borrowed money anyway creating a false economy. And you have never dealt with globalization. Bush says free trade is good and the factories close. And there is little concern. So explain that one for me.

The tax cuts are for the here and now. You may look at Dell or Apple in creating growth with that, but their factories can be built in China. So tax cuts does not answer the problem. It does not solve the problems.

Without research and development by our government in this globalized world, we will have no future. Billions have to be spent on new technologies to compete with other countries. Whoever comes up with a battery that gets 100+ miles on a charge will be the big winner. Now we can sit back with laissez-faire and do nothing, or we can invest in our country and its people. The government gave us the internet, it created millions of jobs around the world and we need to do more. And it will be the most complimentary thing to do for the government to do more research and development for economic growth. Other countries do it, and I can't understand the negativism on this.

To go back to Bush. Real economic growth would have been 2 years of tax cuts and 2 years of bringing down interest rates and cuts in spending. That would have been enough for the economy to grow on. We should have had the war in Afghanistan and not in Iraq. The Iraq war is taking away from our economy. We should have tackled free trade issues and globalization which was not done. We should have invested more in our country to deal with globalization. We would have been better off for it. Unfortunately, we are facing the most challenging economic crisis since the depression.

unions give a return on investment

Submitted by RisingTide on Tue, 01/13/2009 - 12:19.

via increasing the pay of workers, which means more marginal tax rate. geez, this shouldn't be hard to understand.

Oh, and if we get mondo inflation, that means obama's plan to keep America functional will have WORKED. It is REALLY REALLY bad if we get deflation. That would kill the american government.

You guys won

Submitted by Ironman on Sun, 01/11/2009 - 12:04.

it's your job now. If it's too difficult, you could still reconvene the electoral college before the 20th and let McCain take over  I suppose.

Hmmm......

Submitted by chemjeff on Thu, 01/08/2009 - 20:04.

Remember back in early 2001 when George Bush just took office and he was running around saying that we need to enact tax cuts in order to stave off a recession?  The Democrats and the MSM (yet I repeat myself) were scurrilously suggesting that this was some dirty political scheme in order to sell his right-wing ideology.  Here's an oldie-but-goodie:

BILL PRESS, CO-HOST: Tonight, charges that President Bush is talking down the economy.

PRESS: Is he being realistic? Or is it just a ploy to sell his policies?

See that?  It's the eeeeeeeevil Republicans playing politics with the economy!  But now we have Obama scaring the bejeezus out of everyone, warning that we are on the verge of the Next Great Depression and that unemployment could exceed a whopping 10% (which is pretty low for Depression standards, BTW), we have...applause!

Here's a tale of NY Times Hypocrisy:

3/19/01: "Presidents are cheerleaders for the nation's economy." and "Mr. Bush seized on every piece of unfavorable economic news."

12/23/08: "Mr. Obama must continue to level with the American people" and  "To his credit, Mr. Obama has already warned the American people that conditions will get worse before they get better."

unemployment is already at 16% if you use the depression

Submitted by RisingTide on Tue, 01/13/2009 - 12:21.

era standards that were modified by first LBJ and then by whomever took us off the U6 (google it, i don't care).

That's still lower than the great depression, sure, but we ain't through this yet, and unemployment is a lagging indicator.