Obama's clever fiscal stimulus strategy

Barack Obama appears to be making significant overtures to cultivate Republican support for his fiscal stimulus plan with massive tax cuts (albeit short-term tax shifts rather than structural changes or actual cuts).  The Leftroots (and Paul Krugman) are fairly upset about thisKevin Drum says this attempt to win bipartisan support (rather than just the few Republican votes he absolutely needs to secure passage) is a bad idea, because Obama is making concessions he doesn't have to make and diluting Democratic policy.

The netroots is understandably anxious to enact all of their favorite policies - they earned political capital in the campaign and they intend to spend it, they'll argue without a trace of irony - but that's what President Clinton did in 93-94, right before he learned the difference between stated preference (nice things are nice!) and revealed preference (wait, you want to do what to me?).  The Democrats tried to run out of the gate and discovered too late that they'd left a lot of people behind.  In 1994, those people voted.

Obama's strategy is a lot more sophisticated than that.

Here's the calculation on fiscal stimulus: If Obama gets his way, he's looking at massive, trillion dollars deficits, and much more government intervention in the economy.  The public may tolerate this due to fears about economic crisis, but if it works out well and the US gets a relatively soft landing from the recession, then the costs will still be visible (deficit, intervention), but the benefits will be intangible (the crisis that didn't come). 

What's more, the Democrats have only one possible solution to the massive deficits coming down the pike: increase taxes.  (Object lesson: "We can spend more of your money" is the Democrats solution to everything)

If Obama passes the perfect progressive stimulus bill without much Republican help, he owns the spending, the deficits, the tax hikes and all of the pain that comes with it.  Republicans will be happy to run against those problems in 2010 and 2012.

But if Obama buys significant Republican support for his bill, Republicans will own the deficits, tax hikes and intervention, as well.  The stimulus bill will be for Republicans what the Iraq war was for Democrats - a policy they first supported, then regretted, then tripped over themselves to explain.  The "they were for it before they were against it" ads would be inevitable and devastating.

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).

Obama doesn't want bipartisan support, so much as he wants political immunization.  In this case, unity and bipartisanship = lashing the Republicans to the mast of Government.

There aren't many good solutions here, but one thing seems likely: as with the Democrats and the Iraq war, the future leaders of the Republican Party will probably come from among the politicians who can say "I told you so" when they run because they said "no" now.

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Comments

Mind reader!

And your evidence for "immunization" instead of "reaching out to the other side" is????

Obviously the man will be damned by you if he reaches out to Congressional Republicans or not.

Bingo!  And while the GOP

Bingo!  And while the GOP doesn't want to offer any real alternatives, they also don't want to step up to the plate and take responsibility for being "lashed to the mast" of  actually governing (i.e., doing the job they were elected to do).

The job they were elected to do?

They're a minority. "The job [the minority] was elected to do," as defined by the Democrats from 1994-2006, is to bitch, obstruct, and blame your political opponents for everything wrong with the world.

Turnabout's fair play.

 

Silly me... how naive I am. 

Silly me... how naive I am.  I didn't realize the 1994-2006 Dems are the GOP's role models.  Living in AZ I am represented by two GOP senators and I thought they were elected to participate in principled governance representing our interests, but apparently they were elected to emulate 1994-2006 Dems ... please excuse my ignorance.

There's no excusing the

There's no excusing the ignorance and naivete necessary to believe that some kind of "principled governance representing our interests" is possible in a world where the only political power the GOP holds on the national level is a purely theoretical filibuster threat in the Senate.

What the hell do you want the GOP delegation to be doing? Coming up with alternatives to the Democratic agenda that'll be ignored by the media and will never come within sniffing distance of a committee vote, let alone a floor vote? I don't particularly enjoy the spectacle of Republican politicians masturbating; YMMV.

 

I was making my comments in

I was making my comments in light of the purpose of this site.  I understood it was dedicated to formulating the NextRight, not aspiring to be the OldLeft.  But whatever floats your boat.  I see this as an opportunity to offer a bold, conservative message and to explain why there is a better alternative and then, later, the "We told you so" claims might have more resonance.  I'm not naive enough to think a GOP proposal would be passed or as you suggest, even come to a vote.  But there ARE many channels for communicating with voters about how the economic meltdown could be addressed in a conservative way -- why not find a way to create an opportunity?

So I would be less worried

So I would be less worried about trying to outthink Obama's startegy...and start figuring out what it is Republicans really care about. How would they fix the economy if they were in power?

frasi latine

How about:

It makes more political sense?

If Bob Dole and Newt Gingrich has been nice guys

The Democrats would have won the 1994 Congressional elections and the Democrats would never had to be partisans obstructionists at all.

Unfortunately, Boehner and McConnell aren;t lookin like they are in the same league. Maybe they'll surprise me.

Both guys ought to remember that a lot of their members already got tarred with the TARP vote. Voting for Obamanomics for them is like sending an engraved invitation to the party rank and file soliciting a primary challenge.

 

Too cynical here?

I don;t see what the problem is. Are you saying that Republicans don;t know what they stand for? It's easy to "stand up fpor what you believe in" when you're in power. It's much more difficult voting your conscience when cards are against you.

So I would be less worried about trying to outthink Obama's startegy...and start figuring out what it is Republicans really care about. How would they fix the economy if they were in power?

For all the talk of Obama, let's not forget that George W Bush is still in power with only a slight Democratic majority. We've seen him give out plenty of bailout money to anyone who's asked with plenty of Republican votes.

Where's all the straight talk now? Where's all the talk about small governemnt?

 

 

 

How would republicans fix the

How would republicans fix the economy? So far they are clueless.

This is nothing new. It happened to the democrats with welfare 30 years ago. Wanting more of it along with inflation.

Today it is the republicans with a failed supply side trickle down theory. Along with deficits and debt. 

It takes about 30 years to go too far to the left or right. And we see the arrogance and ignorance of the far right. 

Oh well, back to the drawing board.

Conservative alternatives to Keynesian stimulus

Here are just a few:

Permament, across-the-board tax cuts

A two-month tax holiday

Cutting the corporate tax rate especially to spur investment

(Incidentally, even Charlie Rangel supports cutting the corporate tax rate.)

So there are conservative ideas out there for what to do about the economy.  But neither conservatives nor Republicans are in charge, so we don't set the agenda.  So demanding that Republicans "do its job" is a bit odd.

And if you look carefully at the tax cuts proposed by Obama, the biggest part of it is the $500 "Making Work Pay" payroll tax credit, which is really just a disguised stimulus check.  The other stuff are of the "targeted tax credit" variety popularized by Clinton.  So some businesses would get a tax credit but only for one year and only if they hired a new person.  If they generate new economic activity in other ways, then they are SOL.  These types of tax cuts are the ones Democrats like because it continues to enable them to manipulate the economy in ways that untargeted, across-the-board tax cuts, such as the Bush tax cuts, don't permit.  And yet another part of the tax cuts Obama proposes are just an accelerated writeoff schedule for businesses, allowing them to writeoff losses sooner rather than later.  That's not really a tax cut.  Oh and all of these tax cuts are undoubtedly temporary.

So yeah, I'm suspicious that Obama's tax cut proposals represent a genuine attempt to reach across the aisle, because they are (a) disguised stimulus spending, (b) gimmicky, and (c) temporary.  Now if Obama were to come out and say "I support cutting the corporate tax rate to 25%" - now THAT would be significant, considering that Republicans have been complaining for a while that the corporate tax rate is too high.  But he won't.  So I'm more inclined to agree with Mr. Henke that Obama views these tax cuts are bones to throw across the aisle rather than a sincere effort at bipartisanship.

I'm honestly troubled...

...where exactly are the requisite spending cuts to accompany your republican ideas there, my friend?

This is, YET AGAIN, the biggest trap Republicans fall into.  Tax cuts, then go home and have dinner.

If you can't cut spending, don't cut taxes.  Since we have no ability to control spending being in such a drastic minority, don't take the trap of the tax cuts here, as they will simply incur us more debt.

Jon, seriously man, this was one of the best articles I think you've written... I really enjoyed your analysis on this one - top notch stuff.

I agree completely.

 In fact, this should be the new Republican Party's motto: "If you can't cut spending, don't cut taxes."

And let every Republican Congressman and Congresswoman understand this about any infrastructure stimulus proposal, the nation's infrastructure hasn't fallen down percipitously. The main political goal of these funds is to keep states' bloated, unionized employees' salaries and benefits funded. What this infrastructure stimulus proposal is actually saying is,  we want to increase taxes without voter approval in order to keep our state employees' salaries and benefits at their present levels at least until the economy recovers. If individual states want to increase state taxes to keep their employee's salaries and benefits at their present levels, let them do so at their state ballot box, not from my pocket without my consent.

 ex animo

davidfarrar

More on that Nasty Needle

1) By all means, now is the time to come up with a perfect world Republican alternative.

2) On a more realistic level, we should support BHO if this package will actually lead to recovery.  That will happen if we get meaningful reductions in taxes on corproate income/payrolls/ or capital gains.  If we get them, great; otherwise, oppose and obstruct.

3) On Infrastructure, we should suppot modernizng our electrical grid and reducing transportation congestion in big cities.

If we can get a package that will work (eg meaningful corporate tax cuts), even if it's not ideal, we should support it. If it won't work, oppose and obstruct until MAD RIVER GLEN GETS A HIGH SPEED QUAD!!!

Adam

Normal 0 The stimulus

Normal
0

The stimulus plan of President Barack Obama can be a very huge help to consumers especially now that the economy is suffering. Just in case his stimulus plan fails, we still have payday loans to help during those times we are struggling to make ends meet. He calls it the “American Recovery and Reinvestment Plan.” The focal point of this plan is job-producing projects that can get started quickly. In addition, he says he is going to provide assistance for middle and low-income families, who are the ones who typically take out payday loans, and provide debt relief for students. He plans to do this through a form of tax cuts and he plans to invest in infrastructure such as bridges, roads and water mains. We’re going to need a huge dose of that stimulus plan to at least stabilize the U.S. economy in this deepening recession. If this plan succeeds, the number of people turning to payday loans will decrease and prosperity will be restored.

 

The main political goal of

The main political goal of these funds is to keep states' bloated, unionized employees' salaries and benefits funded. What this infrastructure stimulus proposal is actually saying is,  we want to increase taxes without voter approval in order to keep our state employees' salaries and benefits at their present levels at least until the economy recovers Miniclip games

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