The Stimulus Opportunity

The upcoming fight over the largest, fastest expansion of the national debt in American history (a/k/a the "economic stimulus") will be unusually compelling and provocative. First, it will provide an opportunity to reclaim the long lost mantle of fiscal conservatism. Second, it could provide interesting opportunities to build alliances with Blue Dog Democrats and progressive elements within the Obama coalition disappointed in the plan's focus on Old Economy ditch-digging projects.

Here's David Brooks, TR Republican, giving voice to neo-urbanist concerns about the stimulus:

Barack Obama has said that he would start an infrastructure project that will dwarf Dwight Eisenhower’s highway program. If, indeed, we are going to have a once-in-a-half-century infrastructure investment, it would be great if the program would build on today’s emerging patterns. It would be great if Obama’s spending, instead of just dissolving into the maw of construction, would actually encourage the clustering and leave a legacy that would be visible and beloved 50 years from now.

And:

It’s also before the spending drought that is bound to follow the spending binge. Because we’re going to be spending $1 trillion now on existing structures and fading industries, there will be less or nothing in 2010 or 2011 for innovative transport systems, innovative social programs or anything else.

Environmentalists aren't happy either:

In one of the first internal struggles of the incoming Obama administration, environmentalists and smart-growth advocates are trying to shift the priorities of the economic stimulus plan that will be introduced in Congress next month away from allocating tens of billions of dollars to highways, bridges and other traditional infrastructure spending to more projects that create "green-collar" jobs.

FTW, Friends of the Earth is whipping its members into action with the slogan "New Roads = New Pollution." 

In 2002, when Mark Warner tried to push through a tax increase referendum to pay for roads in Northern Virginia, he was thwarted by environmentalists and progressives. The outer suburbs, nominally more Republican, voted for the referendum. Alexandria and Arlington voted against it, with precinct-by-precinct returns tracking closely with proximity to metro stations.

This means a huge chunk of Obama's natural constituency will be soft on an infrastructure-heavy stimulus. And to the extent there still are voices of fiscal sanity left in the Democratic Party, they may balk at the price tag, which at $675-$775 billion over two years would be the largest, most dramatic dollar-per-dollar expansion of government -- and the national debt -- in American history.

It will also be good to be on the side of good government for once. Brooks' embrace of central planning aside, he is right that there just isn't $1 trillion of "shovel ready" work ready to go, which means a lot of haphazard, fly-by-night crap getting funded. The stories of waste, fraud, and abuse from these projects will be legion. We may not agree ideologically with all who may want the stimulus to be more carefully planned out to fund their pet projects, but from left, center, and right, there will be a unifying argument that the Obama stimulus is a big hairy mess that just isn't fully baked.

Ideally, this unfolds as follows.

Republicans begin to tap into Americans' common sense belief in belt-tightening as the appropriate response to lean economic times. Families have had to make sacrifices -- it's time for government to do the same and not saddle our kids with a trillion more in debt on top of bailout after bailout after bailout. Or, taking on more debt than we could afford is what got us into this mess. Now they're saying that taking on more will get us out? Give me a break.

We then introduce a $250 billion package of targeted tax cuts and small business incentives. We cite as a rationale for the figure Obama's own economist, Christina Romer, who has found a 3x multiplier effect from tax reduction, while other mainstream economists who say the multiplier from a spending increase is about 1x. We argue that this package would have the same impact as the inefficient and wasteful Obama stimulus. If they can be brazen and maximalist, so can we. Plus, it would be nice to hold fast to a position that doesn't concede spending hikes.

Meanwhile, Democrats will hopefully delay the package as they figure out how to divy up the spoils, which currently favor 91% male unionized construction workers over women and environmentalists. In an ideal world, we get a moderate Republican who favors some new spending to stake out some sort of compromise position that has two thirds of stimulus spending going to the knowledge or green economy -- building up the GOP's broader New Economy cred -- and limiting the amount of money that can be spent on the stimulus overall and its biggest dollar drain, physical infrastructure (which was already lavishly funded by the pork-laden 2005 transportation bill).

Peter Beinart has sketched out the political economy of the "stimulus" and says Obama is likely to come out the winner, racking up ginormous deficits but spending our way out of the recession. Look at what happened to Clinton, who was baited into fiscal austerity in his 1993 economic recovery package, and was rewarded with the 1994 midterms. Looking at Clinton, Bush didn't even bother with fiscal responsibility (though Bush is starting to look a whole lot thriftier in comparison to his successor).

But Beinart misses one thing: who left office with a 65% approval rating, and who leaves office with a sub-30% approval rating? Gridlock-induced fiscal responsibility eventually worked out for Bill Clinton. The opposite did not work out for George Bush, whose playing against type on spending cost him the support of his base.

Even in times of crisis, there is a resonant chord in the American electorate that wants the government response to be firm, but orderly and responsible. There is a general sense in which the $700 billion bailout -- which everyone told us was supposed to save civilization as we knew it -- was overkill, as evidenced by it being upside down 41-51 with a +7 Democratic electorate in the exit polls. The auto bailout -- though much more limited in scope -- was broadly unpopular.

If Obama looks like he's throwing money at the wall -- and undermining his own promise to build a green economy too boot -- there is ample opportunity to reclaim the mantle of sane governance and fiscal responsibility. But only if we are serious about seizing it, and not just another piece of the bailout action.

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Comments

Great points but I question some of the numbers.

If Republicans appear to be standing in the way of Obama and his plans to get this country our of the mess it's in? It will only doom us come 2010. Watch and see if those politicans who voted against the auto bail out get relected. People are tired of the bickering that does not allow us to see daylight at the end of this recession.

If you want to actually help people, and not just oppose Obama, then come up with better plans. That's what he did when this crisis hit and that's why the majority of this country voted him into office.

Stimulus Package

I think the R's will have to be careful.  I think the idea that government spending is counter-cyclical wrt the economy) is probably pretty appealing to a lot of people.  I don't think R's want to be the party of excessive spending in flush times and scrooge in bad times.

Beinart says everyone wants to be Santa Claus rather than Scrooge.  But most (hopefully) can discern profligacy and irresponsibility from Santa.  The public employee unions are a good example.  Does anyone even know what public employees make when they retire?  Is this all a big secret?   Even the UAW, how much do the retirees make?  What kind of health care benefits do they have?  Is this a big secret?

Secrecy is a big part of the Left/Dem approach.  The R's need to expose their thinking.  A poster boy would be David Brooks.  I'd love to see a poll on his ideas for "national service centers" and all the others. 

 

1,2,and 3

1.. What are you going to make when you retire, and if you don't like that question then why do you ask?

2.  Public employees retirement is usually set by legislation so it doesn't take a genius to find it, so even you should be able to.  (for instance here is the board for New Mexicos retirement for teachers, state employees, etc... www.nmerb.org )

3.  Secrecy is a big part of government, period.  If the last 8 years has taught us anything it is that both parties have one thing in common (and always will) ...the love of power!

I look at it from the other perspective

There are probably a fair number of compelling projects in small-town America to be found, but to spend this kind of money the Obama camp will need to ladel it out in profligate fashion to every big city urban political machine in the country.

One reason the country is in the shape it is in is because you can NIMBY and BANANA a bridge or a energy project to death; but it's very, very easy to hire "community organizers". Perhaps MSM folks like Tom Friedman who bemoan the condition of American public facilities ought to pose a gimlet eye in that direction.   

Pointing out that much of this "stimulus" is simply a slush fund for urban Democratic politicians is a great opportunity to  regain our bona fides as responsible guardians of the fisc--particularly with the outer burbs who bailed on us in '06 and '08.. That's the "green" I'm worried about----the "Whole Foods" voters in trendy inner suburbs aren;t going to flip allegiance on their man Barack no matter how we pitch them---at least, not until he is an uncontroverted screw-up. If they went for Kerry, they will not readily move to us now. 

A caveat

I don't suggest we can win back inner suburbanites who use mass transit, only that Obama can be made to feel pressure from this constituency, thereby delaying the stimulus and allowing us to shape the broader macro-narrative we want to drive (slush fund / corruption / waste, etc.).

Old Town and Rosslyn were selfish votes, not ideology

They already have Metrorail to any destination they want to go to in metro DC.  Had Warner proposed a tax hike to build commuter rail to Loudoun and PW instead of new highways, they still would have voted nyet. They already have what they want and besides, they have thinly veiled contempt for people who live in the outer burbs. They will not pay more to help others in this instance.

 

 

"and who leaves office with a

"and who leaves office with a sub-30% approval rating? Gridlock-induced fiscal responsibility eventually worked out for Bill Clinton. The opposite did not work out for George Bush, whose playing against type on spending cost him the support of his base."

This is what we need to concentrate on. The democrats are going to do what they're going to do.  We have little say.  But the GOP Base is anxious to get enthusiastic again, unfortunately they're finding nothing.  An echo. Crickets chirping.  Why?  Because we wrongly analyze what the problem is by saying things like "spending cost him (Bush) the support of the Base".  Wrong. Wrong. WRONG!   The Base picked up on the contempt that George W. Bush had for them.  This contempt would surface every time Bush would oppose them.  Most recently when he decided to circumvent the will of the Base and the duly elected GOP Senators and bail out the Big 3.  This has happened repeatedly since 1/21/05 when "W" allowed his haughty elitism to surface and run rampant.   And there are many like him still in control at RNC headquarters.  No one seems to want to single them out and dislodge them.

You know you can only poke a finger in your friends eye so many times before they're not your friend anymore.  Darvin Dowdy

Who are the 30% who support Bush?

Who are the 30% who support Bush if not his base? As far as I have read Bush's support such as it is comes from self-identified conservative Republicans. Am I missing something?

Hit Them On Transparency & Accountability, Not Ideology

Patrick is right, this IS the well from which we draw the messaging from in 2010 and 2012:

Republicans begin to tap into Americans' common sense belief in belt-tightening as the appropriate response to lean economic times. Families have had to make sacrifices -- it's time for government to do the same and not saddle our kids with a trillion more in debt on top of bailout after bailout after bailout. Or, taking on more debt than we could afford is what got us into this mess. Now they're saying that taking on more will get us out? Give me a break.

And the anger from the $700 billion Wall Street Bailout and the 30(ish) billion from the Auto Bailout will be key flashpoints as those bailouts were painfully convoluted and murky and expensive and revolting.

Noted: I should point out that I think a lot of GOP incumbents are going to face trouble in 2010 primaries over those two issues as well. It wasn't just a Dem bailout, far from it.

Anyway/but, by all accounts, this country is headed for a VERY tough next several years (most likely real double digit unemployment). People are scared and they don't give a sh*t about ideology. They want to keep their house and their job.

The GOP doesn't have the brand stature to argue "250 billion and tax cuts" (thanks W) when President Obama and his 70% approval rating stands up and says "I'm going to save your job with my fiscal package and the Republicans want you to lose your house."

(also throw in the fact that most smart economists don't really know what the hell is going on anyway, or what will fix it).

What the GOP DOES have the brand stature to do (and can can continue to help rebuild off of) is when Obama puts forth his trillion(ish) fiscal stimulus package the GOP can say, "OK Mr Obama, we're going to work with you to help save America. And, while we think you're going to spend too much money, we're going to work with you. All we ask in return is that this process is open and accountabile so that the taxpayers can see and understand where their money is going."

And then hold Obama/Reid/Pelosi's feet to the fire. And embarress the hell out of them. Because it's going to be brutal. And voters are going to be pissed when they see where their money is going.

No downside for the minority GOP. And a lot of upside.

My two cents.

 

I own a small business

I own a small business. Tax cuts would have zero impact on me, becasue I'm no longer making any profits. And in this climate, there is no tax incentive you could offer me that would cause me to create new jobs, becasue I don't see demand for my products picking up until the economy picks up.

So, I don't see how tax cuts stimulate the economy.

UAW fat cats keep their share of the pork

Fancy golf course, multi-million dollar 'resort' , lear jet....no, not GM executives, but UAW's.

Time to limit the share of the bail out they get.  

NY To Get 5 Billion? What State Is Next?

Let the welfare state begin! 

Stimulus = Fiscal Responsibilty

While I think there will be opportunities for conservatives to make hay on Obama's response to the recession and ongoing financial crisis, I would caution us not to make the mistake of equating fiscal responsibility with a moratorium on government spending by arguing that any fiscal stimulus is irresponsible. During the current crisis, I frankly think it would fiscally irresponsible for government to sit on the side lines while the real economy follows Wall Street over the cliff.

To make a long story short, I don't think we can foresee yet what opportunities will develop that will allow the GOP to draw politically effective distinctions between our GOP policies and principles vs. the Democrats. Frankly, given the stakes, I hope that Obama is successful in getting the economy back on track because I don't at all relish the alternative.

That said, our opportunities will arise in the first place on the margins of Obama's policies (this or that could have been done better/different, etc.) and in the second place in deciding how to address our massive debt. Playing politics with the debt is going to be a tempting and dangerous game. It will be interesting to see how that plays out to say the least.

In the long run, we face a painful period of shrinking standards of living which is after all what we mean when we say "belt tightening". Navigating that political minefield will also be challenging in the extreme.

If MoveOn is blowing a gasket over the $350B already spent

how are less liberal people going to deal with annual trillion dollar deficits for the foreseeable future?

Perhaps GM is a "teachable moment" This large organization made the politically correct decision to borrow heavily and make unsustainable entitlement committments. And proceeded to get it's bell rung by foreign competitors.

David Paterson might not see the analogy, but I think a lot of the folks who bailed over GOP economic stewardship are going to recoil at deficit spending on steroids.

 

Who tells the best story about the cost/benefit of the stimulus

...I think a lot of the folks who bailed over GOP economic stewardship are going to recoil at deficit spending on steroids.

That's the crux, I think. Can a case be made, after the fact, for value? If the money is seen to be wasted then there will be hell to pay. In some sense one can argue that's really what went wrong for GWB's Iraq policy: the investment of blood and treasure was seen by the majority of Americans as too high for the benefits delivered.

If you look at GDP through the CIEG lens where C = consumer spend, I = investment, E = exports and G = government spend then US GDP is tanking severely without G in the short run. Politically, the issue will be who tells a more compelling story on the other side.

However, your point is valid. We got ourselves into this mess with a long credit bender in both the private and public sectors. Does it make sense to now take on more debt to get ourselves out of it? Yes and no; which is to say we're in a pickle. In my view, we need to put money into the economy to get it going again. But really we have yet to pay the piper. Long-term, we have to figure out how to save and live within our means as individuals and as a nation. Fixing the current crisis will in the short-term only make the long-term crisis more challenging to put it delicately.

It is not a pretty picture.

the first rule of holes is...

to stop digging.

The "stimulus package' is just a way to fill in the "private debt hole'  by creating an even deeper "public debt hole" so the Obama Administration can get credit for paying the people who are doing the digging.  

Ironman, yeap.. i agree

Ironman, yeap.. i agree too... Cheers, Katy

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