Playing Politics with Relief Policy

by Keith Cooper

From Broader View Weekly, February 27, 2009

Last week President Obama signed into law the American Recovery and Reinvestment Act. There has been much discussion over the last few weeks about the provisions and costs of the plan and how effective it will be.

The media has played a major role in shaping the public perception of the legislation. Depending on which newspaper you picked up on recent mornings, the headline would project different perspectives. One paper tagged an Associated Press story using words like “huge” and “humongous” to describe the size of the stimulus package, while another headlined the same story with mention of expected job increases or anticipated project funding.

All in all expectations have been low. Even the president and members of the Democratic Party in Congress were cautious. Obama asserted that the plan was imperfect but necessary. Democratic Congress members were conflicted over the votes they had cast. The fact is that even while most economists support the use of such government spending to stem the tide of the worsening economic crisis, they do not hold much hope that the results will be overwhelmingly positive. Nearly all economists agree that the next couple of years will be bad. The favored indicator of economic stability, unemployment rate, will reach 10 or 12 percent by some estimates. However, without the stimulus package, these economists say the rates will be much higher.

But reasonable caution and checked enthusiasm were cause for further media criticism. I heard one news network pundit (a former Bush administration staffer) criticize Obama’s use of the word crisis. He said it was the president’s job to act as a cheerleader and that would boost the public’s confidence. Personally, I would prefer a president with a firm grasp on reality to one so out of touch that he finds it hard to quote the price of a gallon of gasoline or to assess the gravity of an economic downturn.

I don’t think the stimulus package is the be-all and end-all of solutions to the current recession or the impending depression. I think it is a pro-active step in the right direction, and better than doing nothing.

Oh, I have heard Republicans defend unified disapproval of the package by saying they had proposed an alternate growth package. However, after some searching, I was able to come up with little detail of any such plan. Mostly it was about either instituting new tax cuts or making Bush’s tax cuts for the wealthy permanent. One interesting detail I heard discussed on the floor during the last hours of debate before the house passed the Bill on Friday, February 13, was a suspension of the Capital Gains Tax. One Republican representative mentioned that suspending the tax alone would generate market gains of 300 points. I found this interesting because, given the daily hemorrhaging of the market, few are worrying about the Capital Gains Tax (unless they are politicians, apparently). In fact, while times are tough, investors can use the tax code to deduct some of the losses they have suffered.

What bothered me the most about the Congress’ actions during the lead-up to the signing, was the politicizing of what was intended to be a relief package for struggling Americans. I haven’t read the entire legislation, but I am sure there are probably examples of wasteful spending inserted by Democrats. I am also discouraged by the cuts of education funding that were made as concessions to win the necessary Republican votes for the Senate’s version.

More disturbing yet was watching House minority whip Eric Cantor at work. He is credited (in fact lauded) for pressuring Republican members of Congress into voting against the bill en masse. He was successful in getting unanimous disapproval from the House and only allowed three dissenters in the Senate (and those were sent clear messages about their reelection hopes after bucking the Party). The New York Times applauded him on the day after the vote and anointed him the next Newt Gingrich. He did send Obama a “thanks but no thanks” message regarding his attempts to reach out to GOP legislators. It is good to know that petty politics still trump public service on the Hill.

Facts are facts. The stimulus package is the largest ever. The national deficit will increase by somewhere between $1.2- and $2-trillion. Progress will take time and be hard to measure. But we can look at it with a sense of perspective. Former President Bush’s T.A.R.P. program will cost about as much (its final cost estimated above $2-trillion by some accounts). He turned a surplus into a $10-trillion deficit within two terms. And there is almost no transparency and absolutely no accounting for how the T.A.R.P. funds are being used. So much for fiscal conservatism.