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Friday, January 09, 2009

Slowing the Stimulus

There seems to be a little bump in the road to Barack Obama's economic stimulus package. Republicans, for reasons we'll get to shortly, are putting the brakes on the idea, under the flag of caution. It's a whole lot of money, they argue, and you can't just rush willy-nilly into this kind of thing. After having rushed willy-nilly into the invasion of Iraq and the massive bank bailout, it's tempting to give them the benefit of the doubt -- maybe they've learned their lesson. All this willy-nilly rushing often turns out bad.

"As of right now, Americans are left with more questions than answers about this unprecedented government spending, and I believe the taxpayers deserve to know a lot more about where it will be spent before we consider passing it," Senate Minority Leader Mitch McConnell said.

But these are Republicans and assuming cynicism in their motives isn't never a bad bet. Many see the concerns about the stimulus as being more about the future of the Republican party than about the future of the nation. Dean Baker -- who I'm really starting to like -- points out that the GOP is starting another round of historical revisionism. In what they claim is "a careful rereading of the history of the New Deal," Republicans claim that "President Roosevelt's policies actually lengthened the Great Depression." But it's not a rerun of a history they've completely made up that worries them, it's the history that actually happened. Specifically, after the depression.

[F]rom the standpoint of Republicans, the more ominous lesson of the New Deal policies is that it left the Democrats firmly in power for more than 20 years. The Republicans did not regain the White House until 1952, 20 years after President Roosevelt was first elected.

Imagine how terrifying the prospect of 20 years of Democratic presidencies must be for the current generation of Republican leaders. This would mean that they would not retake the White House until 2028, just 20 years before the Social Security trust fund is first projected to face a shortfall.

As Baker sees it, Republicans believe they have to burn the village to save it. Maybe this stimulus would save the economy, but Republican ideas are -- in their own minds -- the only moral way to think. Two decades of Democratic rule would be sacrificing American society to save the American economy. It's not about Republican economic ideas, but Republican societal ideas. They see twenty years of abortion and gay rights and evolution education and that crazy, hippy environmentalism stuff. The GOP, with an already shrinking demographic base, sees American society creating even fewer of those base dwellers.

So, given the options, the GOP will take a trainwreck of an economy over what they see as an unacceptably decadent populace, bought off by Democrats with government "socialism." Republican resistance to the stimulus package has nothing to do with fiscal caution.

Still, Obama sees this and throws the GOPers a bone in the form of corporate tax cuts. It would provide a $3,000 tax credit to companies that hire or retrain workers. The idea (or, more precisely, the pretense) is that if corporations get tax cuts if they hire more people, they'll hire more people. But this reasoning -- a cornerstone of Republican thought -- never made a damned bit of sense. People aren't in business to supply jobs, people are in business to make money. If you're going to make money by hiring more people, you're going to hire more people -- tax cut or no tax cut. If you're going to make more money laying people off, you're going to lay people off. In fact, it'd be good business to borrow money to hire people, assuming that your profits would be more than the interest. Not one business in America will hire more people just because they can afford to. That's just making busy-work to get a tax cut that won't cover the cost of the busy-work. It makes no sense at all.

We're going to wind up dealing with massive deficits for years to come and, as a result, we shouldn't be wasting time and losing tax revenue through ill-advised tax cuts. And it's there that Obama's meeting another speed bump from his own party. Top dems are complaining about the provision:

Sen. Kent Conrad (D-ND): If I’m a business person, it’s unlikely if you give me a several-thousand-dollar credit that I’m going to hire people if I can’t sell the products they’re producing…That to me is just misdirected.

Sen. John Kerry (D-MA): I’m not that excited about it…The creation of a tax credit for hiring isn’t going to make up for the lack of goods being sold.

I think that Obama's worried about Republican resistance, so he's trying to buy them off with a nod to their idiotic trickle-down economics. But I also think that Kerry and Conrad know the vote count here. Democrats may not have a filibuster-proof Senate, but they're only going to be a vote short of it. In this political climate, it's almost impossible to believe that the Republicans are going to be able to maintain perfect party discipline -- someone's going to vote with the Democrats. If a filibuster fails, the stimulus is sure to pass. So, all things considered, I think it's safe to assume that the stimulus is sure to pass.

Republicans may want this bone, but I don't think they should get it. If they win this one, they'll use it as a toehold to spin the whole thing. This one sliver of Republican ideology will be spun into the sole reason for the success of the entire package. They're thinking of the twenty years in the wilderness and we shouldn't be dropping bread crumbs to help them find their way out.



vet said...

I think you're fundamentally wrong here.

Whichever way you cut it, $3000 is $3000. Every employment decision is based on costs and profits. Let's say you're thinking about employing someone at a cost of $30,000, but you're not sure whether they'll be worth it or not; the $3000 break might well swing your decision.

Your conclusion paragraph makes it look as if you're doing the same thing you accuse the Repubs of. You, too, are thinking about their years in the wilderness and how you can prolong them. Is that more important than putting the economy back on track?

Wisco said...

To tell you the truth, I think it's insane to think someone will hire someone just to get a $3,000 tax credit. We just went through a 8 year experiment in this kind of economics and where has it gotten us? Employment has been weak almost the entire time. In fact, it wasn't until his second term that he could claim that one new net job had been created.

It didn't work the last time, so why expect it to suddenly start working now?

vet said...

Not just to get a tax credit, of course. Most of the benefits of employing a person are going to have to come from increased revenues of some sort. But the tax credit adds to that gain. Makes perfect sense to me.

Wisco said...

It's kind of a dead issue now, it looks like the tax credit is out.

No loss, really. As I've already pointed out, we've tried this sort of thing for eight years and it's failed miserably. It's just be a waste of tax revenue.