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Despite Republican Obstinance, The Stimulus Plan Will Soon Reach the President. Will it help alleviate the worst effects of our economic crisis? February 13, 2009

Posted by Suzanne Robinson in Stimulus.
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The Politics.  Well, after much ado, a sufficient number of Legislators have agreed to the compromise stimulus plan.  For such a major piece of legislation, it was passed with remarkable speed but without bipartisan support.  In fact, though Democratic leaders offered to work with any Republicans willing to sit down and hammer out a compromise after the House and Senate each failed to pass their version of the legislation, only three Republican Senators, Arlen Specter (PA), Susan Collins (ME), and Olympia Snowe (ME), accepted the offer and helped reach a compromise that all involved in the negotiations could support.  And, even after Democratic leaders increased tax breaks and cut spending at their behest, not a single House Republican or any Senate Republican, save these three, offered their support.  The president didn’t need House Republican support for passage, but it would have been nice to see some work with him in his attempt to stimulate the economy and get Americans back to work.  But it was not to be. 

Everyone, including Congressional Republicans, agree that our economy is in dire straits.  The IMF said this week that leading economies are already in a depression, and the President of the San Francisco Federal Reserve Bank said she saw “the same type of dynamics taking place that do happen in a depression, according to Dana Millbank of the Washington Post.  Even Senate Minority Leader Mitch McConnell (KY) acknowledged Monday, “the economy is in serious trouble.”

Still, Congressional Republicans said they could not support the plan because it is too big, it will not adequately stimulate the economy, and it will permanently expand government spending programs.  Even with 36% of the resources allocated for tax breaks, Republicans weren’t taking the bait.  Rather, Congressional Republicans joined ranks and refused to budge, all while pressuring the three Republican Senators who did participate to stand down.  Despite their actions, though, Congressional Quarterly (CQ) Politics, reported that Representative Mike Pence (R-IN) said Wednesday, “I know of no Republican in the Congress of the United States that wants to do nothing.”  Not all Republican leaders agree.  Michael Steele, the new Republican Party chairman who has disgraced himself repeatedly in his short tenure, boastfully told House Republicans, “The goose egg that you laid on the president’s desk was just beautiful.”  President Obama has his work cut out for him in bringing a new, civil and dignified tone to Washington in the face of this Republican leadership. 

President Obama, after reaching out to Republicans to join in crafting the stimulus package to no avail, realized he would not garner the 80 Senate votes he had hoped the bill would attract and went to the public to promote the stimulus.  While the nearly total lack of support from Congressional Republicans may have made a less devoted man decide it was impossible in today’s climate to persuade our leaders to work together for the people they represent, President Obama has not wavered.  In an article that appeared in the New York Times and at MSNBC.com, Peter Baker reported, that President Obama has not given up on fostering a spirit of cooperation in Washington.  Rather, he noted that while the time for garnering bipartisan support of this legislation had passed, he made clear that he will continue his efforts.  “As I continue to make these overtures, over time, hopefully they will be reciprocated.”  And the people are watching.

The New York Times reported that we lost 598,000 jobs in January, leaving 3.6 million officially unemployed Americans.  With Republican posturing in the face of these dismal numbers, the public is not happy.  According to a Feb. 6-7 Gallup Poll, 67% of Americans are pleased with the way President Obama is handling the economic crisis, while only 31% approve of the way Republicans in Congress have conducted themselves.  This poll was conducted before President Obama’s Monday press conference, where he undoubtedly won over more Americans with his explanation of why the stimulus is needed and what benefits it will provide.  Even so, the poll revealed that the American people have more confidence in President Obama now than they did when he was inaugurated.  Fifty-five percent say their confidence in his ability to improve the economy has increased.  And 51% say the same about his ability to manage the federal government. 

Three Republicans Found a Compromise They Could Support. Lacking any Republican support, the stimulus plan could not pass.  Fortunately, the president picked up the support of three Senate Republicans, Olympia Snowe and Susan Collins, both from Maine and Arlen Specter of Pennsylvania.  Senator Specter particularly deserves the appreciation of the President and the American people.  He is the only one of the three facing reelection in 2010, and his support at home is waning.  Acknowledging this situation, he said, “I have no doubts about the political disadvantage.  [I’m] losing a lot of political skin about this… It means I’ll have to raise a lot more money.”  This is particularly true since, according to CNN, Scott Wheeler, the executive director of The National Republican Trust PAC announced Wednesday that, “Republican senators are on notice… If they support the stimulus package, we will make sure every voter in their state knows how they tried to further bankrupt voters in an already bad economy.”  He threatened to provide financial support to any primary challenger to the Senators who supported the plan, and vowed to actively campaign against any Republican who agreed to spend more than $800 billion (probably contributing to the $787 ceiling).  He specifically targeted Specter, saying, “[H]e has “crossed the line too many times.  We’re now going to get involved in finding a conservative alternative.”  President Obama and Congressional Democrats should recognize his courageous support, and voters should note that he voted for what he thought best for the country rather than what he thought best for his career. 

The Plan: Breakdown and Highlights. The stimulus plan, now totaling $787 billion, with $505 billion (approximately 64%) in spending and $282 billion (approximately 36%) in tax cuts is a close approximation of President Obama’s initial plan.  He wanted a 60 – 40 split.  It allocates resources among four categories:

  • Tax breaks;
  •  Infrastructure projects, (e.g. transportation, broadband expansion, etc.);
  • Aid to state and local governments; and
  • Investments in healthcare and alternative energy initiatives.

 The Associated Press has provided highlights of the compromise stimulus bill – its spending, tax cuts and incentives.  A summary of the spending provisions is below.  Note that a fuller picture is provided on their site, which is helpful, as certain spending provisions could be placed under two or more categories:

  • Health Care                                                           $137 billion
  • Energy                                                                     $ 97 billion
  • Education                                                               $ 91 billion (includes school repairs)
  • Infrastructure                                                        $ 86 billion  (transportation, internet, etc.)
  • Aid to Poor and Unemployed                            $ 67 billion 
  • Direct Cash Payments                                        $ 14 billion
  • State Block Grants                                               $   8 billion
  • Scientific Research                                              $   6 billion
  • Law Enforcement                                                 $   4 billion
  • Homeland Security                                              $   3 billion

The Battle Over Education Spending. Working with Harry Reid (D-NV) and other top Democrats, including Ben Nelson (IN), the three Republican Senators put together a compromise bill that cut $110 billion of spending that Collins and Nelson said “didn’t belong in the bill.”  Matt Yglesias of Think Progress reported that they cut $20 billion for targeted school repairs and modernization, $7.5 billion to help states progress in meeting No Child Left Behind goals, $1 billion for Head Start, and $25 billion in flexible funding for states that could be used for education projects.  Yet after they cut education spending significantly, Nelson publicly patted himself and Collins on the back, saying that after cutting wasteful spending, “what remains will fund education.” 

Many Congressional Republicans, it seems, believe it is an improper use of the stimulus money to bring schools up to compliance with fire, health, and safety codes, better insulate them to save energy and governmental energy costs.  They (erroneously) argue that it is not an investment to modernize, renovate or repair science and engineering labs or libraries or career and technical school facilities.  It is likely that they fear that spending money now would open a flood gate, that the administration would continue to raise education funding, thus expanding government in a way that they oppose.  But that argument can’t stand when it comes to school repair any more than it can when talking of road repair. School construction creates jobs and puts money into the economy, and weather proofing schools will save on energy costs in the future.  Given that it meets the goals of the stimulus package, and given the low construction costs resulting from this economy, providing much needed repairs at below market value seems to me a solid plan.

House Democrats were understandably distressed over the cuts to school construction and to education spending overall. It is clear to them that we need our students to improve their science skills and master new technologies to be competitive in tomorrow’s economy. This spending is an investment in our people that will help boost our economy now, as the spending occurs, and down the road, when students enter the work force.  Some House Democrats were so distraught over these cuts that they even considered withholding their support for the president’s bill.  But Speaker Nancy Pelosi (D-CA), who also vocally opposed the education cuts, called a meeting with concerned Democrats, which the Washington Post reports opened with chants of, “We want more.”  During the meeting, however, cooler heads prevailed, all involved relented and threw their support behind the compromise bill.

Infrastructure Spending.  Rachel Maddow noted that spending increases economic activity more heavily than do tax cuts, and that some types of spending provide more bang for the buck than do other forms.  She provided a few examples of the ‘multiplier effect,” where government investment provides more economic activity than the amount spent.

  • Tax cuts                                           $1 = $1.09 in economic activity
  • Infrastructure Spending              $1 = $1.59 in economic activity
  • Foodstamps                                    $1 = $1.73 in economic activity

 Despite this, the Senate agreement not only cut nearly $20 billion for school construction, but also cut $8 billion to refurbish federal buildings to make them more energy efficient, and cut $2 billion to expand broadband networks in rural and underserved areas.

 As it turns out, some infrastructure projects are more of a stimulus than others.  According to The Economist:

  • Every $1 billion investment in infrastructure creates 35,000 jobs. 
  • Repairing roads and bridges creates 9% more jobs than building new ones. 
  • Spending on public transit creates 19% more jobs than building new roads.  And, not only does spending on public transit translate into the highest multiplier effect, it also serves other policy goals such as lowering dependence on foreign oil, saving energy and reducing pollution and congestion.  Moreover, convenient and efficient public transit saves Americans money by reducing the costs of fuel, car maintenance and repairs and insurance. 

 But the stimulus plan does not allocate enough to public transit to make a marked improvement.  The Associated Press provided highlights of the plan, reporting that of the $46 billion being spent on infrastructure, $27 billion goes toward building and repairing roads and bridges, while only $8.4 billion is being spent on mass transit. Even with an additional $8 billion for building high-speed railways, our government has not shown that it is serious about cutting emissions by taking this opportunity to build a twenty-first century transit system.

 And, of the $27 billion for roads and bridges, indications are that many states are choosing to build new ones rather than repair old ones.  Nineteen states have made public their transport requests and more than half requested that 80% of the funding be spent on roads, mostly on building new ones.  While some new roads and bridges may be badly needed, there is a risk that too many states will make poor decisions.  Moreover, where practicable, money should be put into alternatives that create the most jobs, save energy, help protect the environment, and save consumers their hard earned money.

 Transparency.  President Obama promised that his administration would operate in the open, and he is delivering on that promise here.  His administration will set up a website, resources.gov, which will track projects receiving funding and their progress.  It will allow us to see how the money is being used, providing accountability for poor decisions, excessive spending and other important matters.  It will allow us to see whether the stimulus plan creates the promised 3.5 million jobs.  And it will allow state and federal leaders to see what work remains to be done.  Mostly, it will provide a welcome departure from the secrecy of George W. Bush’s administration.

Conclusion. Partisan railing aside, I’m not against removing items from the stimulus bill that don’t aid our goals of providing sustenance to those worst hit by the abysmal economy, maintaining and building the middle class by increasing employment, building and improving our infrastructure, increasing energy efficiency, or building a sustainable economy.   I do, however, favor redirecting those resources to projects that meet these goals well rather than cutting the size of the bill. The bill already provides for spending a vast amount of money, and nearly all economists agree that it will take a bold initiative, likely more bold even than this, to alleviate the economic crisis we’re experiencing.  Minor cutting isn’t going to substantially affect our debt – at least not so much as to do too little when doing too little may make things much worse.  Accordingly, I would like to have seen less allocated for tax cuts and more marked for education and for infrastructure, particularly for public transit.  That said, I believe most of the measures will help improve our current situation, and that this is only the first step President Obama will take in his efforts to guide us back to economic health. 

 

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Comments»

1. David Silberman - February 15, 2009

A lifesaver only can be judged a rescue device if it gets to those who are foundering; otherwise it’s just another piece of jetsam floating in the sea, having substance but lacking purpose. To get to those in need, it must be strong enough to support the victims, have plenty of rope to reach them, and be thrown with sufficient force so it does not miss the mark. I fear that the Republicans (and the Democrats, through compromise) have reduced the size of the preserver so that not all can be rescued, shortened the length of the rope so that only those in front will be able to reach it and held on to Obama’s throwing arm (ironically, his “left” one) to further incapacitate his ability to achieve his objective.

We have add more than eight years of failed economic policy based on tax breaks for the wealthy. There have been no benefits of the so-called trickle down effect unless you believe that being pissed on by those in power qualifies. The gaps between the haves and have nots is widening, with power and wealth being concentrated more and more among the richest two percent of Americans. The middle class is rapidly becoming a broad, flat dessert, struggling to maintain even that ecosystem (eco as in economics).

When will a solution, “a change we can believe in”, truly be developed? Only when the masses (poor and what’s left of the middle-class) recognize that they have more power than they realize. When we see people organizing and marching around banks, stock brokerages, and other established financial institutions chanting, “Give it back, give it back, give it back” will real change occur.

Compromise may have its place in marriage, but once we start compromising our principles, we being losing our soul. Mohandas Gandhi noted, “All compromise is based on give and take, but there can be no give and take on fundamentals. Any compromise on mere fundamentals is a surrender. For it is all give and no take.” I believe we should start taking back that which we have an absolute right to have: health care, education, decent housing… our very culture, even it means taking more aggressive steps to do it.

Suzanne Robinson - February 15, 2009

Well said, David. I’ve been thinking quite a bit during and since working on this post about how the administration with ‘revive’ capitalism. We they try new measures aiming to cut the income gap? Will they work toward ensuring that full participation in the economy yields a sustainable income? I hope many Americans are considering this as they tighten their belts or look to family for help or just wonder what they can do – all filled with anxiety about their future. I was reading today about the prospects of this economic crisis shrinking the newly formed middle class in developing countries and what that may mean. Some are protesting already. I hope the US show leadership here, understanding that members of the middle class are democracy’s strongest supporters.

That said, without compromise here, who can say how long the Republicans would have elongated this process – their actions are shameful, but there are still enough of them in the Senate that we can’t act without some help from the other side of the aisle. And the national Party pressured them the whole way to block the bill’s passage. Like you, I am quite displeased with some aspects of the compromise bill, but I guess I’m still holding on to Obama’s hope message. So let us hope that we’ve done enough to begin the long struggle to emerge from our dire situation. But, undoubtedly, we should have done more. Thanks for your thoughtful insight!

2. David Silberman - February 15, 2009

I think the concept of hope is overrated. Hope in these situations is a poor substitute for “Do”; often the former is an excuse not to put sufficient energy into the latter. The Republicans have a sure win in their strategy: if the current package fails, they’ll say I told you so; if it succeeds ever so slightly, they’ll take the credit because of their insistence on more tax cuts. The result will continue to be mediocrity and sluggishness brought about by those whose main concern is their own (and their class’s) self interest and those who lack the courage to stand firm on their principles. I’m not an economic theorist, but when Paul Krugman and I come to the same conclusions about the path one should take, I feel a bit more confident.

To be blunt, real change (whether it’s to be believed in or not) rarely comes without real struggle. This country, through its Congress and now, sadly, though its chief executive, have taken the easier less rocky path, paying more attention to the smoothness of the ride than the destination. Looking back, progress made in Civil Rights or ending the war in Vietnam ultimately were the result of legislation but looked what had to happen to bring it about: confrontation, intense struggle (some of it violent) and insistence on not giving in or giving up. Plessy v. Ferguson was compromise; Brown v. Board of Education was confrontation.

I am beginning to believe that only a total collapse of the “System” will bring Americans to their senses, so that books like, “What’s the Matter with Kansas” don’t have to be written. A modicum of Civil Disobedience might do wonders in raising the consciousness of our population, most of whom are still too comfortable to take any action. Take away their large screen TV, start evicting some of the non-poor, then see what motivates them to action.

3. Suzanne Robinson - February 15, 2009

You’re right again, David. And, I hope you’ll be keeping me honest. I agree with Paul Krugman all the time, even given my limited studies in economics. And, I, too, think Senate Democrats, and even the president let progressives like us down.

I love the point you raise about how things are more likely to change when hard times affect the middle class. One of my favorite lines from Eminem expresses what I have long felt, often with more than tinges of anger. Speaking of those indignities and hardships that the poor face every minute of every day, he says this about when those troubles reach the middle class. “Now it’s a tragedy, now it’s so hard to see.” As long as really hard times are faced only by the poor, most of us don’t take notice, it’s only when it falls in our own back yards that it becomes real. And unjust.

I’ve been reading a lot about the struggles in Lincoln’s day, in MLK’s day… and you’re right. Some mighty prices have been paid for the advancement of justice. We may see something like that yet. President Obama has a heavy load, but one that he must take seriously, lest he find himself facing the collapse you speak of.

As for the Republicans, if the American people can’t see through them yet, well they deserve to be taken in. They say over and over in front of the cameras that the last thing they want to do is nothing. But what did they do to show it. Well, nothing.

4. David Silberman - February 16, 2009

Ah yes, the Republicans… Such blatant partisanship. Never has it been more obvious that these folks put Republican ideology above the national interest or the common good: their way or the highway. Although there was no honeymoon for President Obama, they tried screwing him anyway… and maybe they partially succeeded. Eric Cantor, the Republican whip, is trying to out-Gingrich the Newter, himself, and apparently is quite successful at it: he kept all Republican House members from casting even one yea vote for the Stimulus Package. I have to admire the discipline these guys show and only wish the Democrats could muster such solidarity.

It’s time that Rep. Pelosi and other Democratic leaders wake up and realize that their counterparts on the other side of the aisle are not playing by the rules set up by the majority party. When was the last time Republicans showed their conciliatory side? They are interested in one thing and one thing only: their agenda and they play to win, not compromise. What area of competition, and make no mistake about it: politics is competitive, allows both sides to compromise? The two concepts are incongruous and mutually exclusive. You are either on the winning or losing side. I am not aware of a compromise side.

My faith no longer lies in the leadership of the Democratic party. I look to the people. I believe they will wake up before their leaders do and show to the leadership, the path to progressive change; but they better arise from their slumber soon. Already, the groundwork is being laid by those in power to keep the people in their place. If you believe this to be delusional or paranoid, just look and listen to what is emanating from our leaders and their surrogates:

The NY Times reports, “The new director of national intelligence, [Dennis Blair], told Congress on Thursday that global economic turmoil and the instability it could ignite had outpaced terrorism as the most urgent threat facing the United States. [He] singled out the economic downturn as ‘the primary near-term security concern’ for the country, and he warned that if it continued to spread and deepen, it would contribute to unrest…”

Of course, he is correct; but once the natives become restless, then what? As those being foreclosed upon resist, will the troops (a/k/a local Sheriff) be called in; and will neighbors unite as they did 125 years ago in Fargo, ND and drive them off? Can it be, in the not too distant future, that a desperate citizen will chain him or herself to a hospital’s entrance because he or she cannot obtain health care for a loved one due to the inexcusable state of health care in this country? What will be the local and national response? If the past is any predictor of the future, then we can look forward to water hoses, attack dogs, Bull Connor wannabes and all the other despicable options available to those in power.

Yet, perhaps (sadly) those types of confrontations are exactly what America needs in order to wake up. Would we have the progress made in Civil Rights without the Rosa Parks, the unbelievable courage of four black girls confronting George Wallace, James Meredith, the countless number integrating southern lunch counters and the expression of pride and solidarity of John Carlos, Tommie Smith and Peter Norman in the 1968 Olympic Games? Individuals like them, and apparently not those we put in office, will be the true leaders of this country.

I will be attending a talk/interview with Senator Bernie Sanders (Ind., VT) Tuesday evening. His topic is Why We Need to Unite around a Progressive Agenda. I’ll report back what I learn.

5. Suzanne Robinson - February 16, 2009

Thanks David. It’s hard starting a blog like this in the face of having elected a person who, to me, seems to have the most potential of any president in my lifetime. I want so badly for him to succeed, I’m afraid, that I wasn’t really true to myself in this week’s post. I hated to write two critical posts in a row so much that, even though circumstances proved me right last week, I soft stepped and tried to provide a relatively good picture of the stimulus plan as it was finalized – I thought information was scattered all over the place and hard to get a handle on – but I wasn’t true to myself in writing my opinion. I backed away in fear of readers not wanting to hear too much criticism of their new president. I”m going to try not to make that mistake again.

As for the people, I guess I don’t have the faith in them that you do. I’ve been railing on and on about the wealth gap, about the indignities the working poor must suffer while the rich take more and more and have so much power that Washington might not be able to stop them, even if they wanted to. I’ve wondered for over a decade why people were just accepting this rising income inequality without raising much fuss. I hope people step up this time. But then I’ve also wondered why people didn’t see through Bush – why they don’t see Republican dirty tricks for what they are… Anyway, things have come to a boiling point, and maybe that was what was required for people to get angry. Reports are everywhere that they are now angry. So let’s see what happens.

In the mean, I will try to hold President Obama accountable for his promise to be guided by the principles of equality and fairness. I’m not sure how well he’ll fare. He’s spent much more time running for office than he has actually doing the day to day work of politics. I’m not sure he could really envision what he was getting himself in to. He’s a bright fellow, but it’s always difficult to recognize just how hard something we’re taking on might be – I think we have a tendency to downplay that side of the equation in order to maintain the excitement of the challenge and the power.

But, for now, the middle class will shrink – is shrinking already – and maybe losing something you had is more difficult than never having had it to begin with. Maybe, just maybe, people will begin to tell power that business is as much about creating jobs that build a middle class as it is about making profits. We’ve recently become accustomed by huge companies making huge profits as productivity has increased. The increase hasn’t been shared with the workers who’ve been partly responsible for making such gains possible, it’s only been taken by those who consider themselves worth so much more than those who do the day to day work in their companies. Even now, they cling to the argument that if these ridiculously high salaries and bonuses aren’t handed out to top execs that they will lose their best talent – that they will go elsewhere. My question now is, where will they go? And if that’s the best talent they’ve got, maybe it’s best they hit the road.

I’ve long thought that REAL change in the way we conceive of capitalism will only happen if the people demand it. And, I’ve never really thought that Americans would do so. Then Obama came along and, whether he said it or not, I wanted to hear him say that the old ways of doing business were over. But then he put Larry Summers and Tim Geither in charge – I may just have to wake up and smell the bull hockey.

I read much the same about the growing threat of terrorism and instability in The Economist as they considered what the new middle class in developing countries will do if they’re pushed back into long term poverty. This may be one of those times where we see a big shift in the way things are done. But, you’re right. We’re gonna have to fight for it.

I look forward to hearing from you about the Bernie Sanders talk!

6. AIA - February 17, 2009

“The American Institute of Architects strongly advocated for the inclusion of funds for school construction and renovations in the stimulus package, along with funding for the retrofitting of federal buildings. Although we would have liked to see more, we’re happy that the final plan will include funding for the modernization of educational facilities. In this video (http://www.eenews.net/tv/2009/02/12/) AIA’s own Harry Gordon explains the importance of funding school construction, and you can also learn more on our blog, the Angle (http://blog.aia.org/angle/).

7. Suzanne Robinson - February 17, 2009

Thanks for the information. I, too, am happy that there is money in the plan for school repairs and modernization, but, like you, I would have like to have seen more. And thanks for the links – I’ll check them out!

8. Suzanne Robinson - February 17, 2009

I recommend visiting the the AIA’s website to read their estimation of the spending needed to sufficiently improve our infrastructure. The number is larger than the entire stimulus plan. Other interesting articles, too..


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