Republicans Concerned With Deficit Spending?

When Bush took office in 2001, the government had a projected $5.6 trillion, 10-year surplus, which would translate into at least $560 billion per year. By the end of 2002, the government had a deficit of $158 billion. This, in just about one year of being in office. At the end of his term in office, Bush leaves with a record $1.2 trillion budget deficit, most of it based on needless tax cuts for the rich, and starting two wars, one with maybe a real purpose, one completely for no reason.

Even as the last months are playing out, the Bush government came up with a $700 billion giveaway to more rich people, bailing out Wall Street, banks, lending institutions and the like, with absolutely no oversight (despite the pretend show of congress "mandating" oversight, but getting none). Let's try to keep into perspective the fact that when the banks that received some of this money were asked to identify how it was used, they declined to give any information. Taking taxpayer money, and refusing to account for it, all the while giving their CEO's large pay and other performance packages (despite said performance being of the kind that put this economy into the shitter in the first place) is just the tip of level of incompetence of the Bush Admnistration's financial policies.

Tax rebates don't help the economy. Tax cuts have not helped the economy. Giving out free taxpayer money to rich people/corporations has not helped the economy.

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Are Republicans Already Dictating Terms of the Stimulus Package?

A couple of weeks ago, word was that President-elect Obama's stimulus package would be $850 billion. Now, it seems, that number has already been lowered to $675-775.

Regarding the new administration's stimulus plan, Mr. Axelrod also said that the exact dollar amount Mr. Obama will seek has not yet been determined. "We've talked about a package from $675 billion to $775 billion," he said on CBS's "Face the Nation."

"One thing I think everyone agrees on, economists from left to right, is that we have to do something very large," he said.

Now granted, the $850b figure did not come straight from Axelrod's mouth, and they've actually never committed to a specific dollar figure, but there's really only a couple of things that have marked the interim period between the floating of these numbers: the Obama transition team has reportedly reached out to Republican members of Congress and, as Charles wrote last night, the Republican leadership has expressed "skepticism" about the stimulus package.

Senate Minority Leader Mitch McConnell (R-Ky.) voiced skepticism today about the emerging economic stimulus plan, applying a brake to Democratic plans to quickly pass up to $850 billion in spending and tax cuts soon after President-elect Barack Obama's Jan. 20 inauguration.

What, you mean the Republicans aren't playing along with Obama's promise of unity and reaching across the aisle? You mean they intend to continue to obstruct any progress? No one ever could have ever predicted...

It would be nice if the talking heads who constantly demand that Democrats "work across the aisle in a spirit of bi-partisanship" hold Republicans to the same standard. They didn't demand it of the Republicans when they were in power and they're not now. And it would seem, the Obama transition isn't exactly shaming them into cooperating with them either, but rather they're allowing the Republican obstructors in chief to dictate how big the stimulus package is. Really? For 8 years, President Bush's idea of bi-partisanship was Democrats doing what Republicans wanted. It's imperative that the next 8 years be the exact opposite, not exactly the same.

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Robert Reich's Most Excellent "Maximum-Strength Remedy" for the Economy

TPM Cafe has a post up from former Labor Secretary Robert Reich that diagnoses our biggest economic ailment, lack of demand:

Introductory economic courses explain that aggregate demand is made up of four things, expressed as C+I+G+exports. C is consumers. Consumers are cutting back on everything other than necessities. Because their spending accounts for 70 percent of the nation's economic activity and is the flywheel for the rest of the economy, the precipitous drop in consumer spending is causing the rest of the economy to shut down.

I is investment. Absent consumer spending, businesses are not going to invest.

Exports won't help much because the rest of the world is sliding into deep recession, too. ...

That leaves G, which, of course, is government. Government is the spender of last resort. Government spending lifted America out of the Great Depression. It may be the only instrument we have for lifting America out of the Mini Depression. Even Fed Chair Ben Bernanke is now calling for a sizable government stimulus. He knows that monetary policy won't work if there's inadequate demand.

Then he goes on to prescribe how the Government can best use its spending power to get the economy back on track:
So the crucial questions become (1) how much will the government have to spend to get the economy back on track? and (2) what sort of spending will have the biggest impact on jobs and incomes?

The answer to the first question is "a lot." Given the magnitude of the mess and the amount of underutilized capacity in the economy-- people who are or will soon be unemployed, those who are underemployed, factories shuttered, offices empty, trucks and containers idled -- government may have to spend $600 or $700 billion next year to reverse the downward cycle we're in.

The answer to the second question is mostly "infrastructure" -- repairing roads and bridges, levees and ports; investing in light rail, electrical grids, new sources of energy, more energy conservation. Even conservative economists like Harvard's Martin Feldstein are calling for government to stimulate the economy through infrastructure spending. Infrastructure projects like these pack a double-whammy: they create lots of jobs, and they make the economy work better in the future. (Important qualification: To do this correctly and avoid pork, the federal government will need to have a capital budget that lists infrastructure projects in order of priority of public need.)

Government should also spend on health care and child care. These expenditures are also double whammies: they, too, create lots of jobs, and they fulfill vital public needs.

I've been calling for these kinds of economic stimulus for months. Glad to have someone joining in who's got the ear of the incoming administration.

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President Obama's Agenda

     It is amazing to me how the Republicans and all of their right-wing friends are trying to minimize the total repudiation they and their policies received at the hands of the electorate. According to these "objective" viewers there was no political realignment. The fact that Obama carried states that hadn't been carried by a Democrat in years and put into play states that had been lost to Democrats for a generation does not mean that there was a redrawing of the electoral map according to these illustrious men. Their goal is simple to try and keep President Obama and the Democrats from enacting any sweeping legislation, instead hoping that they stay small and do little if anything. My guess is that they hope by trying these scare tactics and keeping the Dems thinking small that in four years if they accomplish little or nothing the Republicans can highlight how a majority Party did nothing to help the voters that elected them.

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We Caught the Car, Now What Do We Do With It

Yay we won!

Now we're in the driver's seat and the problems coming down the road are much bigger, scarier and implacable than any we've seen in our lifetimes.

In my experience there's only one way to drive out of a fiasco -- fast and in the right direction.

It's not the time for half-measures and Dean Baker has a great idea, healthcare:

President Obama has the opportunity to establish himself as one of the truly great presidents in his first days in office. He can take advantage of the current economic crisis to announce plans to jump start national health care insurance. Extending health care insurance can be an effective stimulus that will provide an immediate boost to the economy.

More importantly, it will provide the same access to health care that people in other wealthy countries have long taken for granted. For this accomplishment, President Obama will rank alongside Presidents Roosevelt and Lincoln as one of the nation's truly great presidents.

The backdrop is straightforward. Economists from across the political spectrum are now calling for a large stimulus package to limit the economy's decline and the rise in unemployment. The consensus is in the range of 2.0-2.5 percent of GDP, or $300 billion to $400 billion a year.

And if that sounds pie-in-the-sky, check this NYT op-ed from Bob Rubin and Jared Bernstein:

The Bible got this right a long time ago (paraphrasing slightly): there's a time to spend, a time to save; a time to build deficits up and a time to tear them down. Though one of us (Mr. Rubin) is often invoked as an advocate of fiscal discipline, we both agree that there are times for fiscal discipline and times for fiscal largess. With the current financial crisis, our joint view is that for the short term, our economy needs a large fiscal stimulus that generates substantial economic demand.

We also jointly believe that fiscal stimulus must be married to a commitment to re-establishing sound fiscal conditions with a multi-year program that includes room for critical public investment, once the economy is back on a healthy track.

One of us (Mr. Rubin) views long-term fiscal deficits -- in combination with a low national savings rate, large current account deficits and foreign portfolios that are heavily over-weighted in dollar-dominated assets -- as a serious threat to long-term interest rates and our currency and, therefore, to our economic future. The other views these economic relationships as much weaker.

At the same time, we both agree that our economic future also requires public investment in critical areas like education, health care, energy, worker training and much else. In our view, then, the next president needs to proceed on multiple tracks, with both the restoration of a sound fiscal regime and critical public investment.

Can we get out of this crisis? Can we do the things we need to do to help those in need -- especially the state governments that actually do so much of the public service work in this country?

Do I really have to ask the answer to that question, today of all days?


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