Concern Over GOP Obstruction & Stimulus Proving To Be Correct

The other day, I wrote, a diary explaining my concerns over the stimulus package.

http://www.mydd.com/story/2009/1/11/1535 10/598#commenttop

My concerns are twofold:

A) In lowballing the stimulus package, it looks like the stimulus will not be big enough when it makes it way through Congress in order to address the economic crisis. Obama's opening negotiation, as I feared, defined the range of the stimulus. This lowballed number was designed to obtain Obama's goal of having the GOP on board the stimulus. He wanted 80 votes. He won't get that.

There were competing theories advanced from mine. The most prominent by Nate Silver that the lowball stimulus was actually a strategy to get the Democrats on board. However, the problem with this is that the spending remains as I predicted low at $518.7 Bil after the Democratic imput. This, again, is negotiation 101.

My concern was that the spending would not be high enough given the make up of the Congress without Obama's leadership.

This appears to be the case.

The Democrats in Congress, for better or worse, are followers. Not leaders. Once Obama provided a number. It is no surprise that they did not veer far from it.

Krugman and others agree that the stimulus (which is over two years, not one) is not going to be enough to address the economic conditions this country faces. In fact, there is something of a consensus growing on this point.

It simply is not enough to create the number of jobs that Obama says he wants to create, and even if it does, it will not keep up with expected job loses from this economic downturn. We will not be moving ahead.

In fact, many of the line items that are critical to us building a sustaintable long term economic prosperity- e.g., new energy economy - aren't there in sufficient amount.

For the record, most of the world is already ahead of us on these issues. China and Europe , for example, are already significantly investing in these technologies. This week alone the American automakers were worried that foreign innovation would outstrip US innovation in building the next battery. A critical element in being competitive in the future. You may think this is a nonissue, but its critical for the new energy economy that we innovate in the area of battery development. To sustain the economy after the stimulus, we must be thinking of how to grow the economy. The new energy economy is clearly one smart way to do this since there is a huge growth potential in both domestic and foriegn markets.

However, I digress. I cite Krugman here for the broader discussion regarding recovery, but there are many others:

http://krugman.blogs.nytimes.com/2009/0106/stimulus-arithmetic-wonkish-but-impo rtant#more-1229

http://www.nytimes.com/2009/01/12/opinio n/12krugman.html?_r=1

Nate Silvers theory that Obama was attempting some kind of Machivellian strategy to push the Democrats into doing much more than what Obama first offered is proving to be false.

Obama's Plan with Democratic input can be found in the following links:

http://www.nytimes.com/2009/01/16/busine ss/economy/16webstimulus.html?hp

http://www.talkingpointsmemo.com/news/20 09/01/summary_american_recovery_and_rein vestment.php

http://www.openleft.com/showDiary.do?dia ryId=10934

Rather than a push back, we got a tweak. A tweak is not enough since there are other actors about walk onto the stage.

B) The only element that remains undefined is that of the GOP and Conservative Democrats since the liberal/progressive voices have spoken. This is a bad sign. The conservatives will almost certainly push this bill to the right.

Here's what Americablog quotes the GOP saying regarding the GOP's stance:

"Obama's stimulus package is on track to pass before the Presidents Day recess in mid-February. But it is increasingly doubtful that he will pick up the 80 Senate votes he had hoped to win in the first major legislative test of his presidency. Instead, the bill is likely to pass on the strength of the Democrats' majority.

Sen. John Thune (R-S.D.) said Wednesday that prospects for bipartisanship in the stimulus debate rapidly were eroding.

"The air is coming out of that balloon," Thune said. "To attract Republicans, they lose Democrats. It is a very difficult needle to thread. They are discovering that the goal [of an 80-vote majority] is unrealistic. He got so much push-back from his own people."

House Republican leaders have set up a working group to draft their own stimulus proposal focusing on permanent, across-the-board tax relief. And the Republican Study Committee, a group of about 100 conservative House Republicans, unveiled a bill Wednesday that contains a series of tax cuts, including reducing all personal income tax rates by 5% and cutting the corporate tax rate from 35% to 25%."

http://www.latimes.com/news/nationworld/ washingtondc/la-na-obama-stimulus15-2009 jan15,0,3980514.story

'

http://www.americablog.com/2009/01/suprise-or-not-stimulus-wont-be-all.html#disqus_thread

C) Thus, where are we right now?

We are left with a stimulus that will not be strong enough by the Democrats under Obama's leadership coming from the "left" and now the GOP will chime in with something from the right. There will be attempts to come to compromise. In other words, Obama's tweaked moderate compromise bill is now the new left, and the GOP will push for something to the right of that bill.

This is exactly as was my concern regarding negotation strategies. By moving the bill to the center as he saw it, Obama effectively had the Democratic Congress work from the center. They tweaked that center, but left it primarily in the center.  By working from that center, he created a triangle in which the GOP/Conservative Democrats will push to move it further right than the already compromised proposal.

My point is simple: by not focusing on a strong position in the openning movemnet, Obama has harmed the ability of the economy to recover.

My prediction: We will almost certainly have another stimulus before the end of the year because this one is too small. Indeed, the time to have pushed for greater things to be done was now: "Among Democrats, liberals said they believe the massive package has enough for all different constituencies to win passage. Conservative Democrats, while alarmed at the spending, don't want to pick a fight with Obama immediately after he takes office and are looking for ways to support the bill. " http://thehill.com/leading-the-news/rep.-obey-not-sure-825b-stimulus-is-enough-2009-01-15.html But, given the opening negotiation, the likelihood of getting more seems lesser.

Update [2009-1-15 19:33:40 by bruh3]: As if on cue, Ezra Klein posts this link to an article today about "Why Republicans Won't Oppose the Stimulus" http://www.thenation.com/blogs/jstreet/397443/why_republicans_won_t_oppose_the_stimulus The core take: "Here's my sense of their long-term strategy. This isn't based on anything other than observation and chatting around the Capitol. I think they'll let the stimulus pass and, indeed will be quite fine with it being very big. Much bigger than it is now: a trillion dollars or more. Because once the stimulus passes, Republicans are going to say: OK. We're done. Meaning: no more money. They'll point to the $700 billion for the TARP, plus the $1 trillion for the stimulus, and they'll say: we've spent all the money there is to be spent. There's no money for healthcare. There's no money for anything, really except the Pentagon. They'll run against deficits, waste and bailout nation." Thus they will attempt as I said to block any almost certanly necessary future action. The political capital that Obama has right now will not have fully been used. Instead, at a future date when the economy is quite possibly still in a meltdown, and Obama has been tied to the economic condition after his first stimulus has not had its desired effect, they will block those actions that he takes then because the theory is he will have less political capital to spin. This is speculation, but this is clearly part of their strategy. An ineffectual plan now, and thus a weakened Obama in a year or so.

Tags: GOP, obama, stimulus (all tags)

Comments

34 Comments

This has to pass

And should get through the Senate.  What are the chances that every Republican votes against it?

by Kent 2009-01-15 11:54AM | 0 recs
Re: This has to pass

I think there is little to no chance that the stimulus will not pass given the environment. The GOP is falling over itself, for example, on SCHIP because it realizes that it can not afford to be seen as blocking progress. What they can do is to thread and intimidate, and thus, weaken the plan and/or push it further right than it has to be to really pass.

I have thought this from the begining. The only question is whether it will pass with 51 or greater than 51. Not whether it will pass. Thus, our calculus should be different than we need the GOP. The truth is that they will fight no matter how much we want them for cover.

Thus, this is why I have felt from the begining the goal should not be to pass a plan that focuses on bipartisan "cover," but instead, one that is focused on economic recovery and building the next economic boom.

But, I am in the extreme minority because I see this as risk based strategy rather than going for it by passing  bill that would really reshape the economy.

Cautious here is actually the most risky choice we can make. But we are talking about 30 years of Democratic thinking, and a President-elect who is by nature cautious.

by bruh3 2009-01-15 12:10PM | 0 recs
Obama and Blue Dogs to met on Curbing Entitlements
this wont be stimulating-obama to host blue dogs on curbing entitlement spending next month
http://voices.washingtonpost.com/thefix/ 2009/01/obama_to_hold_fiscal_responsib.h tml
by art3 2009-01-15 12:29PM | 0 recs
Not nearly enough $$$

If what we are seeing is about $520 billion over two years, then we are getting about a quarter of what we need.  If I'm understanding Krugman and others, they are calling for a trillion this year and possibly another trillion for next year and then we will see where we stand.  It can't just be given to bankrupt financial intitutions so they can keep the party going either.  It needs to be spent productively, something these masters of the universe don't quite understand.  I really wish Congress would put Elizabeth Warren in charge of disbursements and give her the discretion to veto anything the new Treasury Secretary proposes in the way of frivolous spending.

by Demo Dan in Dayton 2009-01-15 12:57PM | 0 recs
So much for the honeymoon

42 in the Senate voted against even giving up the second $350 billion from TARP.  There's no reason to think that trying to acquiesce the GOP will work going forward.

by JJE 2009-01-15 01:14PM | 0 recs
Re: So much for the honeymoon

its clear the gop wont play ball everything to be passed worth passing must be done by dems votes. i read wyden thinks universal healthcare will pass by 75 votes. and what repubs will vote for it? not one worth it

by art3 2009-01-15 01:35PM | 0 recs
this has been my biggest concern

I've long feared that Obama would make far too many concessions to the Republican agenda and would move halfway toward the Republican position and declare victory for post-partisanship.

Now we'll end up with worse policy (a stimulus bill not big enough to help the economy) as well as a worse political position (Obama and Congressional Democrats will "own" a stimulus that didn't help the economy).

Obama put the desire to appear bipartisan ahead of the desire to get the best bill he could get through Congress. It could cost us in 2010.

by desmoinesdem 2009-01-15 01:35PM | 0 recs
Re: this has been my biggest concern

It's not just its not big enough, but also that its not really forward looking enough either.

I have been reading several economic blogs. The core problem is one of what happens after the minor effects of any stimulus as presently designs wears off? How do we create or invest in a booming economy?

The interesting thing is that many in DC talk of fiscal responsibility. But this is, to me, having read this stuff- a joke. The  key way to obtain fiscal responsibility is not to cut spending, but to invest in things that will grow the economy and reduce overall costs.

Don't get me wrong some of the stuff I like- the smart electric meter reading was already coming down the pike. But what about the bigger issue of energy independence? That issue alone is we dedicated enough resources to it could reshape  our economy and produce significant long term savings.

by bruh3 2009-01-15 02:13PM | 0 recs
BINGO!

?

by suzieg 2009-01-16 11:57PM | 0 recs
Krug's theory=awesome, reality=not so much

Based on the initial Krugman calculations, it requires 300B in GDP to reduce unemployment by 1%. According to him, Obama's plan will reduce unemployment by 2%, which according to Krugman is not enough. A key point is that Krugman doesn't define "enough", and I suspect he does this because "enough" is impossible to achieve - which he well knows. The key point of his essay is that, given an expected 9% unemployment, Obama's plan will reduce this to 7.3%. What's wrong with this? Krugman spells it out:


Suppose that we're looking at an economy that, absent stimulus, would have an average unemployment rate of 9 percent over the next two years; this plan would cut that to 7.3 percent, which would be a help but could easily be spun by critics as a failure

His main critique is political, not economic. He acknowledges that the plan will help, but he fears the political ramifications of it's effect. This is NOT an economic criticism, it's a political one. I trust Krugman on economic issues, but I think he can leave the politics to Obama.

Elsewhere, however, Krugman is less of a wannabe politician, and more of an economist. His infamous third-of-a-loaf analogy makes it clear what he believes the goal is: a complete halt of the current economic decline:

The bottom line is that the Obama plan is unlikely to close more than half of the looming output gap, and could easily end up doing less than a third of the job.
[snip]
Whatever the explanation, the Obama plan just doesn't look adequate to the economy's need. To be sure, a third of a loaf is better than none. But right now, we seem to be facing two major economic gaps: the gap between the economy's potential and its likely performance, and the gap between Obama's stern economic rhetoric and his somewhat disappointing economic plan

So, what Krugman is really pushing for, and it's fairly obvious from his calculations, is a plan that's roughly three as large. Let's be clear about this, we are talking about a Krugman Recovery Plan in the area of 2.1 to 2.4 trillion dollars. As I said above, Paul is clearly no politician. It's one thing to propose two-and-a-half trillion dollars of post-TARP spending, I suspect it's another to deliver it. But I digress.

From a purely economic standpoint, how workable is Krugman's plan? I think we can assume that a Nobel Prize winner knows his economics, so obviously spending 2.4 trillion will close the output gap. The only trick is..well...spending 2.4 trillion dollars in 2 years. Now, we've heard about all the "shovel-ready" projects, can't we just put the money there?:

A report released by the U.S. Conference of Mayors entitled "Ready to Go" in early December listed more than 11,000 projects in 427 cities, many of which already have local approval.

The total cost for the projects--everything from a $100,000 driving simulator for Goodyear, Arizona to a $20 million expansion of a housing complex for the elderly in West Hartford, Connecticut--would be nearly $73.2 billion and they would create more than 800,000 jobs, according to the group.

http://www.cnbc.com/id/28525123

73.2 billion is a LOT  of money. It's almost...well...three percent of the amount Krugman says we need to spend. Hmmm. Now we just need to find a place for the remaining 97% of the money, and do it in two years. Luckily, tax cuts are a fast way to inject cash, less efficient but speedy. Except - Krug (and far too many Dems) doesn't LIKE tax cuts, he thinks we should find OTHER ways to spend this money. In two years. I'm sure shoveling 2.4 trillion dollars out of the door as fast as we can is going to give us accountability and oversight. Right?

Look, Krug is a smart guy, and I trust him on the numbers. The problem is, he doesn't have a Nobel in politics or logistics. While I see some validity to his concerns, it is far FAR from a foregone conclusions that his solution is better than Obama's.

by Neef 2009-01-15 01:41PM | 0 recs
Re: Krug's theory=awesome, reality=not so much

My chief problem with your post is its laziness. If you are going to argue against my diary, first read my diary and realize that I specifically state this is not just Krugman. Krugman is an illustration of what most economists have said of the stimulus. Several have ran the numbers, and come to the same conclusion. The issue is creation of jobs. On that front, no one thinks this is sufficient. In fact, this is only half the picture, because no one is asking what happens after the stimulus to sustain economic growth which is what we will need to produce jobs. Nothing Obama's plan will do anything related to stimulating this growth.

by bruh3 2009-01-15 02:08PM | 0 recs
Re: Krug's theory=awesome, reality=not so much

I am addressing Krugman's position, which forms the core of your complaint.

Nor is it germane that other economists agree. I have already conceded the economic calculation. My issue is with the lack of logistic and political reality. "Enough" is not just a mathematical equation, it it a complicated blend of economics, political reality, and administration. It's well and good for an economist to propose we spend three times as much. It's another matter for such a plan to be implemented.

by Neef 2009-01-15 03:18PM | 0 recs
Re: Krug's theory=awesome, reality=not so much

Careful

by jsfox 2009-01-15 03:31PM | 0 recs
Re: Krug's theory=awesome, reality=not so much

your comment makes no sense.

why use his economic points at all if you conceed them?

why talk as if you are the only person who understands the politics is your self?

others have discussed this too, and that's rather the point.

the excuse given for obama's earlier decisions was according to many of you (including yourself since i read the comments) to push democrats to create a larger better plan. the so-called nate silver theory. I imagine I won't hear that theory again because its now proven to be wrong.

I heard some theories- oh obama's just playing the dems to get a better plan out of them. and blah, blah blah.

i saw some estimates of 1.2 tril, etc rather than the plan we got.

Now, we get a plan with barely 820 bil, and the story changes. He had not choice because its political reality , and blah blah blah.

No- its the choices he made because of a bad calculation of how to start the debate in the first place. If he had started higher with more spending , then it would be a differen plan now. Rather than discussing things in context , (ie, as the front page describes- the fact obama's approach is high and the GOP fears him right now), we get these out of reality comments about how Obama has not choice, and this is what he could get.

Again, no, this is what he choose of out caution because he was not willing to spend political capital.

This is why I can't trust many of you. I wish there were something more behind your post than I am circling the wagons,b ut the more I think of what you write, the more i kow the arguments will change as you think it suits obama's position rather than whether that position is the best political and more importantly econonomic one.

I am sure if the package is reduced to 600 bil, then your argument will be the same. But the problem is that its circular logic. Since Obama is mostly engaged in the same strategies democrats have don ein the past and is not pushing for a more aggressive stance,- how will we ever know?

When was the last time the Dems tried to win the debate through the public bullypulpit rather than by compromissing before hand with the GOP ?

by bruh3 2009-01-15 03:38PM | 0 recs
The last time

Clinton did nothing to compromise with Republicans in the 1993 stimulus package and it went down in defeat.

by Kent 2009-01-15 03:41PM | 0 recs
Re: The last time

You may want to read that history again. He got what he wanted after battling the GOp and we had a boom economy.

More importanlty- you may want to realize that 2009 is not 1993. I keep saying many ofyou are stuck in the Reagan era.

by bruh3 2009-01-15 04:15PM | 0 recs
All he got was the budget in 1993

And Democrats paid for it big time in 1994 because of the tax increase it included.  He had a his way or the highway approach to healthcare and he got nowhere.  Same with the 1993 stimulus package.  

by Kent 2009-01-15 04:29PM | 0 recs
Re: Krug's theory=awesome, reality=not so much

why use his economic points at all if you concede them?

Because this is not solely an economic argument. Krugman took the economic shortfall, divided by the size of the package, and came up with a magic number. It's not a bad number, as I have repeatedly asserted. But he entirely ignores the feasibility of reaching that number in the allotted time frame.

I see your point about Obama starting out with a bad calculation, but that requires that you think the number should have been much larger. I have a real problem with that, and I outlined most of why in my comment. Where is the proof that a larger plan would be feasible? I have yet to see that, anywhere.

I'm not asking you to "trust" me, in fact I wish you'd quit trying to discern my motives entirely. If you have a substantive disagreement with my comment, we should be discussing that.

by Neef 2009-01-15 03:50PM | 0 recs
Re: Krug's theory=awesome, reality=not so much

Except again that was not the point of the diary. the point of the economics is to illustrate if Obama does not have the right plan, then the economic planw will fail. if the economic plan fails, he will have waste capital. If he wastes capital, the GOP will make it that much harder the next time to get anything at all effective. That its in their incentive for him to fail. To worry about them now rather than pushing throught he best plan is to hurt his chances in the future because a failure now hurts later when it comes to public perception. My argument is not rocket science. It's also not apolitical. It's very political.

I have to discern your motives because your arguments are a moving target. Pick one with a consitent outcome that you expect and use that as a peg by which to judge your statements as true or false in the future.

Last week it was the Nate Silver is brilliant for pointing out how Obama is being Machivellian to get the dems to a better plan. Now its another one. I am not interested in moving targets.

Next week what will it be then? It's not something I trust when arguments change just for the sake of proving one planned something all a long when the end results that one claims one was planning keeps changing.

Last week, it was "well he's doing this to get a much better plan out of Congress.' We see that plan now. it's not that much better in size, which was the main concern, or quality, the other concern. Thus, I don't take your arguments about wanting to be critiqued on arguments seriuously, because I don't think you are making serous arguments.

by bruh3 2009-01-15 04:23PM | 0 recs
You have me mistaken

My argument has consistently been that this plan was put together based on it's merits, and all my arguments have been in support of that. I have never claimed that this was some sort of Machiavellian political ploy, and I have never supported Nate Silver's argument. In fact, my last response to you was:

the dots are pretty clear. The woman who will chair Obama's Economic Council writes a paper, post election mind you, that shows tax breaks can have a significant effect on GDP. Lo and behold, Obama's plan includes tax breaks. Voila! No need for weird conspiracy theories.

That being said, you're welcome to continue to decide whether you "trust" my arguments. That conversation is between you and you, I shall stay out of it.

by Neef 2009-01-15 05:08PM | 0 recs
Re: Krug's theory=awesome, reality=not so much

Neef is right on! Politics is involved here not just numbers. Who really knows how much is needed. The Economists are always getting it wrong. How did we get into this mess? Give Obama and his team a chance to lead. First he must become the president.

by canadian 2009-01-16 10:44PM | 0 recs
Re: Krug's theory=awesome, reality=not so much

The comment is virtually without any meaning since you do not define anything in terms of the political players. Whether you can admit it or not this diary does in fact discuss the politics, but does so without regard to having to have faith in any one actor as you seem to do.

by bruh3 2009-01-17 08:34AM | 0 recs
Re: Krug's theory=awesome, reality=not so much

Look lets face a fact, we like Krugman because he seems to speak for us. However, I am not so naive to believe for one second he is always right. He an economist and a good one, but 100 economist in a romm will have 101 different opinions.

At some point a decision needs to be made what can get to get the ball rolling. What's the number ($) that gets it through with enough Blue dogs and Rs signing on. If we can show it's working then we can get more. Also let's not forget this is money we do not have it will have to borrowed probably from China. And China is making  noise about the money they lent already.

So while I agree it may not be enough long run it may be one of those let's look at all the parameters and how do we move he ball forward. What can pass and what can we borrow.

by jsfox 2009-01-15 02:12PM | 0 recs
Re: Krug's theory=awesome, reality=not so much

Another person who has a problem reading the entire diary.

I see the point here is to pick up on certain words or names like "Krugman" and then try to argue against those names rather than the subject matter itself.

by bruh3 2009-01-15 02:14PM | 0 recs
Re: Krug's theory=awesome, reality=not so much

No I read the whole diary and yes I picked some points to comment on d add an opinion. So shoot me. Ooops you already did.

by jsfox 2009-01-15 02:16PM | 0 recs
Re: Krug's theory=awesome, reality=not so much

Actually what I am going to do after this post is ignore you. What you did was basically as you admit cherry pick. Thus, the point of why this is not about the subject matter, but you circling the wagons. I get why you are doing it, but it's nice to finally have one of you admit you do not care about whether the stimulus actually helps the economy, whether economists are right or anything else other than how in your warped logic this helps or hurt Obama.

by bruh3 2009-01-15 02:26PM | 0 recs
Re: Krug's theory=awesome, reality=not so much

by jsfox 2009-01-15 02:34PM | 0 recs
Re: Krug's theory=awesome, reality=not so much

I am not going to take my cue on reality from someone in the faith based community.

by bruh3 2009-01-15 02:39PM | 0 recs
Re: Krug's theory=awesome, reality=not so much

If that's what you think I am, then nothing I can say will probably change your mind and the absolute certitude that you and only you are right.

by jsfox 2009-01-15 03:02PM | 0 recs
Re: Krug's theory=awesome, reality=not so much

Except of course , I am not basing this on mean and only me, but you are basing this on your faith that Obama must be right. So yes, I do think you are very similar to the bush supporter of 2004.

by bruh3 2009-01-15 03:06PM | 0 recs
Re: Krug's theory=awesome, reality=not so much

No actually I wasn't basing it on Obama must be right, It was my opinion based on the things I read, think I know and things I had thought about. As far as I am concerned it's you and I that disagee, not you, I and Obama.

Now what might have been a interesting discussion on a difference of opinion hasn't happened because you jumped to a conclusion and assumed something that wasn't in evidence. Turning this into a petty sniping match. So I apologize for going along with it.

by jsfox 2009-01-15 03:14PM | 0 recs
Re: Krug's theory=awesome, reality=not so much

admit you do not care about whether the stimulus actually helps the economy, whether economists are right or anything else other than how in your warped logic this helps or hurt Obama

I addressed exactly this issue in my comment.

by Neef 2009-01-15 03:26PM | 0 recs
Agreed

Personally, I am of the "we can always come back later" school of thought. As long as this money provides a noticeable effect, we can argue that more = better.

by Neef 2009-01-15 03:19PM | 0 recs
Re: Agreed

your if state destroys the whole point you were trying to make. if the economic issues are as dire as the economist say, and you agree with them or conceed their point, then your whole post again makes no sense as to how sometime in the future, afte rhaving lost political capital, we can have a do over.

by bruh3 2009-01-15 03:42PM | 0 recs

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