Stimulus Saboteurs

Republicans are having trouble coming to terms with the collapse of their ideology as they plot their resistance to President Obama’s economic recovery plan. They still have faith that tax cuts and free markets will revive the economy, despite the evidence that tax cuts for the rich and deregulation of financial markets fed the current troubles.

Republican leaders in the House and Senate rejected Obama’s pleas for bipartisanship. Instead they put up their own amendments to replace the Democratic version with an alternative consisting mainly of tax cuts. When those amendments failed, Republicans unanimously voted against the $819 billion economic recovery bill in the House; only three of 41 Republicans were finagled to vote for the $838 billion Senate version.

The US economy has lost 3.5 million jobs since the beginning of the recession in December 2007. President Obama hopes to save or create as many as 4 million jobs over two years through the stimulus and other economic measures. But Republicans have not bought into the sense that there is an emergency. They believe that their electoral recovery depends on the stimulus having limited effect and the recession lasting through the November 2010 midterm elections.

Republicans are still blocking the certification of Al Franken’s election to the Senate in Minnesota, so Democrats needed at least two Republican senators to vote for the stimulus bill under rules that require 60 votes to proceed with a bill that increases the deficit. They got three Republicans—Sens. Susan Collins and Olympia Snowe (R-Maine) and Arlen Specter (R-Pa.)—after negotiations cut $83 billion in spending from the Senate bill. Among the items lost were $40 billion in funds to cash-strapped states to preserve essential services; $19.5 billion in aid to public school and higher education construction projects; $10 billion to states for Medicaid coverage for the newly unemployed; $8 billion to refurbish federal buildings and make them more energy efficient; $5.8 billion to fight preventable diseases; $4 billion from food stamps; $2 billion from a plan to expand broadband access in rural and underserved areas; and $1 billion for the early childhood program Head Start.

The “centrists” forced into the bill $35.5 billion in tax rebates for people who buy homes and $11 billion in credits for car buyers. The car credit likely would have more stimulative impact than the home credit, but neither are as productive as public works projects.

The bill also includes a “patch” on the Alternative Minimum Tax that will prevent 26 million upper-middle-class taxpayers (families making from $100,000 to $300,000 a year) from being hit by the tax, which is supposed to make sure that the super-rich pay at least some income tax. The fix, which would cost $70 million over 10 years, might be worthwhile, but the Tax Policy Center noted that almost 80% of the benefits would go to the richest 20% of households, who are least likely to spend the additional funds, so it “makes no sense as economic stimulus.”

House negotiators can try to reinstate some of those stimulative spending programs in the conference committee, but Democrats will still need to hold onto at least two of the three “centrist” Republicans to pass the final bill.

Economist Dean Baker noted that the spending cuts demanded by the “centrists” amounted to the loss of 500,000 jobs. He added that the $15,000 tax rebate for homebuyers could be abused with “flipping” of houses, costing a lot of money and doing little to help the economy.

Paul Krugman said Obama’s proposal of an $800 billion stimulus was not enough in the first place to fill the looming hole in the US economy, which the Congressional Budget Office estimates at $2.9 trillion over the next three years. Then the “centrists” made it worse. But even as they accused Obama of engaging in “generational theft,” 36 Republican senators voted to replace Obama’s plan with tax cuts amounting to $3 trillion.

Over 28 years, starting with Ronald Reagan, the neocons set out to shrink government to the size where, as strategist Grover Norquist hoped, it could be drowned in a bathtub.

They didn’t manage to drown the government, but over the last eight years they nearly doubled the national debt, to $10.7 trillion, leaving little to show for it.

Republicans still won’t admit that Franklin D. Roosevelt’s New Deal broke the Great Depression. Now they live in dread that Obama will show once again that government can get things done when private enterprise can’t. So they are trying to sabotage the economic recovery. We can’t let them get away with it.

So $800 billion probably is not enough to turn the economy around, and too much of it will go to tax breaks for the fat cats. But it’s a start.

While we’re at it:

• One of the Republican talking points is a proposal to cut the payroll tax—which would threaten the financial stability of Social Security and Medicare. The payroll tax could be reduced from its current level without undermining those needed social programs by a simple recourse—lifting the threshold of income subject to the Social Security tax from the 2009 maximum of $106,800. (Employers and workers split a 12.4% Social Security tax and a 2.9% Medicare tax, which has no limits on taxable income.)

• The Republicans’ objection to federal assistance to make high-speed Internet access available in rural areas is frustrating for rural economic development boosters whose telephone and cable companies are unwilling or unable to provide affordable broadband access in small towns and rural routes. Ironically, rural voters have been among the most loyal to Republican candidates. It appears that rural areas need a good screwing from the GOP every now and then to remind them why their grandparents voted for the Democrats.

• Bankers are complaining that they can’t live on $500,000 a year, as Obama has demanded of corporate executives who participate in the federal bailout. Well, that’s a good incentive for bankers to get a handle on their problems without Treasury participation. Otherwise, those of us who have applied for bank loans probably recall the banker thinking it was his business to tell you how to run your business. Turnabout is fair play.

• If private banks cannot or will not make loans available, the federal government should nationalize Bank of America to make credit available for businesses and the general public.

Obama’s Work in Progress

We already are hearing complaints about our alleged lionizing of Obama. As we’ve said before, Obama was not our first choice among Democrats. Nor was he our second choice. We were looking for a much more aggressively populist candidate when the primary races started. Obama is more oriented towards compromise. But Obama is the one who caught the wave and rode it to the nomination and he was by far the best choice in the general election. Now, just three weeks into the job we think he’s done an excellent job, even if we haven’t agreed with all his choices. His first act was to assure the financial markets with the choice of Larry Summers as his economic adviser and Timothy Geithner as Treasury secretary. They’re not the selections Dennis Kucinich or John Edwards likely would have made, but those populists didn’t get very far in the primary season.

Obama is governing as he said he would when he was on the campaign trail. We aren’t afraid of criticizing him—and some of our columnists already have taken potshots, as you can see elsewhere in our paper. We hope he will steer a more progressive and populist course. In the meantime, work on getting your Congress member to support HR 676, the Medicare for All bill sponsored by Rep. John Conyers (D-Mich.).

Geoghegan for Congress

Tom Geoghegan (pronounced Gae-gan), who is running for Congress in Chicago’s northside to replace Rahm Emanuel in a March 3 special election, would be a great progressive populist addition to Congress. A public interest lawyer, Geoghegan was a policy analyst for the US Department of Energy in 1977-79, then moved to Chicago to work on public-interest, labor and employment law. His 1991 book on his experiences as a labor lawyer, Which Side Are You On: Trying to Be for Labor When It’s Flat on Its Back, is a classic on the struggle to organize workers and get corporations to negotiate with them. See geogheganforcongress.com.

From The Progressive Populist, March 1, 2009

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