Shakespeare so eloquently once stated: “A rose by any other name would smell just as sweet”. We ought to take this sentiment to heart when considering the nature of the “economic stimulus” legislation working its way through congress right now.
For once, the republicans have got it right (sort of). Many have decried provisions in the American Recovery and Reinvestment Act not as stimulus items, but as projects that democrats simply think would be a good idea. What exactly do they mean?
One representative drew a useful analogy: former Treasury Secretary Paulson asked for funds in order to relieve banks of “toxic assets”, to which congress promptly responded by passing the Troubled Asset Relief Program (aka TARP- an apt acronym since congressional leaders evidently thought they could simply pull a financial tarp over the deep, systemic economic wounds the nation was suffering from). Then, once he got the money, Paulson decided that he actually didn’t want to buy toxic assets, but rather distribute the funds in a different fashion. So the problem is Paulson said he wanted the money for one thing (asset relief), but then used it on another.
In the same way, republican are accusing the democrats of simply pushing through funding under one name (stimulus), when they are actually pursing another goal (an agenda). A few examples: $20 billion for health information technology, $350 for military research on alternative energy usage for weaponry, $900 million to prepare for a pandemic influenza, $150 million for a repair backlog at the Smithsonian, etc…
Of course all of this spending will stimulate the economy in some way, but so would investing $250 million in toilet paper research. The question isn’t whether these programs will stimulate the economy- but whether they are the best vehicle for doing so. So what is the republican answer? Well, some of them are calling for massive tax cuts- one even proposed that all income tax be suspended for a year. The argument there is that American consumers can best stimulate the economy by putting money in their pockets.
There are of course a couple of problems with this philosophy, first and foremost- the previous stimulus payments made directly to consumers had very little demonstrative impact on the economy as many (wisely) choose to apply the money towards their debt burdens. It is a reasonable assumption that in tough economic times as these, if Americans have more disposable income by way of reduced taxes they are not suddenly going to run out and purchase a new Prius, but rather pay down their debt, other obligations, or save the money. The net effect of these tax cuts would likely only enrich banks/creditors further, and only mildly stimulate the economy.
After the first round of $350 billion, the banks hardly showed an inclination towards resuming credit and investment, so it is unwise to assume that tax cuts that would largely benefit creditors would help get us out of the recession. A further point to consider is, whether the American people have been consulted on this notion of reducing taxes during a recession. By presumably borrowing money from foreign investors and making consumers involuntarily take the proceeds, we are in effect giving the American consumer a foreign backed credit card they didn’t ask for, without knowing the true future costs of that credit.
After all, if American’s really did go out and purchase big-macs, flat screen t.v.’s and Hummers, is that really how we want to try to stimulate the economy? More moderate republicans have suggested that while tax relief is indeed part of the solution, a greater part of the stimulus legislation should be focused on public infrastructure- and I tend to agree. Construction and repair of buildings, roads, homes, highways and public facilities should comprise a significant portion of the economic stimulus as this will not only create long term benefits to the American people, but it will also immediately generate jobs and income.
The scope of the infrastructure projects that could be undertaken would be limited only by how much of the $825 billion was reserved for such purposes. Obama might be well advised to move towards a Tennessee Valley Authority or Civilian Conservation Corps type program as part of an economic stimulus. However all of this is not to say that the vast majority of spending in the stimulus legislation isn’t valuable, and indeed necessary to the development of our nation, because it is; and it is certainly not to say that the republicans should be let off the hook and hailed as visionaries.
What Obama should do, is pursue a true program of economic stimulus spending on one hand, and then in another round of sweeping legislation, introduce and pass all of the other types of spending under a new “New Deal” type of contract with America. This would range from spending on education to healthcare to social services, and could represent a bold new policy agenda of which funding for these programs would be the beginning.
The benefit of such a strategy would be two-fold. First, if the democrats simply used the remaining $350 billion of TARP money for true economic stimulus side-by-side with separate, “New Deal” legislation that contained investment in all of the other programs they are seeking to fund, they would still get what they wanted: economic stimulus, and a new policy direction for the nation.
Second, and perhaps more strategic, by going along with republican demands that the stimulus solely consist of tax cuts and infrastructure programs they would demonstrate bi-partisanship, and then when seeking funding for a “New Deal”, they could expose the republican opposition for what it truly is: ideological opposition to spending on social services, alternative energy options, and in general, progressive, liberal programs. By removing spending for these programs from the tough-to-defend label of “economic stimulus”, republicans would only have ideological arguments to fall back on when voting against such programs.
By calling their bluff, republicans would look quite foolish in front of the American people denying the necessity of investment in education, alternative energy, health care and social service programs, during our worst economic downturn since the depression. But by trying to sneak funding for these programs in under the label of “economic stimulus” democrats try to subvert the legislative process, call the spending something its not, and give the republicans something to hide behind.
For too long, republicans have beaten the democrats at rhetoric, spin, and in general, the political game. If the democrats and the Obama administration are serious about a new mandate for America, they need to be smart and deliberate about their decisions.
After all, if we get an economic stimulus, and our social programs under different names, won’t they still smell just as sweet?