Less than a month in, President Obama can claim his first foreign policy success, if only quietly.  During the run up to the election, Obama said he was willing to have discussions with countries the US has been avoiding for decades, notably Iran.  After the election, he reiterated the point, tossing a bomb shell into Iranian politics.  For the last several years, Iran’s President Ahmadinejad has scored political points pitting himself against a politically inept Bush administration.  At every turn, Ahmadinejad has come out on top in the view of his constituents and the larger Muslim world that is his major theater of operations.  Whether he was allowing himself to be battered by aggressive university crowds in the US (see how poor the hospitality is in the US) or refusing to correct poor translations in the NY Times (Ahmadinejad never said anything remotely like Israel “should be wiped off the face of the Earth”), he effortlessly outwitted his US opponents who weren’t able or willing to put in the effort to court Muslim opinion.  Those efforts have been critical to his administration because the tide of economic discontent that brought him into power is still there and growing.  In a country with huge oil reserves, there are routine power outages in Tehran.  The economy continues to sputter and the best and brightest in Iran leave. If he could have prompted a military strike, his reelection would probably have been guaranteed.

But the Obama administration presented Ahmadinejad with a new challenge and so far he seems not to know how to handle it.  Apparently, Ahmadinejad perceived Obama’s open hand remark as a weakness because his first response was an anti-US tirade perhaps meant to test which way the Obama team would jump.  But the Obama team didn’t jump, not to a reflexively defensive position, nor to an aggressive position.  That open hand just sits out there.  Ahmadinejad’s demands for apologies seemed to get no where in the international press with some outlets pointing out that the Clinton administration had already apologized for just about everything where Iran was concerned.  Without a radical US response, grumblings in Iran’s progressive communities started to percolate.  Former President Khatami, a well known reformist, had been vacillating on whether to jump into this year’s election, but with Ahmadinejad’s fiery late January speech failing to rouse, Khatami decided to toss his hat into the ring, offering the Iranian people a real, sharp choice in how they want their country to proceed.  Last week, Ahmadinejad had to backtrack, saying

The Iranian nation is prepared to talk. However, these talks should be held in a fair atmosphere in which there is mutual respect.

This seems to be the first diplomatic round the US has won since Ahmadinejad has come to power.  The rhetoric has failed, at least temporarily.  Between now and June, the Iranian people will have to look at that extended hand to determine if they want to reach out for it.  Not that a Khatami victory will change the world overnight.  Despite real efforts from the Clinton administration, Khatami could not overcome interference from the theocracy to affect real change in the ’90s.  Still, it’s a chance and that is more than we had last month.

A Redditor started a Wiki on the stimulus bill. The purpose: to translate its provisions into ordinary language so regular people can understand it, filtering out the legalese. And to sort out exactly how much money is assigned to what and whom.

The initiative got some 870 up votes (and lots of discussion) on Reddit, and it seems like a fair spread of people is now working on the Wiki. I thought it was interesting: both the idea and the resonance it had. Citizenship in action?

Of course, as with every Wiki, the risk of pranks and manipulation looms rather large. But at least, as one commenter notes, it seems like an interesting social experiment. And even just the act of creating it should acquaint a bunch of people with the specifics of the bill, maybe better than many of the Congressmen who had to vote on it hours after the final version was released.

It’s also distinct from a partisan initiative like readthestimulus.org (offline right now), which was sponsored by the Heritage Foundation.

No idea how useful or complete it will become. For one, while the site links to the post-conference version of the bill, it also notes that it is still largely based on the version that was passed by the House on 28 January. Whereas the bill was of course significantly modified since – first by the Senate, which made changes that according to Krugman would have created 600,000 jobs less than the original House bill, and then by the conference, which crafted a compromise between the two bills.

I’d also worry about reinventing the wheel. For example, as noted in the Reddit thread, the CBO already created a table, stretching for a few pages, that summarises the stimulus expenses, year by year, by section of the bill. (Table 2 in the enclosures of this letter from the CBO director to Nancy Pelosi.)

But still I thought it was great. At best it will make for a very neat tool, and at worst it will still, as initiative, be an encouraging sign of the times.

TNR The Plank commenter WoodyBombay on Judd Gregg’s withdrawal of his nomination for the Commerce Secretary post (the timing of which led at least some to suspect bad faith):

Many of the Americans among you, I suspect, will have heard of the telling incident this week in which Fox News aired a news item on the stimulus bill which repeated, word for word, the points in a press release from the Senate Republicans. Without ever mentioning that the analysis they were presenting came straight from Republican officials, of course. “It was so blatant,” Steve Benen notes, “Fox News’ on-screen graphic included the identical typo made in the original GOP document, making it obvious that the network used a party press release as a news script”.

But bias isn’t usually as jaw-droppingly stupid or outrageous. Subtle still isn’t quite the right word, but try this on: Some Critics Blame Emanuel for Obama’s Cabinet Troubles. I clicked the headline because, well, I don’t like Emanuel, so I’m in principle well-disposed to believing the diagnosis, even if it does come from Fox. (The HuPo, for example – admittedly not the most reliable source either – last week had a disturbing take on the stimulus negotiations, which alleged that Rahm had undermined Congressional Democrats and Nancy Pelosi in order to curry favour from moderate Republicans and deflect criticism of Obama.)

Alas. The Fox headline referred “some critics”. The opening sentence read, “President Obama’s latest Cabinet setback [..] has put the White House on the defensive, particularly Chief of Staff Rahm Emanuel, whom some critics blame for cracks in the vetting process.” So what inside sources had Fox News found dishing the dirt on Rahmbo? Who was blaming Emanuel, and what did they have to share about his role in these vetting mess-ups?

Um, well … “some critics” turns out to refer to exactly one person. And that person turns out to be “Kurt Bardella, a spokesman for Rep. Darrell Issa, R-Calif.” That’s it. The only person they got to blame Rahm was the spokesperson to a lowly Republican Congressman, who himself is a bit of a crackpot.

The whole story, in fact, quotes just two sources. One is, unsurprisingly, Democratic consultant Doug Schoen, the kind of Democrat Republicans love; but even he refused to play ball, saying that “it’s hard to defend or attack Emanuel without knowing how involved he’s been in the vetting process,” and that it “doesn’t strike me as fair or appropriate [..] to put it all on Rahm”. The other’s Bardella.

He gets no less than six paras, though.

If you were in any suspense about which Republicans voted for the stimulus in the Senate, by the way, now that the previous Senate and House versions have been unified into a final bill, here’s a hint: they were the same ones as last time.

Four days ago, the Senate voted on its own version of the stimulus bil. All of three Republicans voted in favour: Olympia Snowe (ME), Susan Collins (ME) and Arlen Specter (PA). Judd Gregg (R-NH) abstained, and all other Republicans voted Nay, while all the Democrats voted Yea.

Then the bill went into the conference committee, where Senate and House bigwigs hammered out a compromise between the different versions of the bill the two chambers had passed. Yesterday the House passed the new version almost entirely along partisan lines, with not one Republican voting in favour and just seven Democrats voting against (see this post for the details). Which left it to the Senate to confirm the result and pass the new, unified bill as well.

They did so, and the vote was practically identical to last time. The only differences were that Ted Kennedy, battling brain cancer, wasn’t able to come now, and Gregg this time did not abstain but voted against. The result: 60 Yeas and 38 Nays, compared to 61-37 last time.

You may have seen Karl Rove opine in the WSJ that “support for the stimulus bill is falling”, and that “the more Americans learn about the bill, the less they like it.” He is certainly not the only conservative asserting that the bill is impopular.

I’m not in the super-enthusiastic category myself, if obviously for very different reasons than conservatives have for disliking it. Overall I think the bill doesn’t look bad, though my initial enthusiasm has been damped somewhat after reading, for example, Paul Krugman’s very persuasive commentary. It’s probably not enough, and maddeningly worse than it could have been; but it’s still a whole lot better than nothing, and it does have lots of good stuff in it. So far my layman’s take, which is not exactly the most interesting one.

But what does the American population think? Is Karl Rove right? Unsurprisingly, not quite. An overview of the polls that were conducted in the past two and a half weeks, and explicitly asked respondents to express an opinion for or against the bill.

There are two pollsters that have done more than one poll within this timeframe: Gallup and Rasmussen.

Gallup asked: “As you may know, Congress is considering a new economic stimulus package of at least 800 billion dollars. Do you favor or oppose Congress passing this legislation?” All three times it polled the question, it found a majority in favor, and in the last iteration, on the 10th, that majority had grown from 52% to 59%.

Rasmussen asked: “Do you favor or oppose the economic recovery package proposed by Barack Obama and the Congressional Democrats?” It found strikingly different results.

According to Rasmussen, in late January a narrow plurality of 42% was in favour; a week later the roles were reversed, with a plurality of 43% in opposition; and by the 11th a plurality of 44% was in favour again.

Three other pollsters asked a variation of the same question at some point in these last two and a half weeks.

A CBS poll queried respondents: “Would you approve or disapprove of the federal government passing an economic stimulus bill costing more than 800 billion dollars in order to try to help the economy?” They approved by 51% to 39%.

A Pew poll asked respondents: “From what you’ve read and heard, do you think [the economic stimulus plan being proposed by President Obama that may cost about $800 billion] is a good idea or a bad idea?”. It found a narrow majority of 51% saying it was a good idea; 34% thought it was a bad idea.

So the vote is in; the US Representatives in the House have voted on the new, unified, post-conference version of the stimulus bill.

The outcome is predictably, depressingly similar to when the House voted on its own draft of the bill two weeks ago. No minds were changed here, no hearts were won. Well, one or two.

The vote: 246 in favour; 183 against. Compare: the previous time it was 244 in favour and 188 against.

Just like last time, not a single Republican voted in favour. On their side, the only differences were that:

• Last time, Ginny Brown-Waite (VA-5) did not vote; now she voted Nay;
• Last time, John Campbell (CA-48) and Chris Lee (NY-26) voted against; now they did not vote.

That’s it.

On the Democratic side of the aisle, 246 Representatives voted in favour; 7 against; 1 “present”; and 1 did not vote. Last time round, 244 voted in favour and 11 against.

These are the Democrats who voted against the stimulus both times:

I suggested last night, in a quick first take, that the stimulus bill that came out of the conference committee of Senate and House bigwigs doesn’t look bad. But a quick round-up of the liberal blogs in our blogroll shows mixed reactions, in as far as people have gotten round to responding yet.

Steve Benen at the Washington Monthly quotes the Post saying that the final version of the bill, after “tumultuous negotiations,” looks a whole lot like “the broad outline that Obama had painted more than a month ago.” He comments: “It’s a good point. [T]he administration, a month ago, envisioned a $775 billion plan, with $300 billion in tax cuts. The finished product looks pretty similar.” 

He concludes that while “the package should be more aggressive and more ambitious,” it’s still, as a TPM reader put it, an “astonishing … legislative achievement, coming so early in the term.”

Chris Bowers, generally one of the most critical voices, is pithy: “The deal isn’t perfect, but it is still probably the best piece of legislation to pass Congress in, oh, 15 or 16 years.” You should just make sure that it’s just “a starting point from which our legislative and political prospects only improve.”

Neil Sinhababu at Donkeylicious happily says “Good work, House leadership”, remarking that “Isakson’s idiotic $15K tax break per house for home-flippers is gone, and a bunch of the aid to states is back.” Moreover, Stephen Suh at Cogitamus, whose opinion I was particularly interested in because he’s been very vigilant in his criticism of Democratic sell-outs, is satisfied, calling it “a much better bill than anyone thought could come out of the reconciliation process”.

Not everyone is as equinimous, though. Noam Scheiber is outright disappointed: the “only real improvement” on the Senate bill ” is the rollback of the wasteful car and home-buying tax credit”. Otherwise the package is “insufficient”:

Okay, I was wrong–I’ll be the first to admit it. The conference committee didn’t end up moving nearly as far toward the House version of the stimulus bill as I thought it would. The compromise, from what we know of it, looks much more like the substantively inferior Senate version: the cuts to state aid and school construction and COBRA subsidies more or less stand. So does the $70 billion Alternative Minimum Tax relief measure, which may be a perfectly fine idea, but isn’t stimulus under any reasonable definition of the term. This is disappointing, to say the least. 

He also quotes Sen. Tom Harkin, who was downright dismissive to the New York Times:

“I am not happy with it [..] You are not looking at a happy camper. I mean they took a lot of stuff out of education. They took it out of health, school construction and they put it more into tax issues.”

Mr. Harkin said he was particularly frustrated by the money being spent on fixing the alternative minimum tax. “It’s about 9 percent of the whole bill,” he said, “Why is it in there? It has nothing to do with stimulus. It has nothing to do with recovery.”

Nothing from Ezra Klein or Kevin Drum yet, the two bloggers I quote way too often here, just because somehow it often feels like they’re my long-lost, smarter, more brilliant, skilful and ambitious twin brothers or something. Normally they write what I wish I would have written, so if they turn out to be scathing about the end result, I’ll be second-guessing myself. We’ll see.

To help you make up your own mind, AP has the new, unified bill’s highlights. The Library of Congress has all the prior info on the bill, but does not seem to have info on the conference committee compromise yet. Since Congressional votes are expected within days, I’m sure the final, full text will be available soon.

UPDATE:

Matt Yglesias is ambivalently positive: “Still, the Senate bill was a lot better than nothing and the conference report is better than the Senate bill, largely thanks to Nancy Pelosi who continues to be the most underrated progressive leader in America [..]. Still, despite Pelosi’s best efforts a lot of good stimulative ideas were left out of this package and a lot of the topline dollar figure has been dedicated to an AMT patch that’s useless as stimulus. The administration and the House Democrats still know what these good ideas are, [..] and I think it’s important that they find ways to work some of those ideas into the regular budget process.”

Ezra Klein has “mixed feelings”:

The passage of the legislation is heartening, but the specifics of the compromise are depressing. So too was the demonstrated power of the centrists and the effortless unity of Republican opposition. The process did not bode well for more controversial priorities like health care and cap-and-trade.

Perhaps most galling was the shell game of the AMT patch. $70 billion for an upper class tax break. [..] And this one provision comprised almost a tenth of the bill. [..]

It was a mixed bill that was constructed in a disappointing way. The left bought into the theory of stimulus spending, which included speed, and many hoped that the spending side would be built to accomplish an array of long-term priorities in areas like transit. That proved, if not wrong, then not right, either. The final bill included a lot of spending — most of it genuine stimulus — but much of it was very different from the sort of spending that the left wanted. If you think of the stimulus bill as having had two questions — how much spending, and what sort — I’d say that liberals should feel good about the first and ambivalent about the second.

A P.S. on the silliness of the strutting centrists: Ezra picked up on this:

Senator Collins said getting the final number to under $800 billion was more than symbolic; it meant “a fiscally responsible number,” she said.

(Image shared under CC license by scriptingnews)

Because $820 billion or $838 billion is pork-laden waste, but $789 billion is “fiscally responsible”. Because, you know, it’s a vanity percentage less than the original proposal – so, by definition that’s mission accomplished right there. It’s almost as if she set out to illustrate Ross Douthat’s point (“if the GOP wants, say, $500 billion in tax cuts, the country clearly needs $400 billion in tax cuts – but not a penny more! And if the Democrats want $900 billion in stimulus, then the best possible policy outcome must be … $800 billion in stimulus!”).

As Ezra writes, “I am just continually amazed that the press uncritically accepts nonsense like this from our politicians”. Because symbolism is exactly all the shtick of these people is about. The number needed to be just under $800 billion, no matter what worthy and effective random items had to be scrapped for it, so Collins c.s. could go home and claim their status as official moderate guardians of prudency. Never mind that they never seemed to use any internally coherent set of criteria to arrive at their conclusion of what would be acceptable. As commenter Jeebus snarked on Ezra’s post: “They should have made it $799,999,999,999.99.”

Never mind though, because this, from another commenter, seems about right, if I’m not being too enthusiastic off the cuff on the basis of a couple of news reports: “Sen. Collins was pwnd. She required some big changes in the first Senate bill, and mentioned that she wanted the cost to be about 800 billion instead of 900B. So the conferees cut the plan to less than 800B and took out most of her bad changes, leaving her no alternative but to back the bill as ‘responsible’.”

So the Conference Committee of Senate and House honchos has reached a deal: U.S. Lawmakers Agree on $789 Billion Stimulus Plan (Update4). The $789 billion price tag means that the bill is indeed smaller than either the House or Senate bill – but at first blush the outcome doesn’t look bad (at least not to my distinctly layman ears).

It’s a little distasteful to see the centrists strut themselves on the bill in the most sanctimonious way: 

“It is a jobs bill,” said Democratic Senator Ben Nelson of Nebraska, an architect of the compromise. “And today you might call us the jobs squad.” Nelson and several other senators had insisted that the stimulus plan total less than $800 billion.

Think about this for a second – he prides himself on having cut stuff from the plan – stuff, obviously, that would have created jobs – and even as he touts this dubious achievement, he frames it as having created “a jobs bill,” actually praising himself as part of “the jobs squad”. Never mind that, if it hadn’t been for the vanity tour of his crew, it would have been more of a jobs bill. The chutzpah these people demonstrate, as Matt Yglesias already laid bare earlier, is truly a piece of work.

But all of that is transient. What’s important is the actual bill. And there seems to be a fair bit of good news about this latest revision, going on the Bloomberg update now. At least if you judge the bill by the criteria of liberal criticism this past month – which I am admittedly reduced to somewhat since I have little economic schooling of my own. (So do chime in!)

All in all, about 35% of the plan has ended up as tax cuts and the remainder as government spending. Just to take a step back from the fray: considering just how much tax cuts have been regarded as the holy grail by every administration since Reagan’s, and extra government spending has been widely framed as almost a bad thing in principle, that’s not bad.

Tax cuts

The tax cuts seem overall revised in the right direction. For example, the biggest tax cut that had been included for businesses, which would have let companies convert losses into tax refunds, has been “all but eliminated”. This was a measure that had been criticized as yielding little immediate stimulus and doing little to help the people most in need – Dean Baker of the Center for Economic Progress called it “simply a give-away to the financial industry and homebuilders,” which “has nothing to do with stimulus” and wouldn’t “even be considered if it were not for the political power of the financial industry.”

A proposed $15,000 tax credit for homebuyers was reduced to $8,000. Funding for the plan to let car buyers take a tax write-off on their interest payments has been slashed from $11 billion to $2 billion. These, too, were ideas I’ve seen criticized by liberal pundits. The auto measure would have had little immediate stimulus effect, because it would have primarily resulted in the auto industry emptying the current vast stocks of unsold cars and using the profit to plug debts – all things that would be good, but wouldn’t create new jobs. The tax credit for homebuyers, at this point in the housing market, would be like carrying water to the sea.

On the other hand, Obama’s proposed payroll tax credit has mostly survived, reduced from $500 for individuals and $1,000 for families to will be $400 and $800 respectively.

Can’t have it all though – the plan still includes an Alternative Minimum Tax patch, which, if I’m reading his chart right, ranks very poorly in terms of stimulus impact according to James Galbraith.

Spending

As for the actual spending, there’s these tidbits:

• Nancy Pelosi “said she was reassured by Reid that some of the money Democrats in her chamber sought for school construction were included as part of a stabilization fund for states”. That fund will apparently total $54 billion.
• There’s “$59 billion in aid for unemployed workers in families, including $27 billion to extend unemployment benefits for 20 additional weeks in most states and 33 additional weeks in states with high unemployment rates”. 
  Note that the Progressive Caucus in the House was already very proud of having gotten “at least $12.7 billion” in the stimulus bill the House passed to extend unemployment benefits – so that means that this end result is actually even better, right? 
• It “also increases weekly [unemployment] benefits by $25.”
• The bill “expands a federal subsidy to help jobless workers keep their health benefits by paying 60 percent of their premiums for nine months for married couples who earn under $250,000.”
  Judging on this side-by-side overview of the differences between the House and Senate bills, this seems to have been one of the House bill’s provisions that the Senate centrists had scrapped in theirs.
• It “authorizes a one-time $250 payment for senior citizens, disabled veterans and disabled people living on Social Security benefits.”
  Judging on the above-linked overview, that looks like a more generous scope than the House bill’s, in which only Social Security beneficiaries would have received it.
• It provides $90 billion for federal funds for Medicaid and $19 billion to facilitate the digitization of health records.

All sounds like good stuff that will immediately aid those hardest hit by the crisis, as well as nicely reverse the trend of the last decade or two to squeeze the benefits for the poorest ever further.

UPDATE, 14 February: Yesterday, the Senate voted anew on the stimulus bill; this time on the final, unified version of the bill that came out of the conference, where House and Senate leaders hammered out a compromise between the two bills their respective chambers had passed. The breakdown of the vote was almost identical: see The Republican Senators who voted for the stimulus bill, Round II: The final bill.

—————

Less than two weeks ago, I wrote a post on The Democrats who voted against the stimulus bill in the House. Against the House’s version of the stimulus bill, that is. As you might remember, all 177 Republicans in the House voted against it and 11 Democrats joined them, which means that the bill passed by 244 votes to 188.

That vote passed the baton on to the Senate, and thus a new round of wrangling started. Centrist champions Olympia Snowe (R-ME) and Ben Nelson (D-NE) fought to cut stuff out of any stimulus bill they’d be asked to pass. Their selection of exclusions made little coherent sense and struck some of the most effective elements of the stimulus package from the Senate bill – all in the name of bipartisanship.

Yesterday the Senate voted on the result, and the vote was, as Ezra describes it nicely, “about as constructively bipartisan as kick in the head”.

Since it’s a very rare news report that links to the roll call, you can find it here:

That’s a vote of 61 to 37. All of three Republicans voted in favour: Snowe, Susan Collins (ME) and Arlen Specter (PA). Judd Gregg, Obama’s new Republican Commerce Secretary, abstained from the vote as promised, but in the Senate an abstention de facto equals a “Nay” vote. Every single Republican from a state South or West from Pittsburgh voted against the bill.

Let’s recall the compromises that were made to make this bill palatable for Senate Republicans:

The biggest cut, roughly $40 billion in aid to states, was likely to spur a fierce fight in negotiations with the House over the final bill. Many states, hit hard by the recession, face wrenching cuts in services and layoffs of public employees as they struggle to comply with laws requiring them to balance their budgets. [..]

In addition to the large cut in state aid, the Senate agreement would cut nearly $20 billion proposed for school construction; $8 billion to refurbish federal buildings and make them more energy efficient; $1 billion for the early childhood program Head Start; and $2 billion from a plan to expand broadband data networks in rural and underserved areas.

I don’t need to go into what these cuts meant, because assorted bloggers already presented the score:

Word has it that the Senate has a compromise stimulus plan ready, but the details are being held up while negotiations are still in progress.  We might not know what is in the package, but we’ve seen plenty of trial balloons over the last couple of weeks.  Here are my thoughts on those ideas, both as stimulus and as good policy.  I’ve provided a grade for both and these grades represent only my thoughts.

Critical infrastructure project spending (Stimulus: A+, Policy A+)

This one is a no-brainer for Congress and you could easily spend a trillion dollars on just this alone if Congress has sufficient desire.  Infrastructure spending results in the direct creation of jobs and the purchase of mostly local materials.  Infrastructure improvements directly benefit the economy by laying the groundwork for more efficient use of resources as in roads, electrical grid or data grid improvements or by minimizing loss with levy improvements and wildfire control.

Non-critical infrastructure project spending (Stimulus A, Policy C)

Non-critical infrastructure is my friendly term for a certain type of pork.  But pork is bad, right??  For most people, pork is only bad if it is not in their district.  Still, pork is stimulus for the same reasons that critical infrastructure spending is.  Almost by definition, the spending is very localized, it stays in the US economy and generates local jobs.  What makes it bad policy is that the future benefits of pork spending are secondary to the local, short term impact.  That new VA hospital might be useful, but not in a district with no veterans.  The center to study frisbee dynamics at the local university?  Those research dollars might allow the college to keep a couple of professors on the payroll and maybe avoid a tuition increase next year.  Will it generate the type of sustaining, well paying industries that might have been spawned from putting that money in stem cell research?  Probably not.  Still, that bridge to no where is valuable to the folks living in no where and some projects are too big for local governments even if they have great local value.  Pork doesn’t always have to be bad.

Incentive payments for purchases (Stimulus: C, Policy D)

There’s talk of a $15,000 credit to new home buyers and possibly a credit for car purchases as well.  On the home owner front, this will certainly allow some renters who are close to moving into home ownership to make the leap.  It will also prop up home prices since sellers will know that buyers have this incentive and price their homes accordingly.  Buyers and sellers with a little more cash might go out and buy a little more, but peope are afraid to spend and this type of credit is a very indirect way to stimulate the economy.  It also doesn’t increase sales, just moves them up.  Car and home buyers taking advantage of the credit are probably already in the market and would make a purchase in the next year or two.  By incenting them to buy now, you get a short term boost, but drain the pool of buyers for the next couple of years.

Increased “safety net” payments (Stimulus D, Policy A)

With more people out of work, there is a lot of talk about extending unemployment benefits are making shifts in the tax code to help those at the bottom of the spectrum.  The children’s health insurance program, SCHIP, has already been extended.  In terms of stimulus, this is not going to do much.  Many people in this situation have reduced their spending as far as they can and they are getting by on credit.  More government support will allow them to limit the debt spiral, but it won’t make them spend any more money.  But in terms of policy, this is a home run.  The rapid increase in the unemployed is the first pebble in an avalanche that could overwhelm our social systems.  The demands of high unemployment suck up all the available oxygen at the state level, killing other necessary programs and forcing cutbacks in other areas where we need more spending, not less.  Increasing government support in this area limits this disruption and provides enough time for the shocks to be absorbed by the states.

General tax breaks or credits (Stimulus F, Policy F)

I love low taxes as much as the next guy, but in the situation we’re in now, they have no stimulus effect.  I’m sure my Republican friends would disagree, but the whole idea of the stimulus is for the government to make up for the lack of private sector spending.  The private sector is not spending because of fear.  Some of that fear is very reasonable (“will I have a job tomorrow?”) and some is irrational (“things are bad!”).  In a mild recessionary situation, tax breaks add a little more to the banking account and provide a little “wealth effect” spending, but all the tax breaks in the world are not going to alleviate the fear running through the economy.  People are hoarding their dollars and if you give them a small tax break, they will just hoard it also.  Without spending, there is not stimulus.  From a policy point of view, tax breaks are also terrible.  Over the last couple of decades and especially under the Bush administration, Americans have come to believe that the federal government has tons of money and can do everything without any contribution from them.  You really don’t see this on a local level.  Communities that lay out reasonable, transparent bond referendums for education or recreation generally are successful in getting the votes they need to move forward.  People understand that services must be paid for.  We’ve lost that sense at the federal level.  Tax breaks at this point would further undermine the idea that we pay for what we receive.

Increased Higher Education Spending (Stimulus: B, Policy A)

OK, no one is really talking about this… but they should.  Our economy is changing and our population has to change to meet the need.  The GI Bill after WWII was one of the most successful long term spending efforts ever implemented by the US government.  What was a huge spending program at the time reaped an entire generation of well educated, productive employees who went out and grew the US economy into the juggernut that it is today, even in recession.  If you consider human capital as part of our country’s infrasturcture, this is a way to invest in that direction with proven long term results.  Create an opportunity for all of those unemployed workers to go back to school and get the training they need to really succeed.  It takes them off the unemployment lines immediately and pours money into their communities.  If you combine it with a living stipend, you can make it possible for displaced workers with families to pursue new opportunites.  When the economy needs them in a couple of years, they’ll be ready.