Saturday, February 07, 2009

Congress Screws the Stimulus

As more details are emerging, many more comments are coming on blogs. Here are few of relevance:

1. Jim Manzi on Atlantic argues this whole Science of Economics and Economic Policy making is quite under developed and how lack of ‘falsification’ is real detrimental here. Economics is not smart in the end to tell us to how FDR’s policies alone would have uplifted America during the Great Depression if there was no World War II. Economics again does not clearly tell us shape and size of stimulus packages based on the experience of Japanese lost decade. True that Economics does tell us how to avoid Bank Runs and those lessons are in full play in Bernanke’s Fed policy and Geithner would play to those tunes on Monday. But when it comes to Fiscal Policy; we are in dark. This is the opening for Congress to make the havoc with tax payers money.

It is true that why only Social Sciences fail; Physical Sciences are also at times not so certain. Exhibit A – debate about Global Warming. Though the evidence and Science is overwhelming; it is not as rock solid as like Newton and Einstein’s Physics.

To that extent, Obama and Political Leadership is all about shepherding flock without having 10 commandments from God. Success or failure, Obama got to carry this cross of Stimulus package and as he is acutely aware it will determine whether it will be a ‘one term proposition’ or not. It is precisely for this reason - the long lasting political impact of this stimulus package even though economic impact may not be fully clear or highly contentious – Obama needs to be careful and Dems needs to avoid over playing.

2. Talking about ‘overplaying’ the Dem victory; no one is more responsible than House Apportions Committee Chair Rep. David Obey. I mean this senior hack is still living in the world of Dick Gephardt and old school Labor ideology to produce such a third rate bill in the first place. That quality made it very easy for GOP to attack and make the greatest damage to this entire stimulus package.

3. When the house bill was prepared, there was no ‘out of box’ thinking; there was no creativity. If one wants to know what one of more creative solutions could look like to our problems, read about tax cuts for export profits as long as those are invested back in America; or read about how houses can be rented back to owners to mitigate housing price drops as advocated by Eric Oberg on TheStreet.com. As many folks have said again and again; this Stimulus has been lot wanting in terms of when it comes to finding new ways and creative solutions to our problems.

4. But may be this is my Liberal rant. Andrew Sullivan has more balanced take on this stimulus package. He concludes that in the end it will be a Political Victory for Obama to have Stimulus Package passed.

5. But the question is will it be a ‘pyrrhic victory’? Because if one believes what Politico is reporting; essentially this bill has become Obama Tax Cut bill. The Politico story says that Sen. Collins, Sen. Specter, Sen. Nelson and Sen. Lieberman have essentially cut down all meaningful spending items and allowed tax cuts to move above 40%. Then what chances are there that ‘tax cut’ % to come down within 40%? Paul Krugman rightly says as ‘none’. House can exert some pressure in the conference bill or President Obama can refuse to accept this bill. But it all seems unlikely to happen.

6. For President Obama to argue publicly that American Public has rejected GOP and its philosophy of ‘tax cuts’ as a solution for every problem; but to accept a stimulus bill with more than 40% tax cuts is essentially duplicity. Didn’t Obama say that stimulus means spending? Then what happened to that? What happened is these so-called, lime light hungry, 4 senators screwed up the bill. Or are they listening to Rush Limbough who advocated Tax Cuts and Spending proportional to Senate distribution among GOP and Dems? Looks like then these Senators have missed James Carville’s reply to Rush.

7. May be the best option left for House Democrats is to reject any compromise in the conference. That seems to be the only alternative. What is the point in having Obama Administration which lands up doing nothing but ‘tax cuts’ rather than spending? Why blame American Public when Administration after Administration only offers Tax Cuts as solutions? All Tax Cuts, regardless of who favors what, must compete and then must be in the end contained within a limit. If not, let us drop this stimulus bill completely.

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