Monday, February 23, 2009

Obama Stimulus

There are many critiques of this legislation which have appeared in the media. Two in specific are taken here as representative for the commentary – one by Clive Crook in Atlantic / Financial Times and another by Robert Samuelson in Washington Post.

Both these critics support the need of stimulus and understand the legitimate need of a big, hefty, stimulus at this point in the recession. But both argue that it is too much ‘back end loaded’ instead of being ‘front end loaded’. Out of the bat, it does not spend sufficient money. However valid such a criticism is, as many like to point including Krugman; you got to have some start some where. If we do not undertake certain things just because those will start late, what happens when recession is still there in 2010 or 2011? Would you not think that it would have been better things started back then? Both these critics do not say that projects like high speed rail transportation or computerized health care record are bad. Argument is those will start years down the line. If projects are good then, their late start should not be a problem because everyone agrees that this recession is going to be long.

The other criticism is inclusion of AMT money in the bill since it was anyways to happen and it is not a stimulus. As White House Chief of Staff Rahm Emmanuel would say, will these critics please find a way to seat 60 Democratic Senators? The 3 GOP Senators held this stimulus package at ransom is the political fact and unless their demands of including this AMT tax provision in the bill, it would not have passed filibuster proof in the Senate. I suspect these GOP Senators would have liked only Tax Cuts in the stimulus package. But that being not possible, the next best thing was to cut the non-tax cut funding as much as possible or effectively reduce the size of the stimulus package. That is what they did by including AMT money in the bill by starving non-tax cut items.

Robert Samuelson complains that the money allocated to States in the bill is less. Again, talk to GOP. He further argues that such allocations should have been best left for States to consume anyways they deem it fit. That would mean ‘meat loaf’ fights all over State Capitals – total distraction from the immediate need of spending the money. And our new rising star Bobby Jindal would have returned all of that money back to DC, starving Louisiana folks! American people would expect Congress to indicate clearly where that money should be spend by States and that is what exactly Congress did by allocating funds to specific program. Now, it is a valid criticism that it might make States to always depend on Congress for such continued support in future too. But is that the worry should we have it now when every money half million people are loosing their jobs?

Bottom line is the stimulus package is not ideal. But everyone agrees that provisions in the bill are at least going to alleviate pain for many folks. Keeping it ‘front loaded’ means all tax cuts only and such a policy has been sufficiently discredited in the Bush Regime. No one is under the illusion that any single stimulus package is going to stop the recession. The idea is whether Congress has done what is in its power at this time to reduce the pain. Criticizing Obama for not signing the ideal package is disingenuous. Robert Samuelson has been doing precisely that quite often lately. Clive Crook has been more constructive. For example, apart from his criticism of the stimulus package, he likes Obama’s Housing Plan. I suppose we will have to endure one more flawed, loud mouth article from Samuelson about the housing plan.

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