Obama's First Choice
Almost every economist will tell you the stimulus has to be massive to have any real impact. Even Marty Feldstein, who headed Ronald Reagan's Council of Economic Advisors, told Congress it had to be $800 billion. But a price tag like that scares Republicans and so-called "Blue-Dog" Democrats who worry about government debt.
So here's Obama's strategic choice. He can fight for the biggest stimulus possible - twisting arms and counting noses to get a bare majority in the House and sixty votes in the Senate. That's how Ronald Reagan and George W. Bush got their huge tax cuts, and how Bill Clinton got his first budget through Congress.
Or Obama can go after the backing of a much larger majority than he needs--including a majority of Blue-Dog Democrats and Republicans. Of course, to do this he'd have to settle for a smaller stimulus package--one that may not be enough to immediately jump-start the economy.
Why would he ever choose the second strategy? Because his goal is not just to squeeze through the biggest stimulus package possible. It's to get a Congress that's mostly united behind whatever stimulus package emerges. This would help ensure that Republicans and Blue-Dog Democrats take some ownership of the package, and therefore responsibility for making it work.
And maybe if they feel ownership and responsibility, Obama can return to them later for more money and probably get their backing. Just as important, he might build bipartisan support for other things that have to be done in the next few months - like keeping the U.S. auto industry afloat, reducing mortgage foreclosures, and devising new regulations of Wall Street. And he lays the foundation for a more united Congress capable of tackling a new health-care system and reform of Social Security and Medicare.
It's not the strategy his predecessors used to enact their economic plans. It's not hardball politics, it may not be the best move for the economy in the short run, and it's a gamble. But given the challenges our new president and our nation face, trading bigger stimulus for broad based support may be very smart politics and smarter economics in the long run.
Sorry, but the idea that the Republicans will buy in and continue to buy in later if they get a crippled bill at day one is frighteningly naive.
Movement conservatives are not afraid that Barack Obama will do something wrong, they are afraid that he will do something right, and in so doing, undermine their message that government is evil.
You peel off enough Republicans to beat a filibuster, and that's it.
January 20, 2009 5:57 PM | Reply | Permalink
Bingo.
January 20, 2009 7:28 PM | Reply | Permalink
In order to begin to correct a problem, that problem has to be identified correctly.
That is not the case with the US economy.
The underlying problem is that there has been overproduction in at least three areas - credit, housing, and autos.
In the credit area, many people have maxed out on their credit and cannot afford to accept more debt. Therefore, they are not borrowing. Giving money to banks and financial institutions will have no affect on the underlying problem.
In the housing area, the baby boomers are at the point that they are beginning to move into retirement villages releasing houses to go on the market with nobody having the credit, or the desire, to purchase them.
In the Automotive area, the automotive companies have flooded the market with cars, trucks, and SUV's. Anyone looking at the overcrowded used and new car lots where very few people are buying these cars, trucks, and SUV's will realize this basic fact.
The solution is not to give bailout money to the automotive companies to make more cars, trucks, and SUV's, nor is it to give the banks and financial institutions more money to loan to people whose credit is already at maximum.
The correct solution would be to give the bailout money to individuals. It would probably end up in the banks and financial institutions as people pay off their debts, re-establishing their credit, and allowing the banks and financial institutions to begin making loans again.
The big difference would be that the Banks and financial institutions would have the money, but they wouldn't still have all the debts owed to them by individuals.
January 21, 2009 4:58 PM | Reply | Permalink
I second what Matthew Saroff says.
Dr. Reich, a successful Obama first term will almost certainly be the death knell for Goldwater-Nixon-Cato-Institute conservatism in the United States. This is particularly true if the Employee Free Choice Act is passed (plus, repealing the parts of Taft-Hartley that allow Southern States to disallow closed shops) would finish off movement conservatism, for good.
January 20, 2009 6:06 PM | Reply | Permalink
Disagree with both of the above. You don't need to attract the hardcore Republicans. There are easily 10-20 in the Senate who can be induced to get on board. At that point McConnell can bluster all he wants, but he just makes himself increasingly irrelevant - and that pays dividends later on.
January 20, 2009 6:13 PM | Reply | Permalink
That's what "peeling enough to stop a filibuster" means, though I put that number at 5, not 10-20.
January 21, 2009 8:16 AM | Reply | Permalink
I like Mr. Reich's assessment. Buy in is very important in terms of FUTURE goals. Bring them in now and they feel invested in success.
January 20, 2009 6:17 PM | Reply | Permalink
Precisely:
The key is a long term inclusive coalition. And if you do not like the word coalition, pick a new one. You have to get people to drift to your side by their own volition rather than through force. The returns are more stable long term. Sun Tzu anyone?
January 21, 2009 1:51 PM | Reply | Permalink
All you have to do is look at how the Coleman's strings are being pulled in Minnesota to have an idea of how much the common good matters to Republicans.
January 20, 2009 6:19 PM | Reply | Permalink
Hear! Hear!
January 20, 2009 6:51 PM | Reply | Permalink
I also agree with Mr Reich's assessment. Now is not the time for petulance from our side. Our best shot at long term meaningful reform is to push from the center, not the left.
As fanciful and attractive the view might be to see the Republicans pushed aside, that's ultimately a losing proposition. There are so many ways that legislation can be derailed.
January 20, 2009 6:27 PM | Reply | Permalink
You mistake "petulance" with honest assessment of what the situation is with regards to "Republican" and "blue dog" Democrats are about and how they have and will continue to operate.
Show me a GOP party that doesn't take as a basic precept in politics that bipartisanship is akin to "date rape" and show me evidence of the a modern GOP working in good faith (witness the Cornyn b.s. on Clinton's Sec of State nomination) and I might... might.. begin to consider there is validity to finding a center policy wise if it will put everyone on the hook.
January 20, 2009 7:33 PM | Reply | Permalink
Cornyn != typical Republican
He's just one guy. You are viewing this situation from a siege mentality perspective. Inevitably there are going to be Republicans and Democrats who oppose stuff that President Obama (that has a nice ring to it) is proposing--that's just human nature. And just as inevitably there are going to be Republicans and Democrats who support initiatives being pushed by the POTUS. And who's to say that Cornym (or whoever) wouldn't have a valid point down the road in their opposition?
Democracy is not efficient. Thus, soliciting Republican support maximizes the efficiency of government for the purposes of enacting significant legislation.
January 20, 2009 8:40 PM | Reply | Permalink
The "Blue Dogs" are different from the 'Phants. They just need to be convinced that it's to their political advantage to vote for this.
This is doable.
The Republicans, or at least the movement conservatives who make up more than 2/3 of them in both houses of congress, have to be convinced to abandon their core philosophy, and to support a plan that will work.
This is not doable.
To bring these folks in, you would need to so thoroughly poison any stimulus package that it hits Obama's desk already doomed.
January 21, 2009 8:20 AM | Reply | Permalink
I am protesting if you aren't offered a spot in the administration.
January 20, 2009 6:43 PM | Reply | Permalink
Shouldn't the real question be "what is best for our economy and our people?"
Quite often in politics, the smart guys in charge outsmart themselves by being so damn clever in terms of building consensus that they have thrown the baby out with the bathwater. I think the Obama crowd is particularly susceptible to this kind of thinking. I hope that the President resists it because it is shortsighted and it is not what is best for the nation. It is always best to do what is right first instead of conceding territory to an opponent in advance, particularly when that is territory you might win and the winning will benefit the people of the country.
We know the blue dogs and the republicans are not for doing what is best for the country because their primary interest is to remain in office by serving their corporate masters. I pray the new President recognizes this and refuses to play the smart guy's game in Washington. It's this smart guy's game that has hurt our people so badly over the past 30+ years and put the people in the bad shape they find themselves today. The smart guys were making good deals to advance their personal political aims instead of fighting for what is right.
If we are bringing the old tactics to an end, then I say the first one we throw overboard is the tactic that calls for allowing the Republicans and the DINO's in Congress to call all the shots all the time. Look where that bright strategy has gotten us for God's sake!
Dear Mr. President: do the right thing! Even if it is risky! You will find that if you do, your popularity will soar ever higher because the people recognize and appreciate when someone is ontheir side because it is so rare! Don't outsmart yourelf Mr. President!
January 20, 2009 6:50 PM | Reply | Permalink
Here's what I'm hoping, oleeb. I'm hoping that the people stand up and speak so strongly that even the repub politicians must listen to their voters. I think Obama is capable of talking "past" repub legislators - directly to voters. This is my great hope.
Once again, another amazing comment. Thank you!
January 20, 2009 7:12 PM | Reply | Permalink
I'm not gonna hold my breath on that one but it sure would be nice. But it can't happen if Obama cedes ground in advance to the forces of mediocrity and reaction. The truly critical decision is what he pursues. After that, how he pursues it grows in importance.
January 21, 2009 7:32 PM | Reply | Permalink
Bingo.
That should be the first, last, and only real factor in weighing a stimulus or recovery package.
January 20, 2009 7:46 PM | Reply | Permalink
Timing?
Key.
Does all the money need to be here today?
Do we have anything close to the controls, limits, guidelines necessary to properly institute a stimulus to the economy that large? Would anyone feel comfortable dumping that big of a pile of cash without proper guidance and control? Do we need to have another Paulson story?
The tax cuts provide a short cut that does not require a direct outlay. We will get through this. Some pain is inevitable. I say this as my company approaches the chopping block. I have faith that my business plan is fund-able and strive accordingly. But pain will come, and is a necessary part of the healing process. Stimulus away, but lets be focused and methodical. We retired a cowboy today, lets let the philosopher get to work. (By which I mean all of us as well as our new President!)
January 21, 2009 2:20 AM | Reply | Permalink
Not that I'm saying you're saying it's a good idea - I just feel anytime that suggestion comes up, it needs to be rebutted.
January 21, 2009 10:50 AM | Reply | Permalink
Since I am not versed in the calculations of return on the dollar for money invested (in regards to the stimulus) I am curious if anyone has a good link to this information?
As for rebutting the use of tax cuts as a form of stimulus - the timing of the injection (what I was trying to capture by referring to it as a shortcut) is what I find interesting/important. It may not be the best return on investment, but the impacts are immediate and measurable. Pay checks get larger which makes everyone feel better. Plus (which is important) it does not require "distribution" as it is directly granted to the already productive members of the economy.
If the package needs to be bigger, the best bet is to get everyone on-board using a variety of supposed methods. When people get what they want the first round, concessions are easier the second round. Again the key is to keeping the negotiations public so that no one can hide on round two. A lot of what Obama seems to be focusing on is projects that have measurable outcomes rather than "stimulus" or injection of direct cash.
And for all the gnashing - I would bet most of the "facts" people toss around are relative opinions backed by relative data and relative analysis. Not nearly as "hard" and straightforward as we would wish it to be. Which makes it very hard for any one group to have the lock on the truth. Monetary policy is a slippery beast particularly when the market is jacked up on fear and uncertainty.
January 21, 2009 1:39 PM | Reply | Permalink
Exactly right. Now is not the time to curry favor with Republicans. Now is the time to fix what's broken.
January 21, 2009 12:56 AM | Reply | Permalink
The key is timing. Everyone knows it will cost more money. Does all the money need to be spent today? I do not think so.
Letting him come back for the follow on investment allows for study on various efforts. Of course this means we should be pushing for complete transparency. Wiki pages populated by data and edited and studied by qualified identifiable entities. No anonymous contribution.
Our economy and regulatory systems are very complex and each maneuver should be planned out. Rushing will hamstring our long term goals - rushing got us to where we are now.
January 21, 2009 2:04 AM | Reply | Permalink
And for Republicans, a government program even if it works is bad for the people, because it creates moral hazard, and your daughter dating the guy with the tongue stud, so programs that work are bad for the American people.
January 21, 2009 8:21 AM | Reply | Permalink
Matthew is right. Gov't programs that work are particularly dangerous because they endanger the Republican creed that the purpose of gov't is to provide political patronage to Republican supporters.
Republicans view gov't (even the DOJ)as merely a tool for partisan gain. For them, addressing and meeting needs of the citizens is a threat not a goal. The history of Republican suppression of voters is evidence of this philosophy, as is the Bush use of the DOJ.
January 21, 2009 10:26 AM | Reply | Permalink
@ Matthew & mftalbot
Dr. Reich is correct. This is how Obama operates, how he has operated throughout his career, throughout the campaign, throughout the transition.
That gets you one, and only one, big legislative success. And permanently ends any hope of another. So, which one do you advocate Obama pick? And which hundred others does he consign to oblivion?
Or maybe, since we elected him, we try it his way? Instead of your f***ed up way, the way that has failed us for so long?
January 20, 2009 6:52 PM | Reply | Permalink
Explain to me how you have a GOP and blue-dogs... they vote for a watered down recovery plan which will be "Obama's plan" and then it doesn't do enough to turn around the economy. You a GOPer and a blue-dog, do you say politically "we tried it your way and it didn't work... see Democrats don't have solutions" or do you double-down on a plan you didn't want in the first place?
The GOP and the blue-dogs only path to a viable political position is a failure of Obama wrapped in the cloak of having tried to work with Obama.
Sorry, but the modern GOP philosophically views bipartisanship as date rape. They have said it for decades now. When will start accepting them at their word when they have said (and amply demonstrated it over and over again) that that is what they believe?
January 20, 2009 7:45 PM | Reply | Permalink
This is exactly right.
Obama has an 83% approval rating and a serious mandate to fix things. He will peel off the Senate R's in blue states, and blue dog Democrats will act as, well, Democrats for a change. To do otherwise would endanger their political futures. It's a no-brainer and politically safe thing to vote with Obama right now and probably for the next 120 days. Obama should pass the stimulus that is needed. If it is successful, he gets another 120 days.
The GOP leadership has no interest in seeing Obama succeed. He will only ever get five or six of them to vote with him on anything other than a motion to create National John Wayne Day.
January 20, 2009 8:59 PM | Reply | Permalink
No, you say "OK guys, I'm telling you this is NOT going to be enough, but since you won't budge, I'll try it your way. It's going to cost MORE, later, if we have to go back and do this again. And you're OK with that, so in the spirit of cooperation and bipartisanship, we will listen to your concerns, so long as you listen to ours."
Then you have the "I told you so" option, AND can make your point directly to the constituents that voted the obstructionists in to office.
Hypothetically ...
January 21, 2009 11:11 AM | Reply | Permalink
Problem is that if this fails, there will be no deflecting the blame.
The presidency is where the buck stops.
January 21, 2009 11:28 AM | Reply | Permalink
No, Congress is where it stops. The Executive spends it and has some responsibility, but it is up to Congress. That Congress cedes power to the Executive only establishes this.
January 21, 2009 5:42 PM | Reply | Permalink
Easy: single payer health insurance for America.
See how easy that was?
And once we got Medicare for All passed, we would take that same majority and pass an economic stimulus package that is a good one and one that is right for our people instead of one that assuages the greed and stupidity of the Republicans and their corporate masters.
But do please tell me, what is wrong with just one major legislative accomplishment if it is big? I don't agree with your analysis but even if it were only one major legislative victory how is that a bad thing compared to the typical Democratic approach of no major legislative accomplishments but instead a handful of essentially bad legislation that was chosen as the final product in order to appease Republicans, most of whom voted against them anyway?
The fact is, if Obama passed a single payer health act, it is far more likely that other major pieces of legislation would also past and not the reverse. Why is it so many Democrats insist on surrender prior to joining battle with the enemy? Are you people all so "risk averse" or as my grandma would have said "yellow" that you can't even try to stand up for your convictions and do what is right?
January 21, 2009 1:24 AM | Reply | Permalink
Cut it down. Kill the tax cuts. If you're still making money in this economy, pay your effing taxes.
January 20, 2009 7:14 PM | Reply | Permalink
With deep respect and sincerity, I have to disagree with that assessment. To be even more honest, I posit that it is bordering on delusional to think the Republicans and "blue dog" Democrats will take ownership of this if they get Obama to whittle down his stimulus package.
There is no credible argument I see that has merit given the reality of political leverage which makes your proposition tenable. Success will always find a 1000 fathers, and failure is always an orphan to paraphrase the old saying. But nowhere is that phrase more so in evidence than in politics.
We have a political class and punditry that can lie with a straight face within the span of a single interview on matters trivial and of the most vital of importance. A culture in D.C. which will gladly push a 'heads I win, tails you lose' rhetorical proposition which is at the root of your suggestion. Yet you seriously think that if they get Obama to water-down a stimulus package to get it passed, (and it fails) that it will somehow put them on the hook for it?
I honestly respect your past service Mr. Reich, but please, you should really share whatever it is you are smoking because I hear it might help prevent cataracts.
January 20, 2009 7:27 PM | Reply | Permalink
Amen.
January 20, 2009 7:30 PM | Reply | Permalink
It's unfortunate, but I agree with Matthew. The thought that a vote for the initial, inadequate, package would somehow lock in a Republican or blue dog for further support seems to be wishful thinking. What's more likely is that once the initial, inadequate, compromise stimulus gets through and proves to not be working that they'll turn around and vote against further bills since it's now been proven that this sort of spending "doesn't work".
January 20, 2009 7:32 PM | Reply | Permalink
Exactly.
In reality, a watered down failure of any sort of Keynesian based economic recovery is the only viable path for political viability of the GOP in its current state. And a half-hearted, go-along for now posture by the GOP/blue dogs... and then a failure of a weakened stimulus package even gives them political cover to say "we tried it your way and it didn't work... eliminate all capital gains, etc. etc.!!"
January 20, 2009 7:38 PM | Reply | Permalink
I think it's less about their support, than agreeing to try the watered down version first.
And PROMISING to quite literally beat them to electoral death with their foot-dragging in the next election cycle for their intransigence. The point must also be further publicly elaborated to their(R's and blue dogs) biggest fundraisers.
January 21, 2009 11:16 AM | Reply | Permalink
My question is: will the Obama Administration be able to get the second stimulus back through when it is needed? I think it is risky to assume that in six months the President will have the same popularity and support that he enjoys now.
January 20, 2009 7:40 PM | Reply | Permalink
I'm wondering what happens when the economy returns to health and it's time to repeal the middle and low income tax cuts in the stimulus plan(s). I'd imagine the Obama team is gaming this out that far into the future... Can Grownup Republicans be recreated in time to keep a emergency tax cut from becoming yet another contributor to enormous structural deficits?
January 20, 2009 7:46 PM | Reply | Permalink
I think Reich's suggestion is politically wise -- at least from Obama's perspective.
No matter what the amount of the stimulus the economy will quickly run out of "potholes" to fill; then, another contraction will occur.
Morning in America should take place in early 2012. Too early and bye bye second term. So -- underfund the stimulus and drag it out as long as possible.
January 20, 2009 8:24 PM | Reply | Permalink
It's not either-or, not black vs. white.
You have to look at the cost of getting more politicos on board. The incremental cost gets very very high at some point. If Obama has 65 easy Senate votes, no sense expending capital or diluting the principle focus just to get 10 more votes. Just don't go out of your way to alienate the 35 uncertain votes, and aim to "seduce" them rather than to buy them off with concessions.
Show that "steel in the spine" which Biden dropped near the end of the campaign.
January 20, 2009 8:51 PM | Reply | Permalink
"Buy in is very important in terms of FUTURE goals. Bring them in now and they feel invested in success."
If Obama should kiss their ass and the stimulus is too little, it won't be a success. Than what?
January 20, 2009 9:09 PM | Reply | Permalink
I think the key to a move such as is proposed by Reich is the public inclusion. As far as I can tell, Obama is bringing the panopticon to politics in a way not possible to anyone but the executive. By forcing technology improvements, he can increase social pressure on law makers.
Should he be successful, the legislative branch will be subject to the undying eye of the public web. Everything will be twittered and sit-down protests can happen within hours. Spontaneously.
It will be up to the citizens to assemble and demand our position as mordor's eye. (My apologies for the pop culture reference)
And it will bring a new meaning to bully-pulpit and arm-twisting.
January 21, 2009 2:14 AM | Reply | Permalink
Your panopticon reference seems reversed. In the panoptican a very few monitor the many. Isn't what you want for the many to easily monitor the few (grass roots monitor politicians)?
Are you thinking of "Participatory Panopticon"?
January 21, 2009 4:32 AM | Reply | Permalink
I am not sure what you mean by Participatory other than the traditional form, but the panopticoncan be used by the masses to observe a limited group of people like the House or the Senate when you couple it with the internet. If you want - you can liken the watch tower to the Internets as some singe ever watching entity.
January 21, 2009 9:56 AM | Reply | Permalink
Could not parse the remark in italics, but the panopticon notion allows a small number to observe many without the many knowing who is being observed. The PP notion appears in the wiki article you had cited.
January 21, 2009 9:52 PM | Reply | Permalink
Look I think it might be useful in that there just aren't enough projects spend a trillion dollars at once. Two bills of 500 billion might work better that way. Also as Kevin Drum points out, we are in an economic downturn. It's been exacerbated beyond belief by the Right's policies and simple fear, but it's still a downturn. The bad stuff needs to get out of the system, we have to hit a floor, an artificial floor won't help in the long run.
Of course, you need to use government to cushion the fall, especially for the average citizen, but all of still need to fall to an extent. Stuff is STILL over-valued.
January 20, 2009 9:50 PM | Reply | Permalink
I think it's possible that Obama will continue to disappoint his "base" because: They're his -- signed, sealed, delivered. The core of Obama's support comes from people who will never vote for Sarah Palin, no matter how much they hoped for something more progressive from O.
I just finished reading an article on CNN by Ed Rollins that couldn't have been more excited about Obama. People should go read it. I think Robert Reich is right. He's gonna sweet talk them, and they'll probably like it.
The idea that these people have principles, ideas or actually represent their constituents is a crock. They're in it for the glory, and Obama's got that glorifying touch.
Anyway, it' s only money. I'm more worried what he's going do about Pakistan, Afghanistan and Palestine. I'm hoping a lot -- because he seems to be spending huge amounts of time praising the military, so I hope that means he's angling for room to make big changes.
January 20, 2009 10:16 PM | Reply | Permalink
"... Barack Obama might just be the man to guide us through these troubled times." -- Ed Rollins
"might just be" hardly rises to that level, pardon my cynicism.January 21, 2009 4:47 AM | Reply | Permalink
"The question we ask today is not whether our government is too big or too small, but whether it works"
I think Obama will ask the same question about the stimulus package.
Bugeting is always both a top down process which asks how financial goals can be met and a bottom up process which asks what projects are most economically viable and operationally practical.
January 20, 2009 10:36 PM | Reply | Permalink
I am seriously disappointed in some of the comments I've read here. Do people really think that continuation of the culture wars of the last 20 years is a viable strategy? Shall we just get enough votes to pass it an shove it down the throats of the rest? Haven't we seen enough over the last 20 years to demonstrate that this approach doesn't lead to any kind of lasting success? All it leads to is more and more fighting and less and less progress. What progress you do make is easily undone when the pendulum swings (made more likely by the constant bickering) since there is no mandate behind it.
I'm particularly puzzled by the concept of "standing up for what is right" as if you have some kind of divine directive that confers infallibility. Isn't that what Republicans have been doing? I thought the idea of getting a majority was to put an end to that kind of thinking, not to copy it.
Has no one been paying attention to what Barack Obama has been saying for the last 2+ years? He's doing exactly what he said he'd do, and I'm foursquare behind him. There are 300 million people in this country and every one of them counts. Not just those who voted the "right" way. Every single one of them.
January 20, 2009 11:30 PM | Reply | Permalink
Amen.
Not blindly, but supportive of the direction. He now has the pulpit, lets see what he does.
Meanwhile, lets build/demand the panopitcon. I want every sleepless nerd processing the data of our government. Our constant observation coupled with professional analysis can increase the control the citizenry has over the government.
This media infrastructure Josh is building is a darn good site. Anyone up for franchising? I will take Denver.
January 21, 2009 2:26 AM | Reply | Permalink
It is not a continuation of the "culture wars," it is an understanding that a bad bill with 80 votes in the senate is worse than a good bill with 51 votes in the senate with 9 more voting for cloture.
January 21, 2009 8:24 AM | Reply | Permalink
Did you pay attention to what Barack Obama said yesterday? He said people were interested in government that works.
Prof Reich, who isn't even in the administration, is suggesting that Obama will do something that probably *won't* work to fix the economy now but *might* set him up down the road to do something adequate.
Are we not allowed to discuss if Obama will get the payoff Dr. Reich imagines? It would be irresponsible to ignore that it's a gamble -- a gamble with the entire economy and people's livelihoods and savings -- that might not work!
It is going to be an extremely tedious and tiresome 4 years if everytime somebody questions whether Obama's possible course for policy is going to be productive that the remarks get shouted down by the Obama cult -- or to put in your way, get it shoved down our throats that Obama won the election, so shut up.
No thanks! I voted for him, but that's it. I'm not required to join a cult.
January 21, 2009 12:20 PM | Reply | Permalink
I don't know, professor Reich. I agree with posters here who point out that compromising in exchange for future support never works with either Republicans or Blue Dogs. They take your compromise and then they betray you for it later. They're ruthless.
But also... it has to be at least 5% of normal, non-credit crisis GDP and it has to be now or it's pointless. A big hit now kills this. A too small hit with follow-ups equals Japan.
January 20, 2009 11:43 PM | Reply | Permalink
What if this is more like hiring the guy to fix the kool-aide machine and restock the mind altering drugs. Once everyone is jacked back in again, we shall resume our gluttonous path?
Or, should our resumption be more economical , we might grow in our understanding and progress will be made without instituting substantial centralized control systems that are subject to too many stressors to be effective long-term. (aka big box retail) Globally local. Technology will enable this beyond its current state.
There is a will and a way without massive government spending - it just has to be jump started with like minded principles.
There I go Hoping again.
January 21, 2009 2:35 AM | Reply | Permalink
What often seems to happen is that the compromise to gain the support of the Republicans or the Blue Dogs results in the desired program being underfunded or incompletely developed and unable to achieve its desired goal.
January 21, 2009 3:21 PM | Reply | Permalink
But a price tag like that scares Republicans and so-called "blue-dog" Democrats who worry about government debt.
That you have decided, Mr. Reich, that we cannot worry about government debt (supposedly because we have to prioritize stimulating the economy) suggests to me one thing:
You don't intend to pay it back.
All of this talk about how we cannot afford to worry about deficits only makes sense if we assume that the government, after it gets what it wants, is planning on defaulting.
January 21, 2009 1:32 AM | Reply | Permalink
Yours is a very tempting view, and one which deserves a serious reply from Reich et al.
January 21, 2009 3:57 AM | Reply | Permalink
January 21, 2009 11:46 AM | Reply | Permalink
I will offer my view. People don't buy a house planning not to pay off the mortgage, generally (yes, they may have done so under Bush). Some people think it is sensible to not borrow money you cannot pay back. Other than deliberately inflating debt away, how will the trillions of dollars get paid back?
Monetary inflation is an ongoing default on past promises.
January 21, 2009 5:35 PM | Reply | Permalink
I don't think default is the plan. But they're fine with devaluing the dollar and paying the debt now with less valuable dollars later. Inflationary as heck and hell on folks like you and me but fine for the country's balance sheet.
January 21, 2009 12:44 PM | Reply | Permalink
I've been mulling this over for months, and you all will have to forgive me if I put this out there again as my own post.
I think I have everything figured out. Giving money to the same people who took all the original money is ridiculous. One thing of which I am sure is that there is nothing I cannot understand - if someone else understands it, they are capable of explaining it. If they can't, it's because they don't understand it, or they are hiding something, intentionally misleading me, being as confounding as possible.
I am sure this real simple. There has been an explosive growth of the super rich. They hold more of the wealth than ever. The top earning hedge fund manager was making $700 million dollars a week! CEOs getting those bonuses. Shareholders making money while the the companies lose money. The money didn't cease to exist - it was taken! So what do you do? Give those same people more money. Brilliant!
If you had given all that money to the people whose homes were in foreclosure, they could have paid those companies, as originally agreed, the way lending institutions are supposed to make money. But noooo! They give it to the banks, who still foreclose.
So now, we have a horrible winter, with record numbers of homeless people, who only a few months ago were working, and paying their mortgages, then lost their jobs and their homes, and the banks who got billions of dollars not to foreclose did it any way.
This is repackaged Reaganomics. Money NEVER trickles down. The people who would have put the money back into the economy were shut out, and the hoarders have more to hoard.
It's criminal.
January 21, 2009 2:21 AM | Reply | Permalink
The problem is that there is a loss for every gain in financial matters. Government bailouts tend to go to the previous losers, not to the previous winners. The one qualification is that bankers and brokers are not nominally winners or losers. They like lawyers in litigation "win" on every transaction. They get a "commission" or a fee, win or lose. They are parasites.
Whether this parasitism is more or less symbiotic or cancerous can be argued in specific cases. It looks to many as if it's a rigged con game.
I'm strongly against using government funds to bail out or "guarantee" what amount to gambling losses the way it has been done so far (at least from the very few detailed facts I have found). There is no real limit to gambling losses besides the house (government in the end). Of course counterfeiting (monetary inflation) can in some cases cover large though not infinite losses.
So trying to fix the financial system by feeding money into such potential wells amounts to plugging a hole in the dike by forcing water through it. Pretty soon everyone who uses money is drowning in it.
January 21, 2009 4:23 AM | Reply | Permalink
Almost every economist will tell you the stimulus has to be massive in order to have any real impact. Even Marty Feldstein, who headed Ronald Reagan's Council of Economic Advisors, told Congress it had to be $800 billion. My own view is at least $900 billion. But a price tag like that scares Republicans and so-called "blue-dog" Democrats who worry about government debt.
Republicans are scared about the price tag? They weren't scared when Bush was giving big tax cuts to the wealthiest. They weren't scared when they were spending hundreds of billions in Iraq? It didn't seem to bother them that he added trillions to the national debt. The real problem for Republicans is the spending to help main street Americans. They don't like spending there, and they really don't like not being in control of where and how the money is spent.
January 21, 2009 8:20 AM | Reply | Permalink
In June 2002 Bush sent Rumsfeld to India and Pakistan to talk them down from their confrontation that had been building for 5 months over Kashmir. I remember reading at the time that Rummy brought with him detailed projections of the damage that would be caused to both countries by a nuclear exchange to scare the living hell out of them.
Obama should lay out to individual Republican senators exactly what will happen to their states with a too small stimulus package. The damage this crisis may cause is akin to the affects of nuclear weapons aimed the economy. Scare the living hell out of them. Paulson's lecture scared the living hell out of the likes of Chris Dodd last October and the problem still exists. We go big on all these issues or we waste trillions and still suffer the same fate.
January 21, 2009 10:08 AM | Reply | Permalink
The problem is that red states are largely more rural while Obama is urban-centric (as I read him now). And I think it's likely that the effects will be worse for urban areas than for rural areas.
Detroit might be a leading indicator worth noting.
January 22, 2009 1:44 PM | Reply | Permalink
If Obama can succeed in encouraging significant numbers of Republicans to cease their obsession with partisan attacks, stop their exploitation of wedge issues and fear, and extinguish the Republican belief that government exists solely to dispense partisan political patronage, that will be a big helping of real change.
January 21, 2009 11:36 AM | Reply | Permalink
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