What Do You Think a Stimulus Is?
by Mark Wilson, Editor
February 6, 2009
Yesterday, President Obama finally stood up to the Republicans. For the last week, Republicans have been doing what they do best: controlling the message. They have talked about the American Recovery and Reinvestment Act of 2009 only in terms of its negative components: how much individual elements cost, how there aren’t enough tax cuts. They have, as they always do, derided and made fun of specific parts of the bill, like the part that calls for moving the federal vehicle fleet to hybrid cars. In much the same way that Sarah Palin derided certain research projects during the election (research projects that, by the way, benefit the state of Alaska), Republicans have attempted to hold up individual programs and say, “Isn’t this stupid?” Of course, that message is only suucessful if the audience similarly agrees that the program is stupid.
Yesterday, at a Democratic getaway (which cost $100,000, by the way), Obama defended the stimulus plan and even — what’s that — improvised:
When you start asking, “Well what is it that’s such a problem, that you’re seeing? Where’s all the waste in spending? Well, you know, you want to replace the federal fleet with hybrid cars.”
Well, why wouldn’t we want to do that? That creates jobs for people who make those cars. It saves the federal government energy, it saves the taxpayers energy.
Then you get the argument, “Well, this is not a stimulus bill, this is a spending bill.” What do you think a stimulus is? That’s the whole point. No, seriously. That’s the point.
Republicans have been pushing more of the same: tax cuts, tax cuts, tax cuts. For businesses and for the wealthy. But businesses have shown that they have no tolerance for spending money right now. They’ll take a tax cut and save it rather than use it for new production, or investment, or to hire workers. The wealthy have all the necessities of life they need. Rather than spend a tax cut on a new car or a new house, they’ll save it. The marginal value of a 10% tax cut is greater for a poor person than it is for a wealthy person. The wealthy person doesn’t need another Rolls. The poor person needs to eat.
Part of the Republicans’ problem with the stimulus package is that it involves the government doing things beyond fighting wars. It’s a generalization to say that Republicans hate government, but certainly part of what it means to be conservative is wanting “less government.” Grover Norquist is, of course, the proprietor of wanting to make the government so small he could drown it in a bathtub, which is why the government was so mismanaged for so many years. It’s hard to do a job well when you don’t think that job is worth doing at all. Given the choice between action or inaction, conservatives have preferred inaction (except, of course, when action increases businesses’ profits, as when Congress voted to take up United Airlines’ pension plan). One conservative pundit last week (who may or may not be able to speak for all conservatives and may or many not also be an idiot) claimed that the government has never created jobs, that government can only destroy jobs. It’s like dealing with an economic al-Qaeda: Republicans don’t want to negotiate, they don’t want to be bipartisan. They want to get exactly what they want, in full. They’ve grown accustomed to that after eight years. (Democrats have the exact opposite problem: they’ll capitulate at the drop of a hat. They’ll volunteer to capitulate if no one has asked them. There’s even a picture of Harry Reid in the dictionary next to the word “pusillanimous.” Someone needs to tell the Democrats that Ronald Reagan stopped being the president a long time ago.)
It’s true that, given enough time, the economy could probably fix itself (of course, John Maynard Keynes famously said that, in the long run, we’re all dead). But while we’re waiting for the free market to operate, people are getting laid off and losing their homes. Can we morally permit ourselves to let the economy remain in shambles for an unknown amount of time just to prove a point about capitalism? Of course not; it doesn’t make sense to do something just because it’s liberal or just because it’s conservative. We should do things because they work; Obama said as much in his inaugural address (though, admittedly, he was referring to more government versus less government).
Right now, the free market is broken. Consumers don’t want to spend at any price (and “any price” here means “any price that would be beneficial to the market”; certainly businesses could offer their goods for free, but that doesn’t exactly help us out of a recession). The cycle is supposed to work like this: a recession occurs, consumers stop spending, businesses lower their prices, consumers start spending again, business make more money, they start hiring people, consumers get employed again, business raise their prices, and we’re on our way back to 99-cent gas and Hummers at a 2-for-1 discount.
Our recession is working like this: consumers stop spending, businesses lower their prices, businesses lay more people off in order to save money, consumers stop spending even more as some of them get laid off, business revenue decreases, business lay more people off to save money, and so on. It’s a downward spiral that the market can’t correct. The market needs a fresh infusion of cash that just isn’t going to be coming any time soon.
Monetarism has failed. The discount rate — the interest rate that banks pay for short-term loans to other banks — is between 0% and 0.25%. It can’t go any lower, and banks still are reluctant to lend to other banks. This isn’t an issue strictly of price; it’s also one of psychology. Until businesses are ready to produce again, government must step in and fill the void to prevent the recession from getting any worse than it already is. Republicans criticize the size of the stimulus and bring up the issue of how we’re saddling future generations with this debt (these same people, by the way, were remarkably silent as the debt doubled under George W. Bush, Henry Hyde, Tom DeLay, and Bill Frist). They forget the other component of Keynesian economics: once the economy has recovered, the government must increase taxes and cut spending in order to pay back the money it borrowed. Let’s hope Congress doesn’t forget that part.
Update: Daily Kos has an interesting article analyzing media coverage of the stimulus bill. The Liberal Media, as it turns out, are not liberal at all. “Republican lawmakers outnumbered Democratic lawmakers 75 to 41 on cable news interviews.” In addition to Congressional Democrats themselves, cable news networks must be informed that Democrats won the election. Also, some of the Democrats who appeared on cable news networks were “Blue Dog” Democrats who side with Republicans on economic issues. And pretty much every other issue. Why are they Democrats, again?