January 6, 2009

No Time to Cater to Hypocrites

Republicans, who never once tried to pare back President George W. Bush's rampant, irresponsible, off-budget spending for his misadventure in Iraq, are suddenly portraying themselves as the guardians of taxpayer money now that the country is in dire need of fiscal stimulus, and President-elect Obama's plan to shore up the economy with public sector spending is center stage. Although there is perhaps some merit to the idea that the GOP is trying to "reclaim its brand" in the wake of sweeping electoral defeats in November 2008, the fact that it is the same old hacks and political thugs declaring themselves born-again reformers reveals this posturing to be nothing more than a sham.

Let's be perfectly clear: After the walloping the Republican Party took in the last election, men like House Minority Leader John Boehner and his Senate counterpart Mitch McConnell have nothing to gain and everything to lose if Team Obama is successful in righting the ship of state that they and the Bush Administration ran aground. As Larry Sabato, Director of the University of Virginia Center of Politics notes, “Their job is to sit and wait to see if Barack Obama and the Democrats in Congress fail. Not a very good option, but that’s what it amounts to.” If Mr. Obama's "New New Deal" economic stimulus plan cushions the effects of the current deep recession, the very economic ideology on which Mr. Boehner and Mr. McConnell have staked their political lives will have had the final nail driven into its coffin.

And if you think that's exaggeration, consider the newest conservative talking point making the rounds (and if you are a student of either history or economics, hold onto your jaws to keep them off the floor): Franklin Roosevelt's New Deal policies actually extended the Great Depression. It's popped up everywhere from small blogs, to new books masquerading as reputable history, and the most crackpot advocates of this theory are even going one better, claiming that FDR's policies that the New Deal didn't have any positive effect, or even that they caused the Depression - never mind that it began in 1929 before he had even assumed the presidency.

To be frank, this is utter nonsense, as detailed in a short, but excellent article by David Sirota at Salon:

On deeper examination, I discovered that the right bases its New Deal revisionism on the short-lived recession in a year straddling 1937 and 1938. But that was four years into Roosevelt's term - four years marked by spectacular economic growth. Additionally, the fleeting decline happened not because of the New Deal's spending programs, but because Roosevelt momentarily listened to conservatives and backed off them. As Nobel-winning economist Paul Krugman notes, in 1937-38, FDR "was persuaded to balance the budget" and "cut spending and the economy went back down again."

To be sure, you can credibly argue that the New Deal had its share of problems. But overall, the numbers prove it helped - rather than hurt -- the macroeconomy. "Excepting 1937-1938, unemployment fell each year of Roosevelt's first two terms [while] the U.S. economy grew at average annual growth rates of 9 percent to 10 percent," writes University of California historian Eric Rauchway.

What about the New Deal's most "massive government intervention" - its financial regulations? Did they prolong the Great Depression in ways the official data didn't detect?


According to Federal Reserve Chairman Ben Bernanke, "Only with the New Deal's rehabilitation of the financial system in 1933-35 did the economy begin its slow emergence from the Great Depression." In fact, even famed conservative economist Milton Friedman admitted that the New Deal's Federal Deposit Insurance Corporation (FDIC). was "the structural change most conducive to monetary stability since ... the Civil War."

OK - if the verifiable evidence proves the New Deal did not prolong the Depression, what about historians - do they "pretty much agree" on the opposite?

Again, no.

As Newsweek's Daniel Gross reports, "One would be very hard-pressed to find a serious professional historian who believes that the New Deal prolonged the Depression."

But if there is one thing that eight years of George W. Bush should have taught us, it's that rightwing talking points don't get generated by the grassroots; they are messaged, with discipline, from the top down, especially when they are as fact-free as this one, and that matters intensely in the battle for public perception. Stung already by a slapdash financial sector bailout from the Bush Administration that has been administered without meaningful oversight or accountability, taxpayers are justifiably gun shy when it comes to shelling out hundreds of billions more of their dollars.

President-elect Obama has already declared that oversight will be a key element of his plan, vowing to ban all legislative earmarks in order to maximize its effectiveness. This is as it should be, but in recent days, he has also begun talking about sourcing as much as $300 billion of his proposed $775 billion stimulus package from tax cuts rather than new government expenditure. From a budget perspective, tax cuts are no different from deficit spending, but they are widely divergent in their effects. As Paul Krugman puts it:
Let’s lay out the basics here. Other things equal, public investment is a much better way to provide economic stimulus than tax cuts, for two reasons. First, if the government spends money, that money is spent, helping support demand, whereas tax cuts may be largely saved. So public investment offers more bang for the buck. Second, public investment leaves something of value behind when the stimulus is over.
There are good reasons - namely speed-of-implementation - for including tax cuts along with public spending, but the proportion being reported - approximately 40% - is both out of whack and alarming in its implications for any success from the stimulus package. In a separate article, Mr. Krugman has a detailed explanation for those with an economic bent, but it boils down to the fact that depending this much on tax cuts in lieu of spending will almost certainly doom the stimulus to - at best - mediocre results:

And that gets us to politics. This really does look like a plan that falls well short of what advocates of strong stimulus were hoping for — and it seems as if that was done in order to win Republican votes. Yet even if the plan gets the hoped-for 80 votes in the Senate, which seems doubtful, responsibility for the plan’s perceived failure, if it’s spun that way, will be placed on Democrats.

I see the following scenario: a weak stimulus plan, perhaps even weaker than what we’re talking about now, is crafted to win those extra GOP votes. The plan limits the rise in unemployment, but things are still pretty bad, with the rate peaking at something like 9 percent and coming down only slowly. And then Mitch McConnell says “See, government spending doesn’t work.”

Bluntly, this is no time to be anything less than bold, and it is no time to cater to the likes of hypocrites like Mitch McConnell or John Boehner. Let's hope that the incoming Obama Administration team sees past its own rhetoric of bipartisanship to do what needs to be done.


lokywoky said...

I'm afraid I just don't get the emphasis on how many votes. Who the hell cares as long as it passes. All this yelling from the right about bi-partisanship. What bi-partisanship. There is no such thing when they are in charge. But since the 'rules have changed' now they are whining and belly-aching about being 'cut out of the process' and that's 'undemocratic'. Yeah right. I say screw 'em.

Pass the damn bill any way you can. To hell with the number of votes. Let's get off the dime and do this. And by the way - tax cuts aren't going to help the middle class right now. If everybody gets $500 - is that going to save your house? No. Or your car? No. It'll buy a few more groceries but if you don't have a job...well, let's just say leave the taxes alone and let's have some support for jobs. Otherwise nothing else will work, and I mean nothing else.

Thanks for excellent post.

PBI said...

Hi LW,

Happy New Year!

I think the emphasis on the number of votes is to provide political cover, but I agree, pass it anyway possible and move forward. I have a suspicion that if McConnell/Boehner and company continue to block the way, the Dems will just step around them, as they should. I give Obama credit for trying, but frankly, these guys have shown themselves anything but worthy of that consideration. (And notice how the "obstructionist" tactic of filibustering has now become the "time-honored tradition" thereof?)


lokywoky said...

What I have also noticed is the Republicans screeching hissy fits about the 'new' rules changes in the House - where they put things back to the way they were before the Republicans changed the rules to favor themselves. Ha Ha!

And I love all the wailing about 'he didn't consult me first' coming from both sides of the aisle. Too bad.

I'm just getting pretty sick of everyone in the MSM and a lot of the cable shows and blogs too, consigning the Obama administration to the ash heap of history before he even takes office. For crying out loud - could you just give the guy a chance?

PBI said...

I honestly think the Villagers are just continuing to make themselves more and more irrelevant. My sense - naive thought it may be - is that the vast majority of people realize we are in a very serious spot, and that Obama isn't the man in charge yet. Moreover, I think most people want him to succeed - or at a minimum have the country climb out of its doldrums - and the rooting against him you describe is only going to drive people to other places to get their information. Right now, it's annoying, but I say, give 'em enough rope!

lokywoky said...

Hey - did you see McConnell's response to Obama's economic speech today? He wants to LOAN the states money at 5% interest for 5 years and 9% after that "just like the banks". WTF! The prime rate right now is zero!!!

The states are not banks. The taxpayers who live in those states are paying the money to 'loan' to the states. States don't have the ability to 'make money' like a bank. And if the states have to pay interest - the same taxpayers who put up the money for the original loan will have to pay interest to the government on THEIR OWN MONEY!!!!

Is this guy dumb or dumber or what? Unbelievable.

PBI said...

Oy. The Stupid - it hurts!