The Stimulus Opportunity
by Patrick Ruffini | December 29, 2008 at 12:48 AM
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The upcoming fight over the largest, fastest expansion of the national debt in American history (a/k/a the "economic stimulus") will be unusually compelling and provocative. First, it will provide an opportunity to reclaim the long lost mantle of fiscal conservatism. Second, it could provide interesting opportunities to build alliances with Blue Dog Democrats and progressive elements within the Obama coalition disappointed in the plan's focus on Old Economy ditch-digging projects.
Here's David Brooks, TR Republican, giving voice to neo-urbanist concerns about the stimulus:
>>> Barack Obama has said that he would start an infrastructure project that will dwarf Dwight Eisenhower's highway program. If, indeed, we are going to have a once-in-a-half-century infrastructure investment, it would be great if the program would build on today's emerging patterns. It would be great if Obama's spending, instead of just dissolving into the maw of construction, would actually encourage the clustering and leave a legacy that would be visible and beloved 50 years from now.<<<
And:
>>> It's also before the spending drought that is bound to follow the spending binge. Because we're going to be spending $1 trillion now on existing structures and fading industries, there will be less or nothing in 2010 or 2011 for innovative transport systems, innovative social programs or anything else.<<<
Environmentalists aren't happy either:
>>> In one of the first internal struggles of the incoming Obama administration, environmentalists and smart-growth advocates are trying to shift the priorities of the economic stimulus plan that will be introduced in Congress next month away from allocating tens of billions of dollars to highways, bridges and other traditional infrastructure spending to more projects that create "green-collar" jobs.<<<
FTW, Friends of the Earth is whipping its members into action with the slogan "New Roads = New Pollution."
In 2002, when Mark Warner tried to push through a tax increase referendum to pay for roads in Northern Virginia, he was thwarted by environmentalists and progressives. The outer suburbs, nominally more Republican, voted for the referendum. Alexandria and Arlington voted against it, with precinct-by-precinct returns tracking closely with proximity to metro stations.
This means a huge chunk of Obama's natural constituency will be soft on an infrastructure-heavy stimulus. And to the extent there still are voices of fiscal sanity left in the Democratic Party, they may balk at the price tag, which at $675-$775 billion over two years would be the largest, most dramatic dollar-per-dollar expansion of government -- and the national debt -- in American history.
It will also be good to be on the side of good government for once. Brooks' embrace of central planning aside, he is right that there just isn't $1 trillion of "shovel ready" work ready to go, which means a lot of haphazard, fly-by-night crap getting funded. The stories of waste, fraud, and abuse from these projects will be legion. We may not agree ideologically with all who may want the stimulus to be more carefully planned out to fund their pet projects, but from left, center, and right, there will be a unifying argument that the Obama stimulus is a big hairy mess that just isn't fully baked.
Ideally, this unfolds as follows.
Republicans begin to tap into Americans' common sense belief in belt-tightening as the appropriate response to lean economic times. Families have had to make sacrifices -- it's time for government to do the same and not saddle our kids with a trillion more in debt on top of bailout after bailout after bailout. Or, taking on more debt than we could afford is what got us into this mess. Now they're saying that taking on more will get us out? Give me a break.
We then introduce a $250 billion package of targeted tax cuts and small business incentives. We cite as a rationale for the figure Obama's own economist, Christina Romer, who has found a 3x multiplier effect from tax reduction, while other mainstream economists who say the multiplier from a spending increase is about 1x. We argue that this package would have the same impact as the inefficient and wasteful Obama stimulus. If they can be brazen and maximalist, so can we. Plus, it would be nice to hold fast to a position that doesn't concede spending hikes.
Meanwhile, Democrats will hopefully delay the package as they figure out how to divy up the spoils, which currently favor 91% male unionized construction workers over women and environmentalists. In an ideal world, we get a moderate Republican who favors some new spending to stake out some sort of compromise position that has two thirds of stimulus spending going to the knowledge or green economy -- building up the GOP's broader New Economy cred -- and limiting the amount of money that can be spent on the stimulus overall and its biggest dollar drain, physical infrastructure (which was already lavishly funded by the pork-laden 2005 transportation bill).
Peter Beinart has sketched out the political economy of the "stimulus" and says Obama is likely to come out the winner, racking up ginormous deficits but spending our way out of the recession. Look at what happened to Clinton, who was baited into fiscal austerity in his 1993 economic recovery package, and was rewarded with the 1994 midterms. Looking at Clinton, Bush didn't even bother with fiscal responsibility (though Bush is starting to look a whole lot thriftier in comparison to his successor).
But Beinart misses one thing: who left office with a 65% approval rating, and who leaves office with a sub-30% approval rating? Gridlock-induced fiscal responsibility eventually worked out for Bill Clinton. The opposite did not work out for George Bush, whose playing against type on spending cost him the support of his base.
Even in times of crisis, there is a resonant chord in the American electorate that wants the government response to be firm, but orderly and responsible. There is a general sense in which the $700 billion bailout -- which everyone told us was supposed to save civilization as we knew it -- was overkill, as evidenced by it being upside down 41-51 with a +7 Democratic electorate in the exit polls. The auto bailout -- though much more limited in scope -- was broadly unpopular.
If Obama looks like he's throwing money at the wall -- and undermining his own promise to build a green economy too boot -- there is ample opportunity to reclaim the mantle of sane governance and fiscal responsibility. But only if we are serious about seizing it, and not just another piece of the bailout action.
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