Friday, February 13, 2009

Stimulus, Stabalizer, Spineless or Strategy?

While many conservatives complain President Obama's stimulus package is far too costly, many liberals complain Obama's stimulus package does not go far enough. At the insistence of Republicans, President Obama, in the spirt of bipartisanship and unity, has pared it down even more.

Although the stimulus package sounds like a huge sum of money, relatively speaking, it "only" amounts to approximately 2% of of America's $15 trillion GDP. Economist Paul Krugman says, "Obama’s economic policy should be bolder, not more cautious than FDR’s economic policy" and Columbia University economist Jeffrey Sachs calls the stimulus package a "fiscal pinata" in his article, The Stimulus is a Fiscal Straitjacket.

Dean Baker, co-director of the Center for Economic and Policy Research in Washington, DC, said, Roosevelt was "too worried about the whining of the anti-stimulus crowd that he confronted," and that if anything, Roosevelt didn't go far enough.

Others have said the following regarding the potential of the stimulus package :

"The largest spending bill in history is going to turn out to be the war in Iraq. And one of the things, if we're going to talk about spending, I have a problem with is when we leave out that extraordinarily expensive, damaging war in Iraq, which has caused much more harm than good, in my judgment.

And I don't understand why, from some of my conservative friends, building a road, building a school, helping somebody get health care, that's -- that's wasteful spending, but that war in Iraq, which is going to cost us over $1 trillion before we're through -- yes, I wish we hadn't have done that. We'd have been in a lot better shape fiscally. -- Barney Frank
"But when I look at it in its entirety, I fear that we may soon look back and say that we missed a huge chance to go bigger and bolder. After all, there were three flaws with the old economy that has crashed:
  1. It favored consumption over production
  2. Debt over smart savings;
  3. Environmental damage over environmental renewal.
Some parts of the stimulus package seem to be more of the same -- trying to prop up the old, failed economy. That strategy simply won't work -- but we could waste a lot of money and time trying. Instead, we need a new direction for our economy. You can't jump halfway across a chasm -- you just end up falling into the abyss." -- Van Jones, author of The Green Economy
"First of all, there's a question of magnitude. The overall stimulus is about 6 percent of GDP. We did not exit the Great Depression without a stimulus that amounted to about 25 percent of GDP -- we called that World War II... The second problem is with the mix... Only $335 billion worth goes to job creation -- that's about 3.5 million jobs, about $100,000 a job. Three-and-a-half million jobs is only two percentage points on the unemployment rate. That's not enough. I would get rid of the tax cuts and use the entire package for job creation... There are lots of great public works projects that would be well worth supporting. And, in the near term, what about CCC-type activities that put people to work right away, cleaning up public parks, weather-stripping homes, offices, schools, government buildings?" -- Rick Levin, Economics professor and President of Yale
"I am not suggesting that the United States start a world war in order to solve the world's economic problem. But I am suggesting a strategy that could be called the fiscal equivalent of war.

It would consist not merely of updating or repairing the nation's infrastructure, but in undertaking massive new investments that would expand the scope of American industry, and address other urgent problems in the process: global warming, over-reliance on petroleum, and the need to revive America's domestic manufacturing capabilities—not just to provide jobs, but also to provide tradeable goods that can reduce the country's current account deficit." -- John Judis article, Not Doing Enough from the New Republic
With so much at stake, it's natural to criticize and speculate that President Obama might be wasting a crisis or, a ripe opportunity to act; or that he is failing to take advantage of the leverage he currently has; or that politics should not enter into his economic decisions; or that we should stampede rather than tiptoe, etc. However, to be fair, we should also consider the possibility that President Obama might be one step ahead of all of us.

Abraham Lincoln, who President Obama more than admires, was a man who connected the dots, as Joe Biden once said was so important. Rather than a quick study, Lincoln was a deep study, as he considered every side of the question. James M. McPherson author of Tried by War: Abraham Lincoln as Commander in Chief said, as a lawyer, Lincoln's strategy was to focus on the main point, conceding minor points to his opponent, therefore lulling them into a false sense of complacency. Lincoln reserved the main point, on which the entire case turned, to pounce.

In addition, according to McPherson, President Lincoln forced the hand of the Confederacy, rather than start the war himself. This gave him the upper hand by providing him with a united North, due to his reasonable actions.

In the same way, isn't it possible that President Obama might be taking a page out of President Lincoln's book, so to speak? At first he tries to resolve the issue at hand - the economy - in a reasonable and cooperative manner, in hopes that his opponents will respond in the same way. Fully realizing his opposition may snap the extended "olive branch" in half, his initial peace offering should be enough to unite the people behind him, thus giving him the fresh impetus required to tackle the structural changes that must take place for our economy to function in the 21st century.

After all, look at Obama's choice for White House chief of staff: Rahm Emanuel, the pitbull politician...the killer strategist.

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