Fiscally Understimullating

There was a lot of big economic news yesterday. One was the plan for the financial bailout announced by Geithner, which was interesting in the fact that it wasn't really a plan more then a statement that we'll most definitely be spending the other half of the bailout to give to bank CE ... I mean buy overvalued asse ... ugh, actually who knows what their going to do with the money but they'll do something. Aside from the utter lack of detail in the "plan", which by the way sent Wall Street all topsy turvy yesterday, there is a huge amount of criticism that it doesn't offer anything new in terms of what Bush was already doing (which was heavily criticized as well); mainly because if some of the banks are insolvent then buying bad assets isn't going to help much, unless of course we dupe the tax payer and take the losses for the banks.

If that wasn't enough, the Senate passed the stimulus package, but decided that the House bill wasn't bad enough and it needed to be made worse. I absolutely love this quote by Senate Minority Leader Mitch McConell: "But I do think it's important to focus on the larger question of: Where are we going to leave the country in two years if we take all of these steps? We will have made a dramatic move in the direction of, indeed, turning America into Western Europe." God forbid we all became Europeans! With their free university education, universal AND better healthcare, and their funny accents. Nothing stirs up a good American then like being compared to those stuck up Europeans.

Well, besides all the rhetoric and empty words that Congressman seem to love throwing around, what is the actual differences between the two bills? Well, you can get the jist of it by reading all the articles floating around, but for an actual complete breakdown without all the missleading quotes it seems that wikipedia is the only source capable of giving specifics (man, how sad is that? PLUS its well sourced). Of course, the general difference, which was easily predictable, is more tax cuts and less spending on health, energy, and infrastructure in the Senate version vs the House version of the bill. These aren't small differences, were talking about billions of billions of dollars being shifted around to get the two votes necessary to get the thing passed. My biggest gripes?

1. The inclusion of the Alternative Minimum Tax adjustment. This adds $70 billion and is something that needs to be addressed seperately (and it usually is). Its inclusion is just a way to funnel funds away from the spending proposals.
2. The whole energy spending portion, one of the most important parts that was already underfunded IMO, was completely gutted. It lost more then $20 billion in funding.
3. Less spending on Medicaid for the unemployed. More and more people are losing their jobs, and there is going to be a huge increase in people without medical insurance as the recession deepens. If you thought it was a problem before, its only going to get worse.
   
4. Less aid for states. With more unemployment checks being written and with many states already in the red there is going to be a big problem funding many of the local programs that people depend on directly. Plus, this is the most direct way to inject capital into the economy quickly, states have alot of infastructure projects just that are waiting to get funded.

Despite all this, even if Congress is eventually able to get a bill onto Obama's desk that resembles the House version more, I'm still deeply worried about how effective its going to be. Many economists say the bill doesn't do enough in terms of spending and making up for the shortfall in the economy and the consequences of not doing enough are far graver then those of doing too much. In the end, the success of the stimulus package and whether its able to guide the economy out of a depression is going to define Obamas presidency, much like the outcome of the Iraq war defined Bush's (though, unfortunately for Obama, he wasn't able to choose his battle).

And so far Obama's performance has been, underwhelming. He has allowed the Republican minority in Congress to dictate the tone of the debate, rather then leading it himself. Instead of forcefully pushing the idea that spending does far more then tax cuts in terms of stimulating the economy he has allowed conservatives to talk about how much money were going to be spending (none of which, I heard about when we started the Iraq war). My biggest fear is this was a wasted oppurtunity. Although Obama has funding for many areas he highlighted in his campaign, the most important of which is health care and energy, they're all funded by half measures in the bill. He expands Medicaid and provides funding for modernizing the health care system, but nothing else in terms of reorganizing our borken medical insurance system. There is funding for new energy research and incentives to use less energy, but falls far short of the "Man on the Moon" mentality that sparked the space race and which I think is necessary to really spark an renewable energy revolution.

In short, I think this has been a wasted opportunity. At best the plan will allow the economy to hobble back to life, instead of roaring back like it should (and thats wishful thinking). Even if its a decent success its at all unclear whether Obama will be able to garner the political capital to deliver more forcefully on his other campaign promises. And far worse if he doesn't succeed, for the stimulus pakcage will be seen as a failure in general and not because it didn't do enough. Now was the time to seize the moment, to force through a strong package that would have delievered on a huge swath of his campaign promises and advanced a progressive agenda, because quite simply they would have been great for the economy as well. This was the time for strong leadership and bold action; I'm afraid we got neither.