Stimulus Plan Taking Shape

Two things are becoming clear about President-elect Obama's stimulus plan; Congress won't be ready to pass it when he takes office on January 20 and quite a bit of it is likely to come in the form of tax cuts. Is Obama angling for Republican support, caving in to their views, or what, exactly?

The outlines of the plan of about $800 billion over two years includes perhaps $350 billion of that in tax cuts, $150 billion in aid to the states, and the other $300 billion in infrastructure investment. Obama and Congress are right not to promise to pass such an immense program two weeks from now after 24 or 48 hours of consideration. It is way too big and complicated for that and deserves serious hearings and overview. That is the way the Bush White House did things with Tom DeLay, Denny Hastert and Trent Lott running the show in Congress. That's how we got the abuses of the "Patriot" Act, "Clear Skies" and Cheney's energy plan stampeded into law. By all means a thorough, though not protracted, examination should take place, including the consideration of amendments. That's Congress' job.

The tax cuts are indeed a dangle to encourage Republican votes. Obama talked about bipartisan and postpartisan approaches to problem solving and here is obviously an opportunity to show it. He wants to do more than just get a couple of moderates to jump the GOP ship to get the 60 votes he'll need in the Senate; he wants 12 or 15 to join the Democrats and pass the bill with an overwhelming 70 votes or so. The key here is a game of "chicken." The tax cuts Obama and the Democrats will be pushing for will be ones designed to get money quickly to businesses that are truly small and to individuals who are middle and working class. That means they won't all necessarily be income taxes. This is what Obama talked about in the campaign. The Republicans want to slash corporate and capital gains levies, but they cannot win that argument with the public if Obama exposes a plan like that for what it is. The tradeoff is that he won't push to eliminate the Bush tax cuts for the rich right now. He'll let them expire in 2010 as they are scheduled to.

Senate Republican leader Mitch McConnell is trying to undermine Obama's apparent direction by suggesting, among other things, that any help to the states be made as loans, not grants. The intent seems to be to water down the effectiveness of such a program. It was national economic policy that put the states in the trouble most now face, that and federal mandates such as the flawed "No Child Left Behind" Act. The states must balance budgets and cannot borrow or print money like Washington can. The only way they will be able to balance budgets in these times is by drastic cuts, a practice that Nobel Economist Paul Krugman points out would cut demand and worsen the recession just as similar moves did during the Hoover days.

In the end, Obama and the Democratic Congress should be able to adopt a couple of his key campaign promises, tax relief for average Americans and a strong infrastructure program, by working things this way. The deficit will be higher than they would have liked, but the Republicans would fight rescinding Bush's cuts tooth and nail and might draw the fight out long enough to delay recovery for millions of Americans for many more months. Avoiding that has to be the priority for those whose objective is to speed recovery and help the American people.