Barack's Economic Salvo

by John M. Curtis
(310) 204-8700

Copyright February 9, 2009
All Rights Reserved.                    

        Firing a shot across the bow, President Barack Obama traveled to economically depressed Ekhart, Ind. to sell his recovery package.  His program was scaled back in the U.S. Senate, watching his former GOP rival Sen. John McCain (R-Ariz.) lead the charge against his new eonomic stimulus bill.  McCain’s loud opposition reveals in glaring terms his sour grapes after losing the election.  Barack reminded his detractors that the American people spoke on Election Day, rejecting former President George W. Bush’s economic policy and asking for a new direction.  Despite fervent opposition to Barack’s plan, McCain should remind himself that the campaign ended Nov. 4.  McCain’s plan, defeated last week in the U.S. Senate, continued Bush’s Supply Side idea of only cutting taxes.  He didn’t object to Bush’s $700 billion spending plan but now vociferously rejects Obama’s new plan.

            Barack seeks to have more than a $100 billion reinstated to his plan, especially spending on the states, counties, cities and education.  McCain and other detractors don’t quite get that voters deserve to have Obama’s neo-Keynesian plan, relying on government spending to create new jobs and succeed.  Emasculating the plan to win Senate approval doesn’t give Barack’s economic package as chance.  “We can’t posture and bicker and resort to the same failed ideas that got us into this mess,” Barack told a supportive crowd at a High School town hall meeting.  While the Senate is expected to pass the neutered version of the bill, Barack wants to see funding for the states and education reinstated.  Republicans have reverted back to Supply Side Economics, advocating more tax cuts.  That’s the exact same formula that led the economy down its current path.

            House and Senate versions of the president’s plan differ by around $100 billion in spending.  GOP senators, led by McCain, argue, against all empirical evidence, urge tax cuts as the way to go.  Barack has incorporated much of the GOP tax cuts but can’t see where vital spending cuts help the economy.  Baracks’ plan clearly advocates a Keynesian approach, shifting emphasis on government intervention to spur the manufacturing and jobs growth needed to turn around the economy.  Together with GOP-urged tax cuts, Barack’s approach combines the best of both worlds, arguing that neither Supply Side nor Keynesian economics has all the answers.  If you cheap-out on the spending, it’s going to be difficult to assess the effectiveness of Barack’s plan that lets the government fund the start-up capital needed for new business and industry, especially green services and manufacturing.

            Barack’s argument with the GOP boils down to you’ve tried Supply Side economics for the past eight years and it hasn’t worked.  With the economy in crisis, it’s too late in the game to settle for half-measures, including cutting essential spending and overdoing tax cuts.  “You know, look, it’s not perfect,” Obama admitted.  “But it is the right size, it is the right scope.  Broadly speaking, it has the right priorities to create jobs that will jumpstart our economy and transform the economy for the 21st century,” said Barack, though not giving up on reinstating essential spending.  Barack plans a primetime news conference today, precisely to put more pressure on the House-Senate conference committee that will try to hammer out a compromise.  Regardless of the merits of Barack’s plan, GOP opponents risk further alienating voters at a highpoint in public dissatisfaction. 

            Cash-strapped governors, GOP or Democratic, aren’t happy with the Senate’s attempt to sabotage state bailouts.  Whether admitted to or not, state officials from both parties are lobbying hard to reinstate essential funding.  Painting the GOP as obstructionists to economic progress puts pressure where it belongs:  On senators, like McCain, that continue to fight for a lost cause.  “Being here in Ekhart, I am more confident than ever that we will get where we need to be,” said Barack, heaping more pressure on GOP senators.  Obama wants the conference committee to reinstate needed state and education spending.  His primetime news conference today tries to put the onus back on the GOP.  “Doing nothing is not an option,” said Barack.  “We’re had a good debate.  Now it’s time to act,” putting the GOP on notice that he intends to fight to getting vital spending reinstated.

            Barack’s new spending plan collides with past policies designed to provide stimulus through tax cuts.  Bush tax policies left the economy in shambles, unwilling to examine other strategies for reviving an economy , now compared to the Great Depression.  No one wants the blame for the failed economy.  But the ruling party must take responsibility for experimenting with failed strategies.  Barack wants to move beyond Supply Side to a neo-Keynesian paradigm that combines the best of government intervention with appropriate tax cuts.  Everyone agrees that something must be done.  Where the two sides differ is on how much spending vs. tax cuts.  Barack’s plan commits tax dollars to major infrastructure rebuilding projects and developing new green technology and businesses.  Judging by his words in Indiana, he’s not about to back down to GOP demands.

John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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