1 Boring Old Man

Showing Some Discipline
By DAVID BROOKS
New York Times
February 9, 2009

It’s no fun being a leader in a financial crisis. You’ve got to be bold but reassuring, free-spending but disciplined. You must decisively crush the short-term problem without freaking everybody out and leaving a long-term mess.

To my mind, the stimulus packages on Capitol Hill fail to strike these balances. They are broad but sloppy, too slow to make a quick difference and too enduring to avoid fiscal damage.

But another part of the administration’s economic strategy is being unveiled today by Treasury Secretary Tim Geithner, and at first blush the news is much happier. Geithner’s plan is huge but also disciplined. It’s designed by someone aware of government’s limitations…

A Better Stimulus Bill
New York Times
February 9, 2009

In Elkhart, Ind., on Monday afternoon to rally support for an $800 billion stimulus and recovery package — and in his first prime-time press conference Monday night — President Obama said that he couldn’t guarantee that every item voted by Congress will work exactly as planned. But he warned that doing nothing could not be an option.

He is absolutely right that Congress needs to quickly pass a stimulus bill, and the Republicans who have been blocking action are courting disaster. But a bill that is merely better than nothing won’t be nearly good enough. The economy is too fragile. And the numbers are too huge.

When members of the House and Senate sit down this week to craft a final version of their differing bills, they must include the most-effective provisions — those that provide powerful stimulus and help those Americans who are most in need.

There is a decent deal to be had in negotiations. Whether Congress and the administration get there will depend a lot on Mr. Obama’s leadership and his insistence on a better bill.

Both the House version, which passed nearly two weeks ago, and the version in the Senate that is expected to pass on Tuesday, provide adequate increases in unemployment benefits and food stamps — generally the two most-effective forms of stimulus. Those items must not change appreciably.

Aid to states is excellent stimulus because the money is funneled quickly to public employees, private contractors and beneficiaries of public programs. The Senate bill falls far short. It provides $40 billion less to the states than the House’s version — money that is mainly targeted at education budgets. It shortsightedly fails to include a $10 billion provision that would allow states to temporarily offer Medicaid coverage to uninsured people who are unemployed.

Negotiators should also salvage the child tax credit, worth up to $1,000 per child. The House wants to make the credit available to all working families. The Senate would make it available only to families with wages of at least $8,100. Negotiators should split the difference. The credit is robust stimulus because the recipients are likely to spend it quickly.

There are obvious compromises that could pay for these must-haves.

Nearly $70 billion of the Senate bill is spent on providing a one-year reprieve from the alternative minimum tax. The relief is needed. It also is a measure that passes easily each year on its own. A fair deal would be to take A.M.T. relief out of the package — contingent on a promise from Mr. Obama to champion a separate relief bill as soon as possible. Or leave it in but add it on top of — not in place of — the package’s other spending increases and tax cuts.

Tax cuts aren’t the best stimulus. But the House bill’s $3 billion to improve a first-time homebuyer’s tax credit already on the books is a reasonable attempt to spur demand. The Senate’s $39 billion in tax credits for anyone and everyone who wants to buy a house goes way too far, especially since the bulk of the credit would go to people who would buy a new house anyway.

The administration is also expected to unveil on Tuesday a plan to use tens of billions from the bank bailout fund to forestall foreclosures, which would more directly address problems in the housing market. Negotiators should go with the House version.

Odds are unfortunately high that even an $800 billion stimulus package will fall short of what’s needed to combat today’s downturn, and that more will be needed later. When the Obama administration asks for more, it will need to be able to make a compelling case that the first round was the best it could possibly be. It’s certainly not there yet.

Obama’s Bill isn’t big enough because it wouldn’t have passed. Obama’s Bill isn’t big enough because it’s not clear what to do yet, so it only covered the obvious bases. Obama’s Bill had too many tax cuts because he was trying [unsuccessfully] to appease the psychotic Republicans. Obama’s bill isn’t big enough or global enough because the American people voted for Saxby Chambliss, and Joe Lieberman, and Lindsey Graham, and George Bush – not giving Obama the majority in the Senate he needed to do what needed doing.