Stimulus and Health Care Have Democrats on Defensive
by Michael Barone

Like many Democrats over the past 40 years, Barack Obama has hoped that his association with unpopular liberal positions on cultural issues would be outweighed by pushing economic policies intended to benefit the ordinary person.

In his campaign in 2008 and as president in 2009 and 2010, he has hoped that those he characterized to a rich San Francisco Bay area audience as bitterly clinging to guns and God would be won over by programs to stimulate the economy and provide guaranteed health insurance.

At least so far, it hasn’t worked, as witnessed by recent statements by some of the Democrats’ smartest thinkers.

The 2009 stimulus package is so unpopular that Democrats have banned the word from their campaign vocabulary. “I’m not supposed to call it stimulus,” Rep. Barney Frank told the “Daily Show’s” Jon Stewart. “The message experts in Washington have told us that we’re supposed to call it the recovery plan.”

“I’m puzzled by that,” Frank went on. “Most people would rather be stimulated than recover.” The problem is, the economy has neither been stimulated nor has it recovered.

As for the health care bill, Democratic pollster Stanley Greenberg, who has been pondering Democrats’ standing with working-class voters since his perceptive 1980s studies of Reagan Democrats in Macomb County, Mich., has pretty much thrown in the towel.

In a leaked report for Democratic insiders, Greenberg and fellow pollster Celinda Lake concede that “straightforward ‘policy’ defenses fail to be moving voters’ opinions about the law” and “many don’t believe health reform will help the economy.”

“Women in particular,” they add, “are concerned that (the) health law will mean less provider availability — scarcity an issue.” In other words, people have figured out that government rationing may mean less supply for a product for which there is great demand.

Greenberg and Lake recommend using personal stories to highlight the law’s benefits. But “don’t overpromise or ’spin’ what the law delivers” and don’t “say the law will reduce costs and deficit.”

Do say: “The law is not perfect, but it does good things and helps many people. Now we’ll work to improve it.” (emphasis theirs)

This amounts to an abandonment of the claims that the Obama Democrats have been making about the health care bill they jammed through five months ago. It’s an admission that they messed up when they had supermajorities and will do better when they have fewer votes. It’s a retreat from framing the issue as support versus oppose to revise versus repeal.

So much for the economic issues that were going to provide the underpinnings of what Greenberg’s associate James Carville predicted would be 40 years of Democratic Party dominance.

As for cultural clashes, Democrats can claim to have quieted down debates over abortion and other issues that, as Obama said in his 2004 convention speech, unduly divided Blue America and Red America. But others have taken their place, to the Democrats’ discomfort this legislative season. The Obama Justice Department stepped in and got an injunction against Arizona’s law authorizing law enforcement to ask people stopped for other reasons about their immigration status.

Never mind that other states do this routinely without getting sued. The real problem is that about two-thirds of Americans support the Arizona law. Why couldn’t the administration let it go into effect and see if it assisted the efforts they assure us they are making on border and employer enforcement?

Then there was Obama’s iftar celebration comments on the mosque proposed for a site two blocks from the World Trade Center ruins — comments that were taken as an endorsement, until the president proclaimed himself a day later as agnostic on whether it should be built there.

A large majority of Americans, according to a Fox News poll, believe the advocates have a right to place a mosque there, but even more believe they should not do so. Now we have been watching as Democrats from Harry Reid and Howard Dean on down scamper to say they agree with both these views, while Obama endorses only the first.

The Arizona law and the ground zero mosque issues are not likely to be dispositive issues in most congressional races this year. But they are additional baggage for the Obama Democrats who find themselves, as the economy languishes, on the defensive on the issues they thought would win over the bitter clingers.

Obama’s Fantasy Jobs Plan
by Steve Chapman

This is that wonderful time of year when a roly-poly, white-bearded fellow descends from the North Pole to lavish us with presents. So when President Obama follows suit, maybe it’s just his way of getting into the spirit of the season.

He sounded uncannily like Santa Claus the other day in a speech taking credit for creating and saving 1.6 million jobs and vowing to do even more. The recent uptick in the economy and dip in unemployment, the president announced, came about because of the $787 billion economic stimulus package he signed last February.

But with unemployment still at 10 percent, Obama perceives a need for the government to generate additional jobs — which he plans to do with a new collection of tax cuts, public works expenditures, subsidies to homeowners for energy-saving investments, and a partridge in a pear tree. Though he stressed his commitment to fiscal responsibility, the president studiously avoided putting a price tag on this plan.

Like a certain jolly old elf, he doesn’t want us to worry about the cost. After all, fiscal stimulus is supposed to more than pay for itself by goosing consumption expenditures to unleash a new surge of jobs, economic activity and tax revenue. It’s a Christmas that will go on for months or even years.

If only it were true. In fact, there is no reason to believe the American Recovery and Reinvestment Act has done anything to revive the economy. Economist John Taylor of the Hoover Institution at Stanford University reports that the economic data show “no noticeable impact of the temporary tax rebates and one-time payments on consumption.” No impact, by the way, is pretty much what we got when President Bush tried a stimulus in 2008.

The administration’s allies crow that in the six months before the package was approved, the economy shrank, and in the six months after, the economy grew. But just because football season follows baseball season, that doesn’t prove baseball causes football. Just because the economy grew after the stimulus passed doesn’t mean the stimulus deserves the credit.

Considering the claims of stimulus supporters, John Cochrane, a macroeconomist at the University of Chicago Booth School of Business, says, “There is just as much evidence that Valentine’s Day saved the economy.” What the advocates disregard, he notes, is that every dollar spent on federal programs is a dollar that is not invested or spent elsewhere. An extravagant program can create jobs in one place only by endangering them in another.

Even by the administration’s logic, the success story doesn’t hold up. The contraction of the economy slowed sharply in the first month after the passage of the stimulus — before any appreciable amounts of federal cash had been spent. Which suggests that the economy, far from requiring huge injections of federal cash to avert a depression, was already bouncing back on its own, something economies did for eons before Keynesian prescriptions came along.

What has happened since then doesn’t make the case for buying a second round. Apparently the recession has already ended and unemployment has begun to fall — despite the fact that most of that $787 billion is doing about as much stimulating as the gold in Fort Knox. Only about one-third of the money has actually gone out the door.

If one-third of the stimulus spending was potent enough to rekindle growth, shouldn’t the other two-thirds be even more effective? Why do we need to throw more tens or hundreds of billions on the fire when it’s already starting to blaze? On the other hand, if the first stimulus fizzled, as the evidence suggests, it makes no sense to do a sequel.

Either way, there’s precious little to be said for opening the throttle of a federal spending machine that is already hurtling out of control. But there’s a lot to be said against it. Every big new appropriation represents money that has to be paid back with interest, on top of the $12 trillion we already owe.

Whatever else it may do, piling up more debt brings us closer to the day when the government will have to choose among such dire options as vastly increasing taxes, resorting to inflation and defaulting on its obligations. If that day comes, Santa Claus may be hard to find.

Is the stimulus superfluous?
by Donald Lambro

The biggest unasked question in today’s economy is whether it has started turning around before President Obama’s spending-stimulus program has fully gotten under way. There is growing evidence that the U.S. economy is showing signs of life amid increasing reports that Obama’s nearly $800 billion economic stimulus is trickling into the economy at an ever-slower pace. We’ve had two back-to-back months of increased existing-home sales. Banks are making a comeback as the administration’s stress tests largely acknowledged. Bank of America’s stock rose by nearly 10 percent Monday after a favorable recommendation from Goldman Sachs, as did other financial equities. Bank deposits are up, mortgage loans are rising, suggesting that credit has begun flowing again, and we are seeing an uptick in construction.

This week, the National Association of Home Builders (NAHB) put out a report saying that builders’ confidence in the market for new homes climbed for the second straight month. David Crowe, NAHB’s chief economist, said the renewed confidence level “indicates that home builders feel we’re at or near the bottom of the market.” And the decline in housing prices appears to be slowing.

Consumer confidence is rising, too, though retail sales remain sluggish and unemployment, now at 8.9 percent, continues to rise, but the signs suggest the economy clearly has begun bottoming out.

Federal Reserve Chairman Ben Bernanke, who has been the unsung hero in the Fed’s heavy lifting in this recovery, predicted as much. “We continue to expect economic activity to bottom out, then to turn up later this year,” he told lawmakers earlier this month. “The pace of contraction may be slowing.” The White House maintains, of course, that all of this is the result of the administration’s economic stimulus and its other recovery policies. But there are reports to the contrary that suggest the flow of infrastructure spending to the states has been slow and that much of the critical decision-making at the U.S. Treasury has been “on hold” because of bureaucratic snafus, White House micromanaging and unfilled job slots in key positions.

Late last month, the Government Accountability Office (GAO) released a report on Obama’s infrastructure spending that estimated that only $49 billion of the nearly $300 billion being sent to the states would be spent by the end of fiscal year 2009.

The report, said Brendan Buck of the House Republican Study Committee, “reveals that stimulus dollars are mired in typical glacial bureaucratic processes.”

Among the GAO’s findings on the stimulus act’s Highway Infrastructure Investment spending: Only “two of the 16 states (studied) had agreements (with the Department of Transportation) covering more than 50 percent of their states’ apportioned funds, and three states did not have agreements on any projects.”

In a front-page article last week, the New York Times elaborated on the GAO’s findings under the headline, “Stimulus Aid Trickles Out, but States Seek Quicker Relief.”

The Times’ findings: “Nearly three months after President Obama approved a $787 billion economic-stimulus package, intended to create or save jobs, the federal government has paid out less than 6 percent of the money, largely in the form of social-service payments to states.”

While the White House and the president say that the program is right on track and creating jobs, “they have actually spent relatively little so far,” the Times said.

Over at Treasury, decision-making has slowed to a crawl or delayed altogether. While Secretary Timothy F. Geithner and the White House have made dramatic proposals, “carrying out those policies has bogged down because critical decisions about how to do so aren’t being made,” the Washington Post’s David Cho reported Monday. Nearly four months into Obama’s presidency, the department is without a deputy secretary and other top people are missing from its senior ranks.

The result: After announcing a plan to relieve banks of toxic assets, it isn’t clear who will carry out its details. After announcing a $15 billion plan in March to open up credit for small businesses, “it is still struggling to get off the ground” after officials said it would not work.

The trouble is as much Geithner’s inability to manage a bureaucracy as large as Treasury as it is the White House’s propensity to micromanage all of its decision-making — right down to the design of the department’s Web site.

Meantime, the economy seems to be making a comeback of its own, and some economists are suggesting that maybe much of Obama’s stimulus-spending plan isn’t needed.

When I asked American Enterprise Institute economist Kevin Hassett whether he thought that a lot of the stimulus spending may come too late and may not be needed at all, he replied, “You raise a good point, if the third quarter starts out strong after a good second quarter, then we might well have too much stimulus.”

But the political reality is that if the economy begins to improve in the second half of this year, as many predict it will, the administration will claim that it is due to its stimulus spending — even when very little of it has been spent.

Bonfire of the Trivialities
by Charles Krauthammer

A $14 trillion economy hangs by a thread composed of (a) a comically cynical, pitchfork-wielding Congress, (b) a hopelessly understaffed, stumbling Obama administration, and (c) $165 million.

That’s $165 million in bonus money handed out to AIG debt manipulators who may be the only ones who know how to defuse the bomb they themselves built. Now, in the scheme of things, $165 million is a rounding error. It amounts to less than 1/18,500 of the $3.1 trillion federal budget. It’s less than one-tenth of 1 percent of the bailout money given to AIG alone. If Bill Gates were to pay these AIG bonuses every year for the next 100 years, he’d still be left with more than half his personal fortune.

For this we are going to poison the well for any further financial rescues, face the prospect of letting AIG go under (which would make the Lehman Brothers collapse look trivial) and risk a run on the entire world financial system?

And there is such a thing as law. The way to break a contract legally is Chapter 11. Short of that, a contract is a contract. The AIG bonuses were agreed to before the government takeover and are perfectly legal. Is the rule now that when public anger is kindled, Congress summarily cancels contracts?

Even worse are the clever schemes now being cooked up in Congress to retrieve the money by means of some retroactive confiscatory tax. The common law is pretty clear about the impermissibility of ex post facto legislation and bills of attainder. They also happen to be specifically prohibited by the Constitution. We’re going to overturn that for $165 million?

Nor has the president behaved much better. He too has been out there trying to lead the mob. But it’s a losing game. His own congressional Democrats will out-demagogue him and heap the blame on the hapless Timothy Geithner.

Geithner has been particularly maladroit in handling this issue. But the reason he didn’t give the bonuses much attention is because he’s got far better things to do — namely, work out a rescue plan for a dysfunctional credit system that is holding back any chance of recovery

It is time for the president to state the obvious: This recession is not caused by excessive executive compensation in government-controlled companies. The economy has been sinking because of a lack of credit, stemming from a general lack of confidence, stemming from the lack of a plan to detoxify the major lending institutions, mainly the banks, which, to paraphrase Willie Sutton, is where the money used to be.

Obama has been strangely passive about this single greatest threat to the country. In his address to Congress and his budget, he’s been far more interested in his grand program for reshaping the American social contract in health care, energy and education.

Obama delegates to Geithner plans for a bailout — and Geithner (thus far) delivers nothing. Obama delegates to Nancy Pelosi and her congressional grandees the writing of all things fiscal — and gets a $787 billion stimulus package that is a wish list of liberal social spending, followed by a $410 billion omnibus spending bill festooned with pork and political paybacks.

That bill, we now discover, contains, among other depth charges, a Teamster-supported provision inserted by Sen. Byron Dorgan that terminates a Bush-era demonstration project to allow some Mexican trucks onto American highways, as required under NAFTA.

If you thought the AIG hysteria was a display of populist cynicism directed at a relative triviality, consider this: There are more than 6.5 million trucks in the United States. The program Congress terminated allowed 97 Mexican trucks to roam among them. Ninety-seven! Shutting them out not only undermines NAFTA. It caused Mexico to retaliate with tariffs on 90 goods affecting $2.4 billion in U.S. trade coming out of 40 states.

The very last thing we need now is American protectionism. It is guaranteed to start a world trade war. A deeply wounded world economy needs two things to recover: (1) vigorous U.S. government action to loosen credit by detoxifying the zombie banks and insolvent insurers, and (2) avoidance of a trade war.

Free trade is the one area where the world indisputably turns to Washington for leadership. What does it see? Grandstanding, parochialism, petty payoffs to truckers and a rush to mindless populism. Over what? Over 97 Mexican trucks — and bonus money that comes to what the Yankees are paying for CC Sabathia’s left arm.

httpv://www.youtube.com/watch?v=bEZB4taSEoA

Upside Down Economics
by Thomas Sowell

From television specials to newspaper editorials, the media are pushing the idea that current economic problems were caused by the market and that only the government can rescue us.

What was lacking in the housing market, they say, was government regulation of the market’s “greed.” That makes great moral melodrama, but it turns the facts upside down.

It was precisely government intervention which turned a thriving industry into a basket case.

An economist specializing in financial markets gave a glimpse of the history of housing markets when he said: “Lending money to American homebuyers had been one of the least risky and most profitable businesses a bank could engage in for nearly a century.”

That was what the market was like before the government intervened. Like many government interventions, it began small and later grew.

The Community Reinvestment Act of 1977 directed federal regulatory agencies to “encourage” banks and other lending institutions “to help meet the credit needs of the local communities in which they are chartered consistent with the safe and sound operation of such institutions.”

That sounds pretty innocent and, in fact, it had little effect for more than a decade. However, its premise was that bureaucrats and politicians know where loans should go, better than people who are in the business of making loans.

The real potential of that premise became apparent in the 1990s, when the Department of Housing and Urban Development (HUD) imposed a requirement that mortgage lenders demonstrate with hard data that they were meeting their responsibilities under the Community Reinvestment Act.

What HUD wanted were numbers showing that mortgage loans were being made to low-income and moderate-income people on a scale that HUD expected, even if this required “innovative or flexible” mortgage eligibility standards.

In other words, quotas were imposed– and if some people didn’t meet the standards, then the standards need to be changed.

Both HUD and the Department of Justice began bringing lawsuits against mortgage bakers when a higher percentage of minority applicants than white applicants were turned down for mortgage loans.

A substantial majority of both black and white mortgage loan applicants had their loans approved but a statistical difference was enough to get a bank sued.

It should also be noted that the same statistical sources from which data on blacks and whites were obtained usually contained data on Asian Americans as well. But those data on Asian Americans were almost never mentioned.

Whites were turned down for mortgage loans more often than Asian Americans. But saying that would undermine the reasoning on which the whole moral melodrama and political crusades were based.

Lawsuits were only part of the pressures put on lenders by government officials. Banks and other lenders are overseen by regulatory agencies and must go to those agencies for approval of many business decisions that other businesses make without needing anyone else’s approval.

Government regulators refused to approve such decisions when a lender was under investigation for not producing satisfactory statistics on loans to low-income people or minorities.

Under growing pressures from both the Clinton administration and later the George W. Bush administration, banks began to lower their lending standards.

Mortgage loans with no down payment, no income verification and other “creative” financial arrangements abounded. Although this was done under pressures begun in the name of the poor and minorities, people who were neither could also get these mortgage loans.

With mortgage loans widely available to people with questionable prospects of being able to keep up the payments, it was an open invitation to financial disaster.

Those who warned of the dangers had their warnings dismissed. Now, apparently, we need more politicians intervening in more industries, if you believe the politicians and the media.

The Real Lessons of the Great Depression
by Michael Barone

“Not since the Great Depression.” “Not since the 1930s.” You hear those phrases a lot these days, and with some reason. As Congress prepares to pass the Democratic stimulus package, it may be worthwhile to look back at Franklin Roosevelt’s New Deal and consider how well it worked as policy — and politically.

There’s a fairly broad consensus on policy that some of Roosevelt’s actions made a positive difference but that they didn’t get us out of the Depression. Amity Shlaes in her path-breaking “The Forgotten Man” makes a strong case that some of Roosevelt’s moves blocked recovery, and even his admirers admit that his policies led to a sharp recession in 1937-38. After eight years of the New Deal, unemployment remained at 15 percent in 1940 — double the figure for today. What really got us out of the Depression was World War II. The total number of employed persons and military personnel increased from 44 million in 1938 to 65 million in 1944.

So it would be unwise to copy the New Deal as a recipe for economic recovery. And the policies that produced the wartime boom are not replicable today. We are not going to have rationing, wage and price controls, government spending nearly half the gross domestic product, 91 percent tax rates and a 12-million-man military (the equivalent today would be 27 million).

There has been general agreement, however, that Roosevelt’s policies were politically successful. Most of us in the political commentary business make frequent use of the phrase “New Deal Democratic majority” and tend to believe that Roosevelt’s policies worked for his party for a long generation extending into the 1960s.

I think the picture is more complicated than that. Democrats did win big in the 1934 and 1936 elections. They made big gains in large cities and factory towns, many of which were staunchly Republican in the 1920s. But these gains were not sustained, as the effects of some New Deal policies — high taxes on high earners, the unionization-promoting Wagner Act and jobs programs like the WPA — became apparent.

In early 1937, unions engaged in sit-in strikes in auto and steel factories; they were plainly illegal, but Democratic governors in Michigan and Ohio refused to enforce court orders against them. Later that year, the “capital strike” Shlaes describes led to a sharp recession.

The jobs programs were widely criticized as “boondoggles” and “leaf-raking.” Allegations of political favoritism and corruption were widespread. In the 1938 off-year elections, Democrats lost 81 House seats, 51 of them in the industrial belt from Pennsylvania and Upstate New York west to the Upper Midwest. The Democratic governors of Michigan and Ohio were defeated for re-election. The congressional district that included Flint, Mich., site of the first sit-in strike, went from Democratic to Republican; so did most congressional districts in Ohio.

As pro-New Deal historians have conceded, New Deal policies no longer had congressional majorities, given the opposition of many Southern Democrats. Nor was the outlook for Democrats rosy as the 1940 elections approached. Polling, then in its rudimentary stages, suggested that Republicans would win if the election were decided on domestic issues.

But in September 1939, World War II broke out in Europe. In June 1940, France fell; Adolf Hitler and Joseph Stalin, then allies, seemed to have most of Europe under their sway. Just days later, the Republicans nominated Wendell Willkie, an attractive candidate with no experience in foreign policy. The Democrats met in July, and Roosevelt sent a letter saying that he did not want to be a candidate. But, with help from the Chicago commissioner of sewers piping over a loudspeaker, “We want Roosevelt!” the president was renominated. He won his third term in November not, as he put it later, as “Dr. New Deal,” but as an experienced leader when the nation was facing grave peril.

“The American people in their righteous might will win through to absolute victory,” Roosevelt declared in his Pearl Harbor speech, and so they did by September 1945. In my view, it was the war effort, the mobilization of big government, big business and big labor, that much more than the New Deal enhanced the prestige of the state. It got Americans proud of thinking of themselves as small cogs in very large machines. It made them amenable to statist policies that they would never have accepted in the 1920s and at which many of them were bridling in the late 1930s.

No two political times are ever the same. But as we watch the stimulus package moving to passage, we get the whiff of bailout favoritism and crony capitalism that was also present in the New Deal. The forced unionization envisaged by the card-check bill may prove to be no more popular than the unionization forced by the sit-ins was in Michigan and Ohio in 1938. Today’s Democratic programs may get as mixed a political reaction as the New Deal did in the years before World War II.

The Worst of All Worlds
by David Limbaugh

At the risk of beating a very live horse, the worst of all the horrible things about President Barack Obama’s “stimulus” bill is that even if it worked to stimulate the economy beyond the president’s wildest expectations, it would cause a further explosion of the national debt, which would become a worse “catastrophe” than the one this bill promises to alleviate.

Yet the president is so eager to start spending the people’s money he can barely be trifled to acknowledge the growing debt as a concern. When backed into a corner, all he can do is attack the credibility of his critics on the issue, as if pointing fingers at the other kid in the schoolyard either exculpates him or addresses the problem.

Twice during his tightly controlled prime-time marketing infomercial, billed as his first presidential news conference, he aimed partisan fire at Republicans for daring to raise the issue.

He said: “When it comes to how we approach the issue of fiscal responsibility … it’s a little hard for me to take criticism from folks about this recovery package after they’ve presided over a doubling of the national debt. I’m not sure they have a lot of credibility when it comes to fiscal responsibility.”

He used the same specious argument to deflect another objection to the bill: that it’s long on pork and short on stimulus. He said, “First of all, when I hear that from folks who presided over a doubling of the national debt … I just want them to not engage in some revisionist history. I inherited the deficit … and the economic crisis that we have right now.”

The Bush administration is certainly vulnerable to the charge that it spent way too much. Unfortunately for the always-campaigning President Obama, however, this is not a valid response to the question of whether he should spend more now.

The relevant question is not which party is guiltier but what is the right thing to do. Even if the Republicans were the worst hypocrites in the history of the universe, would that make it any more prudent for President Obama to embark on a mission to trump them? Indeed, that he is citing GOP fiscal profligacy as an excuse and license for more just confirms that debt is not on his mind; government debt is never on a liberal’s mind except as a tactic to win arguments or elections.

Another argument Obama often invokes to divert attention from the debt elephant in the room is that he has a mandate to proceed.

But did 53 percent of the electorate sign on to the expenditure of trillions of more dollars we truly don’t have and probably can’t get in our lifetimes just so he and his fellow social planners could finally get a crack at cranking out their mad-scientist experiments to perfect society through confiscation and redistribution of the people’s private property and income? Looking at recent polls and market trends, it would appear not.

Folks, the proponents of this boondoggle can’t even point to an obscure theory to suggest this bill might pay for itself, even if it miraculously catapulted the economy into robust growth mode. We couldn’t have afforded the readily visible costs of this bill, not to mention the hidden ones experts have identified, even before the separate trillion-dollar bailout fiascos. How much less can we tolerate them now?!

And that’s without factoring in the looming entitlement quagmire that one party, for purely political reasons, has refused to address. It’s also without considering the other horrors in Obama’s grab bag that could reduce America to Third World financial straits all by themselves, such as global warming mandates, socialized medicine, open-borders-driven entitlements, doubling our foreign aid commitments, and reversing welfare reform.

Adding insult to injury, contrary to the falsely claimed economic consensus, this legislation, with its emphasis on non-stimulative spending and non-stimulative demand-side tax cuts, has not been optimally crafted to stimulate the economy. Even if Obama’s neo-Keynesians were correct that government spending is the answer, this bill wouldn’t come close to fitting the bill and, in the long run, probably would have a counter-stimulative effect.

So this plan is the worst of all worlds — unless you are a once-closet socialist trained in the grand academic tradition of Chicago street organizing who finally sees an opportunity to “come out” and work your wonders on the poster nation for greedy and decadent capitalism, the United States of America. It involves incomprehensible spending in aggravation of an already dangerous national debt load; a possible net retardant effect on economic recovery; greater government control over the economy, with a consequent diminution of our liberties; and a necessary reduction of essential government services.

Frankly, I think it’s just about time to panic here — and the market apparently shares that sentiment.

An Insufficiency of Fear
by George Will

The president, convinced that the only thing America has to fear is an insufficiency of fear, has warned that “disaster” and “catastrophe” are the certain alternatives to swift passage of the stimulus legislation. One marvels at his certitude more than one envies his custody of this adventure.

Certitude of one flavor or another is never entirely out of fashion in Washington. Thirty years ago, some conservatives were certain that their tax cuts would be so stimulative that they would be completely self-financing. Today, some liberals are certain that the spending they favor — on green jobs, infrastructure and everything else — will completely pay for itself. For liberals, “stimulus spending” is a classification that no longer classifies: All spending is, they are certain, necessarily stimulative.

At Yale’s 1962 commencement, President John Kennedy expressed Washington’s recurring confidence in the ability to supplant politics with expertise. As is traditional, Kennedy deplored “traditional labels” and insisted that “differences today” involve not clashes of principles but only “matters of degree.” Kennedy argued that “the practical management of a modern economy” is “basically an administrative or executive problem.” Congress need not intrude. Because policy issues are “sophisticated and technical questions,” demanding “technical answers, not political answers,” laypersons could hardly participate in the debate.

In December 1965, John Maynard Keynes, although 19 years dead, was, as today, enjoying one of his recurring resurrections as vindicator of government management of the economy by manipulating “aggregate demand.” Keynes’ visage was on Time magazine’s cover and the accompanying story said that happy days were here again and here to stay.

President Lyndon Johnson was embarked on building the Great Society, assisted by policymakers who, wrote Time, “have used Keynesian principles” to smooth the moderate business cycles and achieve price stability: “Washington’s economic managers scaled these heights by their adherence to Keynes’ central theme” that a modern economy can operate at “top efficiency” only with government “intervention and influence.” So, “economists have descended in force from their ivory towers and now sit confidently at the elbow of almost every important leader in government and business, where they are increasingly called upon to forecast, plan and decide.” Ten years later, the “misery index” — the unemployment rate plus the inflation rate — was 19.9, heading for 22 percent in 1980.

Today, again, we are told that “politics” has no place in the debate about the tripartite stimulus legislation, which is partly a stimulus, partly liberalism’s agenda of social engineering, and partly the beginning of “remaking” the economy. Gary Wolfram of Hillsdale College notes that the size of the stimulus — the House-Senate compromise bill is $789 billion — is just slightly less than the amount of all U.S. currency in circulation, and is larger than the entire federal budget was until 1983. Yet it is said that in the debate about this encompassing legislation — which concerns what government can and should do, and ultimately what kind of regime America shall have — people should “transcend” (so says Larry Summers, the president’s economic adviser) politics. What, then, would be left for political argument to be about?

It is said that the negligible Republican support for the stimulus legislation means that bipartisanship is dead. But what can “bipartisanship” mean concerning legislation that concerns almost everything?

John McCain probably was eager to return to the Senate as an avatar of bipartisanship, a role he has enjoyed. It is, therefore, a measure of the recklessness of House Democrats that they caused the stimulus debate to revolve around a bill that McCain dismisses as “generational theft.”

The federal government, with its separation of powers and myriad blocking mechanisms, was not made for speed but for safety. This is particularly pertinent today because if $789 billion is spent ineffectively or destructively, government does not get to say “oops” and take a mulligan. Senate Republicans have slowed and altered the course of the “disaster! catastrophe!” stampede. Still, as Anthony Trollope wrote in one of his parliamentary novels, “The best carriage horses are those which can most steadily hold back against the coach as it trundles down the hill.”

Not yet a third of the way through the president’s “first 100 days,” he and we should remember that it was not FDR’s initial burst of activity in 1933 that put the phrase “100 days” into the Western lexicon. It was Napoleon’s frenetic trajectory in 1815 that began with his escape from Elba and ended near the Belgian village of Waterloo.

The Top Six Problems With the Stimulus
by John Hawkins

1) First of all, it’s very debatable whether stimulus bills work at all. As Walter Williams has pointed out,

“In stimulus package language, if Congress taxes to hand out money, one person is stimulated at the expense of another, who pays the tax and is unstimulated. A visual representation of the stimulus package is: Imagine you see a person at work taking buckets of water from the deep end of a swimming pool and dumping them into the shallow end in an attempt to make it deeper. You would deem him stupid. That scenario is equivalent to what Congress and the new President proposes for the economy.” — Walter Williams

2) According to the Wall Street Journal, there is very little actual “stimulus” in the stimulus bill,

“In selling the plan, President Obama has said this bill will make ‘dramatic investments to revive our flagging economy.’ Well, you be the judge. Some $30 billion, or less than 5% of the spending in the bill, is for fixing bridges or other highway projects. There’s another $40 billion for broadband and electric grid development, airports and clean water projects that are arguably worthwhile priorities.

Add the roughly $20 billion for business tax cuts, and by our estimate only $90 billion out of $825 billion, or about 12 cents of every $1, is for something that can plausibly be considered a growth stimulus.”

3) Even if you set aside #1 and #2, a significant percentage of the spending in the stimulus bill doesn’t occur for two years.

“Although the argument for quickly passing the $800-billion-plus stimulus bill now before Congress is that pumping money into the economy immediately will spur economic growth and create jobs, almost half of the new spending—as opposed to tax cuts—being proposed in the bill would not be spent until at least two years from now, according to an analysis published by the Congressional Budget Office.”

How is spending that’s not going to occur for two years supposed to stimulate the economy today and prevent those 500 million lost jobs per month that Nancy Pelosi told us about? If Barack Obama really believes what he says and thinks that, “A failure to act, and act now, will turn crisis into a catastrophe,” then why isn’t the spending frontloaded into this bill?

4) Even the “non-partisan” Congressional Budget Office, which many Republicans consider to be tilted to the left, is saying that this bill is worse than doing nothing over the long-haul.

President Obama’s economic recovery package will actually hurt the economy more in the long run than if he were to do nothing, the nonpartisan Congressional Budget Office said Wednesday.

CBO, the official scorekeepers for legislation, said the House and Senate bills will help in the short term but result in so much government debt that within a few years they would crowd out private investment, actually leading to a lower Gross Domestic Product over the next 10 years than if the government had done nothing.

CBO estimates that by 2019 the Senate legislation would reduce GDP by 0.1 percent to 0.3 percent on net. [The House bill] would have similar long-run effects, CBO said in a letter to Sen. Judd Gregg, New Hampshire Republican, who was tapped by Mr. Obama on Tuesday to be Commerce Secretary.

How much sense does it make to push through a bill designed to “stimulate” our economy when we know that it will actually reduce economic growth?

5) Despite the initial claims that this bill would be “targeted, timely, and temporary,” the Democrats have moved quite a few regular budget items into the stimulus package. Republican Senator Jeff Sessions says this was done in order to avoid the normal budgeting process and that the new baseline for these programs will be the amount that they were allocated in the last budget plus the amount the programs receive in the stimulus package.

In other words, the stimulus package seems likely to add hundreds of billions of dollars, every year going forward, to the budget deficit. No wonder Barack Obama is predicting that America will run “trillion-dollar deficits for years to come” under his “leadership.”

6) The sheer cyclopean size of this stimulus package, which comes up to roughly 1.2 trillion dollars when you add in the interest over 10 years, is difficult for most people to comprehend. How big is it? As Mitch McConnell said,

“If you started spending the day that Jesus was born and you spent a million dollars every single day, you still wouldn’t have spent a trillion dollars.”

Still having trouble wrapping your mind around it? Think of it like this: in today’s dollars, the stimulus bill will cost more than the war in Korea and the war in Iraq — combined! It will cost about the same amount as FDR’s New Deal AND the war in Vietnam combined! It’ll cost far more than the Marshall Plan, the Louisiana Purchase, and putting a man on the moon — combined!

Those were momentous events in our history. Going to the moon, rebuilding Europe, fighting wars — meanwhile, ten years from now, we’ll have very little to show from this stimulus plan other than a considerably larger national debt and slower economic growth. In other words, all hyperbole aside, this may very well be the single least effective, most wasteful, most costly piece of legislation in all of recorded human history.

Here’s a Bill in Congress Everyone Can Back:
Investigate How We Got Into This Mess, and Do So Quickly
by Matt Towery

President Barack Obama is rolling the dice early into his presidency with a “stimulus” package that is burdened by the typical “throw everything but the kitchen sink into it” mentality that is the hallmark of the leadership in the U.S. House and Senate.

If Obama’s proposal were truly an infrastructure program that could hit the ground running, it would be receiving the bipartisan support that he is seeking. But with friends like Nancy Pelosi and Harry Reid, the new president doesn’t need enemies.

They loaded up the bill with money for every possible constituency — teachers unions, environmental activists, and all sorts of groups whose members receiving cash infusions might not result in the creation of many, if any, new jobs.

So, clearly, the stimulus package will not receive much, if any, Republican support. It may, if it turns out to be the boondoggle it seems, turn out to be a future political disaster for moderate Democratic members of Congress.

But there is a proposed piece of legislation that everyone can support and which should be passed as quickly as possible. Sen. Kent Conrad, D-N.D., and Sen. Johnny Isakson, R-Ga., have proposed legislation to create a “Financial Markets Commission” charged to investigate every aspect of how our nation’s financial institutions ended up losing tens of trillions of dollars. This is legislation that should become law immediately with the commission appointed and put to work in no time flat.

The incredible hubris that we have seen coming from the top leaders of many of these financial institutions — ranging from jets that were ordered after bailout money was received, to big bonuses paid out at the last minute to employees of institutions that had already been reduced to corporate beggars — tells us that this is one commission that really needs to get to work.

And it should not simply be a dry report to be presented and forgotten a week later. We need to take names and kick rear ends. And, if in the course of the commission’s investigation, they uncover wrongdoing, then their findings should immediately be forwarded to the proper legal authorities. There is little doubt New York’s Attorney General Andrew Cuomo, who has shown no hesitation to take on those who wrecklessly played games with America’s economy, would love to get his hooks into any and all offenders.

How Big Government Is Obama?
by Lawrence Kudlow

Obama spoke Thursday at George Mason University about his American Recovery and Reinvestment Plan — a.k.a. the stimulus package. There’s an interesting section that would warm the heart of John Maynard Keynes. It goes like this:

“It is true that we cannot depend on government alone to create jobs or long-term growth, but at this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe.”

Well, 28 years ago Ronald Reagan said government was the problem, not the solution. Dealing with a bad recession like this one, the Gipper lowered taxes and domestic spending. Obama on the other hand has offered an $800 billion package, with plenty of infrastructure spending that alleges to create three million jobs.

Nobody really believes infrastructure spending will end the recession or create permanent new jobs. However, it’s interesting just how much the Obama plan has changed since the election. The size has been roughly constant. But the mix of tax cuts and spending increases is now totally different.

Instead of $100 billion worth of tax credits, there are now $300 billion worth of tax cuts. This includes a big new piece for business, more cash-expensing for small-business investment, and a restoration of the five-year tax-loss carry-back, which will especially help banks and homebuilders. It might even result in tax refunds for businesses, and might also allow banks to rid themselves of toxic assets, since the losses will now be spread over many years.

So what we have now is an $800 billion stimulus package with $300 billion of so-called tax cuts which could infer less spending than before — maybe only $500 billion worth.

Obama’s economic advisers are bragging to me about their new tax-cut package. They say they’re very pro-growth. And you know what? I acknowledge it. People like Larry Summers, Austan Goolsbee, Christy Romer, and Tim Geithner are no left-wing big-government whackos. They may not be hard-core supply-siders. But in terms of the economics profession, I would call them center-right.

And they absolutely understand the importance of private business and investment in the job-creating economic-growth process. And I think they’re views are the main reason for the reshaping of the Obama package between the campaign trail and the eve of inauguration.

The problem is that they’re not reducing marginal tax rates on large and small businesses or individuals. Their tax credits will be two-year’s worth, not permanent. There will be no incentive effects to maximize growth. And many of the tax cuts are refundable credits, which really are a form of government spending.

So it’s not a supply-side package. However, I’ve really never met a tax cut I didn’t like. And any tax cut is better than a spending increase since private companies and individuals will at least get the money instead of government.

This is the interesting part of the Obama plan. Somewhere in there the tax cuts will have a small positive economic effect. I would have designed it differently, but then again Team Obama won the election. I guess I could say it could have been worse.

Of course, Team Obama will have to contend with the sticker shock of a $1.2 trillion deficit for 2009, just printed by the Congressional Budget Office. And that’s before the Obama stimulus plan. But I don’t think Republicans really have a leg to stand on with the deficit argument — or for that matter the spending argument.

Yes, Obama is raising the ante, and the new numbers are just about over the edge. But a lot of that new deficit is TARP money that should be scored as investment — not real spending. And in view of all the economic pessimism out there, I doubt if the public is very worried about deficits.

What’s most regrettable is that congressional Republicans have yet to make the alternative case. They haven’t pressed for marginal tax-rate cuts as an option to Obama’s credits. So far, the GOP is me-too. They’ve offered an echo instead of a choice.

Meanwhile, polls now say the public favors Obama’s plan by 55 to 65 percent. His personal approval rating is even higher. And he’s being politically astute by reaching out to Republicans. He has virtually removed partisan rhetoric. Simply put, Obama is in the driver’s seat right now.

Sure, the Democratic Congress may mangle Obama’s plan. They might even repeal the Bush tax cuts this year. So there is considerable uncertainty about the details of the final package. But I must say, a crafty Obama is doing his best top employ his version of the Reagan tax-cut plan. Obama talks big government. But so far his program actually reduces the government-spending share and increases the private tax-cut share.

Very interesting.