Congress Challenging Obama on Stimulus Plan
By Alan Stewart Carl | Related entries in Barack, Congress, Economy, LegislationApparently, Congress isn’t just going to pass whatever economic stimulus ideas President-elect Obama requests. Already, there’s opposition brewing from both sides of the aisle.
Republicans, in a sudden burst of fiscal responsibility, are worried about tacking on even more spending to what is projected to be a $1.2 trillion dollar deficit in 2009. Some Democrats are complaining about the size and nature of Obama’s planned tax cuts. The $3000 tax break for job creation received a particularly negative responsive as many lawmakers don’t believe such a break will motivate businesses to hire employees they don’t otherwise need.
The good news for Obama is that there is wide support for passing some form of stimulus package. Congress always wants to put their own mark on bills and the current grumblings are likely nothing more than a combination of truly constructive criticism and the usual boundary testing.
The challenge for our new president and his administration is navigating the legislative process so the bill that comes out is not the usual pork-laden mess but actually contains useful provisions. What Obama is willing to concede on and what he will fight for will tell us a lot about what kind of President he will be. Will he be too willing to make bad compromises for the sake of expediency? Will he be too obstinate and cause the bill to die before it makes it to a vote?
My suspicion is, if Obama stumbles on this stimulus, he will err on the side of compromising too much and allowing the bill to be too watered down and too overgrown with earmarks. We’ll see. It should be interesting to watch.
This entry was posted on Friday, January 9th, 2009 and is filed under Barack, Congress, Economy, Legislation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
January 9th, 2009 at 8:57 am
Well, I think the numbers warn us that we’re all just going to be hoping that the stimulus works.
I’m not arguing against it. I think a defensible case can be made for increased deficit spending in response to an economic downturn.
However, I urge every American to be acutely aware of the __SCOPE__ of what we are talking about. Because the scope of current actions truly dwarves the deficit spending that only some people have complained about or bothered to understand in the past.
Some folks might be eager to continue to ignore warnings against deficit spending, because concerns about it in the past seldom led to the kinds of dire predictions the drain circlers made. When the fed gov’t was spending 2, 3, 5% more than it collected, that practice was semi-sustainable when accompanied by similar economic growth. To put it into terms everyone can understand, that’s like spending $102, $103, or $105 dollars when you only have $100. As long as your next paycheck covers the past overspending, you stay afloat, give or take.
But right NOW, we’re overspending by a ton. Reporting on the number, 1.2 trillion, doesn’t help folks understand. You have to understand it by comparing what we are spending to what we are collecting. Last year we collected about 2.66 trillion and budgeted to spend 2.9, and then we added another 0.7 for the bailout, so we collected 2.6 and spent 3.6. Boiled down, that’s roughly like spending a bit over $4 for each $3 we have.
So today, suppose (to make the numbers easy) the 2009 receipts end up at 3 trillion, and we spend that extra 1.2 trillion, which is the current forecast, not including the potential Obama stimulus package. That puts us at 4.2 trillion. Then add in the stimulus package’s expected cost of about 750 billion or 0.75 trillion. Let me emphasize where that gets us:
Deficit spending at that scope will become utterly unsustainable after 2 or 3 years or so. I don’t know the number. But IMO it’s nearly impossible for us to sustain that level of overspending without triggering currency devaluation and serious inflation. Unless things are so bad everywhere that Earth’s economy functions like the current absurd global conspiracy.
So again, to sum up, I am not arguing against deficit spending in the current environment. I am cautioning that with the already spent bailout and the impending new package, we need to figure that we can probably afford no more than one more swing. Maybe zero or two.
January 27th, 2009 at 4:17 pm
Just doing the math, doesn’t most of the money spent on stimulus go into payroll? If the stimulus pkg adds 3,000,000 jobs and the average hourly wage is $18.37/hr, that yields maybe $44 Billion/year in additional withholding and payroll taxes collected – the package pays for itself in two years. I fail to hear a clear problem.