Opinion Round-Up: Democratic Criticism of Obama's Economic Plan (and Why That is a Good Thing); Plus One Commentator's Modest Proposal for "the Economic Equivalent of War"

by Damozel |  Teh Nutroots posted earlier regarding questions raised by Democratic members of the Senate Finance Committee and Nancy Pelosi concerning Obama's economic plan, particularly in light of the new (and frightening) unemployment statistics.  Bill Kavanagh posted his response to economist Paul Krugman's commentary.   Rhetoric-wise, Democrats aren't by any means falling into line.  Whether they can walk the walk as well as talk the talk remains to be seen.

In "The Obama Gap," Krugman points out that Obama's plan for dealing with the crisis will not, because as presently configured it cannot, live up to his rhetoric.

This is the most dangerous economic crisis since the Great Depression, and it could all too easily turn into a prolonged slump. But Mr. Obama’s prescription doesn’t live up to his diagnosis. The economic plan he’s offering isn’t as strong as his language about the economic threat. In fact, it falls well short of what’s needed....

Bear in mind just how big the U.S. economy is. Given sufficient demand for its output, America would produce more than $30 trillion worth of goods and services over the next two years. But with both consumer spending and business investment plunging, a huge gap is opening up between what the American economy can produce and what it’s able to sell. And the Obama plan is nowhere near big enough to fill this “output gap.”...

Whatever the explanation, the Obama plan just doesn’t look adequate to the economy’s need. To be sure, a third of a loaf is better than none. But right now we seem to be facing two major economic gaps: the gap between the economy’s potential and its likely performance, and the gap between Mr. Obama’s stern economic rhetoric and his somewhat disappointing economic plan. (NYT)

Krugman wonders why Obama isn't responding more aggressively.

Why isn’t Mr. Obama trying to do more?

Is the plan being limited by fear of debt? There are dangers associated with large-scale government borrowing — and this week’s C.B.O. report projected a $1.2 trillion deficit for this year. But it would be even more dangerous to fall short in rescuing the economy. The president-elect spoke eloquently and accurately on Thursday about the consequences of failing to act — there’s a real risk that we’ll slide into a prolonged, Japanese-style deflationary trap — but the consequences of failing to act adequately aren’t much better.

Is the plan being limited by a lack of spending opportunities? There are only a limited number of “shovel-ready” public investment projects — that is, projects that can be started quickly enough to help the economy in the near term. But there are other forms of public spending, especially on health care, that could do good while aiding the economy in its hour of need.

Or is the plan being limited by political caution? Press reports last month indicated that Obama aides were anxious to keep the final price tag on the plan below the politically sensitive trillion-dollar mark. There also have been suggestions that the plan’s inclusion of large business tax cuts, which add to its cost but will do little for the economy, is an attempt to win Republican votes in Congress.  (NYT; emphasis added)

These concerns are echoed by John B. Judis at The New Republic:

Does Barack Obama understand the seriousness of the economic crisis? Yesterday, he laid out his economic agenda, and it was filled with all sorts of important exhortations and proscriptions. He appropriately condemned the "anything goes" policies of the last administration. He declared that government is now the solution to our woes, not the problem....

Judis argues that we need "the economic equivalent of war." And Judis has some excellent suggestions of his own for a proper strategy:

It would consist not merely of updating or repairing the nation's infrastructure, but in undertaking massive new investments that would expand the scope of American industry, and address other urgent problems in the process: global warming, over-reliance on petroleum, and the need to revive America's domestic manufacturing capabilities--not just to provide jobs, but also to provide tradeable goods that can reduce the country's current account deficit.

One area that is ripe for such investment--and that is not, from what I have seen, a declared priority of the Obama administration--is high-speed rail. Amtrak's Acela trains--the closest thing we have to one--average less than 100 mph between Washington D.C. and Boston, whereas trains in Western Europe and Japan go more than twice as fast. Many of them also run on electricity. They would be the most energy-efficient and quickest means of getting between places like Boston and New York, or Los Angeles and San Francisco. But they would require a massive investment....

Investing in high-speed rails would be very expensive, but unlike tax cuts--the benefits of which can be siphoned off in the purchase of imported goods--the money spent would go directly to reviving American industry and improving the country's trade balance.

Though a massive investment in high-speed rail brings its own set of complications, it's worth keeping these kind of examples in mind when one hears from the Obama people that they can't find sufficient infrastructure projects to fund. The question I would pose is this: Are we not at some point going to have to go beyond repairing roads and bridges in our conception of public spending and public works, and contemplate the kind of ambitious industrial expenditures that the country made on war production in 1941?

That is definitely something I'd like to see, particularly after spending time in England.  In fact, I imagine that a lot of Americans would like the trains to return, now that --- to paraphrase an old Jethro Tull song --- the oil barons really are about to drip dry.  How can you be "the greatest country in the world" without decent mass transit?  Who doesn't love trains, even Amtrack?

John Aravosis comments:

Judis talks about high-speed rail, the kind they have in Europe and Japan. The Amtrak train from DC to Chicago takes 24 hours, I wrote a while back. If we had a French-style TGV connecting the two cities, it would take less than 6 hours....

We are falling behind, and to get ahead, we may need to get a lot more creative than $19 handouts and $300bn Bush-era tax cuts. We need the economic equivalent of war, the economic equivalent of putting a man on the moon. Spending 40% of the stimulus plan on tax-pork to woo Republicans because someone arbitrarily decided that 80 votes was better than 50 or 60 is not change.

A lot of Democrats, including a startlingly outspoken Nancy Pelosi and a number of economists, aren't happy about the tax cuts. 

“The true test of the policies we’ll pursue won’t be whether they’re Democratic or Republican ideas,” Obama said at George Mason University in Northern Virginia, “but whether they create jobs, grow our economy, and put the American Dream within reach of the American people.”

The reference to “Republican ideas” required no translation. Obama’s plan calls for hundreds of billions of dollars in tax breaks for businesses and individuals that some reports estimate amounts to 40 percent of the entire stimulus package. The strategy is part effort to make good on campaign promises of cutting taxes and part effort to entice Republicans in Congress to support the huge spending package. (The Washington Independent)

Charles Lemos at My DD has a good round-up of authorities who favor repealing the Bush tax cuts sooner rather than later. 

With Congressional Dems showing --- better late than never, I guess --- unwillingness to roll over at a word from the executive branch, we can only hope that he and his planners will not only be "open" to dissent but will actually absorb ideas that come from outside the inner circle. 

John Cole points out that this is actually exactly the sort of debate we need.

I think this is a good thing. This is healthy. They are debating actual ideas, and there are disagreements, and hopefully they will work them out and come to a healthy endpoint. Maybe the Republicans will pull their heads out of their collective asses and decide that in the wake of the DOW dropping 80,000 points and massive unemployment and five quarters of negative growth there is something more important than capital gains tax cuts, Elian Gonzalez, Terri Schiavo, and the fairness doctrine, and join in the debate and act for once in good faith and with the best interests of the country in mind. A man can hope.

At Obsidian Wings, Eric Martin agrees:  dissent and debate are how democracy is supposed to work.

Not only are such debates healthy, they are vital to the formation of good policy. The ability to engage in such dialectical exercises - with the likelihood that those policies that emerge victorious in the competition of ideas will be implemented - is what makes liberal democracies more efficient than more autocratic models.  Democracy has its advantages, this is one of them, and we would be foolish not to utilize it to the fullest.

Along these lines, I'm hopeful that the Obama administration can bring about a return to a method of governance modeled on the embrace competing ideas - not fear of dissent - both within the White House and Washington at large.  That was one of the more grievous structural flaws in the Bush administration's approach to governance - and the way the Republican Party acquiesced to that approach.

At Daily Kos, Susan G says:

With his own party now urging him to act more boldly, and nobel laureates chiming in, it seems clear that Obama has some cover to think even bigger in the crisis than he first announced.

But will he?  By now, most of us are so used to the executive branch imposing its will on Congress that we've nearly forgotten why the Founding Fathers built into the Constitution the concepts of separation of powers and checks and balances.

As Eric Martin says:

The Bush administration was, at the very least, effective at maintaining a remarkable degree of top-down discipline within the White House and within the Party ranks on Capitol Hill.  Dissent was simply not tolerated, and any bit of data or intelligence that called into question the advisability of policies and directives from on high was dismissed, downplayed and discredited.  Recall, the Bush administration literally discarded reams of valuable scholarship on Iraq and the post-invasion environment because, well, because that work contemplated the potential for phenomena that would be considered outside the best-case-scenario, hoped-for outcomes.  Real-world obstacles were treated as bad PR.  The intelligence failures followed a similar arc, both before the invasion and during the occupation.  Policy was based on the political. 

And, as he concludes --- with really wonderful restraint --- "[T]he outcomes were unsurprising."

At any rate, I'm personally pleased that the Dems in Congress are signalling that they have no intention of rubber-stamping Obama's decisions.   What this country needs is more and better ideas and less blind loyalty.

Will the stimulus package pass "as is" despite all this?  Ambinder reckons that the odds are 60/40 in favor of its doing so. 

All the posturing headlines today notwithstanding, momentum, the politics, the urgency and public opinion are on Obama's side. Now -- the 60% figure is flexible. If Obama's team decides not to comrpomise, then the bill won't pass. If they do, they could get 80% of the vote.  What would they need to get 80% of the vote?  Well, about a third of Republicans and 90% of Democrats. The proposal to allow business to refile their tax returns and spread out their 2008 losses over the past five years will keep enough Republicans on board; the Chamber of Commerce and the National Association of Manufacturers love the idea, and they've already assumed some ownership of it. That suggests to me that the Chamber and NAM won't object to the parts of the plan they don't like. In the absence of pressure from the Chamber and NAM, a healthy number of Republicans are likely to support the bill. ......Then ask yourself whether liberal Democrats will really defect because the bill won't include enough direct transfer payments to the poor; then ask yourself whether conservative Democrats will be satisfied if Obama promises to tackle entitlement and budget reform in his first official budget. I think they will.

I guess at the end of the day I think so too.  So maybe celebrating the return of checks and balances is premature.  But perhaps it's a start?

Memeorandum has more on the Judis proposal here.

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