Across the country today, President-elect Barack Obama got exactly the headlines he wanted from his supporters in the establishment media. “Obama Pitches Stimulus Plan: GOP Asked to Help Design” says the Washington Post. “Obama Sweetens Stimulus for GOP” reports the Los Angeles Times. Obama Finds Lovefest on Capitol Hill blares the San Francisco Chronicle. Obama’s strategy is clear: make as big a show of bipartisanship as possible to provide the most amount of conservative cover for what all signs point to being at least a $1 trillion stimulus package. Hence the New York Times reports, “Mr. Obama pledged to help advance the legislation in any way he could, participants said, including inviting skeptical members of Congress to meet with him at his transition headquarters or at his temporary residence, the Hay-Adams Hotel.” Hopefully Republican votes in Congress are more expensive then a lunch at the luxurious Hay-Adams Hotel.
But the bigger worry is that conservatives in Congress will sign their names to almost $1 trillion in new federal government spending in exchange for a measly $300 billion in temporary tax cuts. Rugters University professor Ross Baker told the LAT: “That’s Republican bait. It’s difficult for many Republicans to vote against a large tax cut.” Baker is right; generally Republicans ought to favor large tax cuts. But not all tax cuts are created equal. Short term tax cuts (like rebates, holidays, etc.) simply do not work. Both the Bush 2001 tax rebates and the Bush 2008 tax rebates failed to stimulate the economy. Only long-term tax rate reductions trigger the important economic decisions that a real recovery depends on like more investment in new factories and new equipment.
And what is the price for conservatives if they accept $300 billion in temporary tax cuts? Hundreds of billions of dollars in new entitlement spending on benefits like unemployment insurance for part-time workers and Medicaid eligibility for laid-off workers. Hundreds of billions of dollars in bailouts for profligate states like California, New York, and New Jersey. Hundreds of billions of dollars in new spending on infrastructure projects which will do nothing to stimulate the economy.
As Sen. Everett Dirksen (D-IL) quipped during the Great Society spending boom of the 1960s, “A billion here, a billion there — pretty soon, you’re talking real money.” The Wall Street Journal adds:
How quaint. In modern Washington, trillion is the new billion. … The human mind is not well equipped to fathom a number that large. A check for $1 trillion — a million million dollars — would have 12 zeros to the left of the decimal point. Homo sapiens hadn’t evolved a trillion seconds ago: 31,546 years in the past, Neanderthals were still trying to make fire. More immediately, $1 trillion is about one-third of annual U.S. government spending and 13% of the U.S. economy. It is more than the GDP of all but 12 countries in 2007 (America, Japan, Germany, China, the U.K., France, Italy, Spain, Canada, Brazil, Russia and India, in that order).
Obama likes to say, “We are being guided by what works, not by ideology.” But if that is true, then he should listen closely to his Council of Economic Advisers chairman Christina Romer, who has published economic studies concluding that: 1) tax increases harm economic growth; 2) permanent tax cuts lead to greater economic activity; and, most importantly, 3) increased government spending has at best a small effect on stimulating economic activity.
- It is unclear at this time how Senate Democratic leaders plan to physically block Illinois Gov. Rod Blagojevich’s appointee to replace Barack Obama, Roland Burris, from the Senate floor today.
- An ACORN employee has been charged in federal court with submitting false information on Missouri voter-registration cards, including turning in cards from nursing home residents without their knowledge.
- The same California Supreme Court that forced same sex marriages on Californians ruled unanimously Monday that, despite the fact that each church held deeds to their land in their own names, three parishes that left the Episcopal Church over its ordination of gay ministers must forfeit their property to the Episcopal Church.
- Democrat and Hugo Chavez shill Joseph Kennedy II announced yesterday that Venezuela will end its three year old home heating-oil assistance program for Americans.
- Despite a slower rate of growth due to slowing prescription drug spending, total health care spending grew to a record $2.2 trillion, or 16.2% of the gross domestic product.