Friday, January 23, 2009

Stimulus Plan A Huge Gamble

If haste makes waste, then the Democrats' proposed $825 billion economic stimulus bill if approved in its present form is in for a barrel of troubles.

President Barack Obama after meeting with Congressional leaders Friday said the stimulus plan is on target for passage by Feb. 16. No question there is a need for speed as the economy continues to spin in a downward spiral.

But the House, and especially the Senate, is ill-equipped for intelligent rapid-fire decisions. Case in point: the first $350 billion bailout of the financial sector with zero accountability.

Obama conceded the stimulus plan is opposed by some Republicans and will require "some heavy lifting." He cautioned "the recovery package that we're passing is only going to be one leg in at least a three-legged stool." He said it has to be "part and parcel of a reform package" aimed at ensuring transparency and accountability in the way taxpayer dollars are managed as part of the stimulus effort.

Americans received the first glimpse of the stimulus plan earlier this week from the Congressional Budget Office.

Its analysis found that most of the approximately $355 billion in proposed discretionary spending on highways, renewable energy and other initiatives wouldn’t be spent before 2011. The government would spend about $26 billion of the money this year and $110 billion more next year, the report said. About $103 billion would be spent in 2011, while $53 billion would be spent in 2012 and $63 billion between 2013 and 2019, the report said. Republicans said the analysis showed that the plan won’t get money into the economy quickly enough.

The stimulus plan is aimed at helping lift the economy out of recession through tax cuts for families and businesses and $550 billion in new spending on programs including expanded unemployment benefits, aid to state governments and increased funding for scientific research.
The CBO report analyzed only the discretionary section of the bill, omitting the $275 billion in proposed tax cuts and approximately $195 billion in mandatory spending increases.

The analysis suggests that much of the stimulus may not come until after the economy has begun to recover. The CBO has previously said it expected a “slow” recovery to begin later this year and that the economy will expand by a “modest” 1.5 percent in 2010. The plan in its present form does not have a closure clause once the economy shows significant gains.

Republicans are seeking deeper tax cuts than the proposal contains and question whether $550 billion in new federal spending for roads, bridges and other projects can stimulate the economy quickly enough. Some conservative Democrats are joining Republicans in complaining that the package is too big and some of the spending plans too wasteful.

David Brooks, the conservative columnist writing in the New York Times, argues the stimulus bill "is a muddled mixture of short-term stimulus haste and long-term spending commitments. It is an unholy marriage that manages to combine the worst of each approach — rushed short-term planning with expensive long-term fiscal impact." Continues Brooks:

""The bill has three essential failings. First, it lacks any strategic vision. This $825 billion bill has to be passed within weeks. There’s no time for fundamental rethinking or new approaches. Instead, there’s a sloppy profusion of 152 different appropriations — off-the-shelf ideas that mostly create costlier versions of the status quo.

"The committee staff took the kernel of President Obama’s vision — infrastructure programs to create jobs — and surrounded it with an undisciplined sprawl of health, education, entitlement and other spending. There’s money for nurse training, Medicare, Head Start, boatyard support, home weatherization and so on. Eleven of the programs in the bill account for the vast majority of the actual job creation. The rest may be worthy or not, but they have little to do with stimulus. The total package is so diffuse, it costs $223,000 to create a single job.

"Second, the bill has relatively modest short-term impact. Many parts don’t even pretend to be stimulus measures, like funding for basic research, or special ed programs.

"Third, the spending measures in this bill have no sunset..."

"President Obama is clearly going to have to show the hard way that he meant what he said about bringing change. He didn’t run for president just to sign whatever bills the Old Bulls put on his desk. He’s going to have to prove the hard way that he meant what he said about being pragmatic and evidence-based... He’s going to have to show that his plans have credibility, that a stimulus bill is really a stimulus bill, and not a Christmas tree for every special interest desire.

"If he can do that, we’ll look back on this stimulus as a timely, temporary and targeted success. If not, we’ll just remember it as the sprawling mess that kicked up dozens of scandal headlines about $200 million programs to lay grass around the Jefferson Memorial."

Brooks' points are well taken.

The problem is Obama will be forced to sign the bill even with provisions in it considered pork and unessential.

Time is of the essence.

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