Politics

Fastest Failure Ever?

It’s only four weeks since it convened, so how could a reasonable person say the 111th Congress is a failure? Actually, a reasonable person could hardly avoid that conclusion.

The 110th Congress’s legacy is one of inaction, failing to address the nation’s most urgent problems. The worst part of that failure was the hastily-drafted bank bailout bill of last fall which — at the cost of $700 billion — was rammed through despite warnings that it simply wouldn’t work.

Faced with that failure, and the accelerating decline of the economy, the 111th Congress began to the tune of the Obama inauguration and fanfare about changing the way Washington worked. But nothing has changed since Obama took office.

Taking up its most urgent task — to pass an economic stimulus package that will actually create jobs and revive industry — the House instead has passed a bill that’s just a dog’s breakfast of porkbarrel spending and liberal nostrums that won’t — according to economists on both the left and the right — do much to help the economy.

As a Sunday Washington Post editorial said, “Former Clinton administration budget director Alice Rivlin fears that "money will be wasted because the investment elements were not carefully crafted." Former Reagan administration economist Martin Feldstein writes that "it delivers too little extra employment and income for such a large fiscal deficit." Columbia University’s Jeffrey D. Sachs labels the plan "an astounding mishmash of tax cuts, public investments, transfer payments and special treats for insiders.”

Only $30 billion of the $825 billion package is dedicated to fixing infrastructure projects such as highways and bridges. There is $40 billion for electric grid development and another $20 billion in tax breaks for business. That’s only about $90 billion out of $825 billion or 12 cents on the dollar that — as the Wall Street Journal pointed out — can plausibly be characterized as an economic stimulus. Even the minor business tax breaks it includes will not do much to stimulate business.

The proximate cause of the failure is Speaker Nancy Pelosi’s relentlessly partisan approach to the stimulus package. The Republican Study Committee’s alternative proposal was denied a vote and the lesser Republican leadership’s alternative was defeated on a party-line vote.

The RSC alternative — as analyzed using the Democrats’ models — would have created 6.2 million jobs by doing not-so-radical things such as cutting the corporate tax rate to equal those of Europe. But the Democrats aren’t interested in creating jobs: they’re interested in government control of the economy.

Pelosi said that the bill was bipartisan because Republicans had a chance to vote for or against the bill. That’s the Democrats’ definition of bipartisanship: Republicans voting for Democrats’ proposals with which they disagree.

The Senate takes up the misnamed stimulus bill this week. And Senate Democrats seem to be eager to go Pelosi’s way. Sen. Dick Durbin (D-Il), the majority whip, criticized Republicans saying “where is their alternative”? But the Senate Republican alternatives, like those in the House, were entirely disregarded in committee markups. Sen. Jon Kyl (R-Ariz.) said that all the Republican amendments were voted down.

Over 63% of Americans disapprove of the job Congress is doing according to the RealClearPolitics average of polls. And President Obama’s polls are falling: already down to under 62% from his inauguration high of 83%.

As the leader of Senate conservatives, Sen. Jim DeMint (R-S.C.) said, if government spending caused economic strength, we’d have the strongest economy in the world. But government spending — which — along with “reforming” the economy to be in line with liberal theory — doesn’t stimulate anything except government growth.

President Obama’s success depends on his success in reviving the economy quickly. If the economy continues to sink – which it will if the current bill is enacted – Obama will be a failure. If he doesn’t intervene to fix this bill, he will equal the speed to failure that characterizes the 111th Congress.

Obama has never been a leader. In the Senate, he followed the lead of liberals and demonstrated none of the “bipartisanship” he now touts. On controversial votes – like the one to condemn the MoveOn.org “Petraeus-Betray Us” ad – he absented himself.

That option is no longer available. Obama has a choice now, to either lead the Senate to fix the failures of the House and make the stimulus bill one that actually might stimulate the economy, or to go along and see his presidency fall as the economy does. There is a better way. He has to demand that the Senate Dems dump the wasteful spending and adopt Republican ideas for tax cuts that will stimulate the economy.

The partisan games continue to threaten Obama’s agenda. Or do they?

On Sunday, Sen. Chuck Schumer (D-NY) said it was a “smokescreen” to say that the House and Senate faux-stimulus packages were different from Obama’s agenda. Schumer added that even Republican economist Martin Feldstein said tax cuts weren’t the way to go. But, unsurprisingly, Feldstein — who was President Reagan’s Chairman of the Council of Economic Advisers — says just the opposite. He wants tax cuts that actually will stimulate the economy.

In the Washington Post on January 29, Feldstein wrote that the current formulation of tax cuts won’t work and proposed a whole slate of others. Feldstein warns that the proposals now in the bill won’t work. He suggests, instead, that there should be tax changes focused on “…providing incentives to households and businesses to increase current spending. Why not a temporary refundable tax credit to households that purchase cars or other major consumer durables, analogous to the investment tax credit for businesses? Or a temporary tax credit for home improvements? In that way, the same total tax reduction could produce much more spending and employment.”

Feldstein also recommended, “Postponing the scheduled increase in the tax on dividends and capital gains would raise share prices, leading to increased consumer spending and, by lowering the cost of capital, more business investment.”

"You have to start from scratch and reconstruct this," Sen. Jon Kyl of Arizona told "Fox News Sunday." Good advice. President Obama should send to the Senate a list of things to be cut from the bill, including the permanent expansion of entitlements, the $1 billion for improving the census, the $600 million for satellites to monitor global warming and the $2.5 billion for National Science Foundation grants. (According to one news report, the $2.5 billion would support grants to an additional 12,750 students. That’s about $196,000 per student, almost four times the income of the average American family.)

Accompanying the list of cuts, the president should also demand the inclusion of a series of tax provisions designed to stimulate the economy. Heading that list should be the Republican Study Committee’s idea to reduce corporate taxes to about 25%, the average rate in the European Union.

It’s up to the president now: he can let the Senate Democrats follow the House into failure and join them in it. Or he can, uncharacteristically, lead them to redraft the stimulus package and make it one that will much more likely to help the economy.

Our economy cannot afford another trillion-dollar mistake. And, politically, neither can our new president. It would be far better for him to delay the package in order to make it work than to rush headlong into failure, following Pelosi, Reid and Schumer.


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