RSS Feed MenuDuring the run up to the Iraq war, liberals used to complain that President Bush was attacking the wrong enemy. “Iraq did not attack us on 9/11.” In reply, President Bush offered a complicated argument about how fighting in Iraq would contribute to American security.
If the US had scored a cheap and easy success in Iraq, Americans would probably have accepted Bush’s indirect approach. When things got tough, however, the president’s support corroded – and then collapsed. Angry Democrats accused the president of outright deception: “Bush lied, people died.”
Barack Obama however seems to have decided to learn from Bush rather than repudiate him. His stimulus package does for the economy what Bush was (unfairly) accused of doing after 9/11: uses the crisis of the moment to redirect the nation toward a solution that Obama and his supporters had in mind all along.
The crisis is the collapse in credit markets, the loss of consumer wealth, and the threat of an accelerating deflation. The answer agreed by most economists is a large and immediate fiscal stimulus: use the federal government’s borrowing power to get the country spending again – and fast.
The big idea advanced by market-oriented economists – like the 5 distinguished academics featured in our symposium on the stimulus – is to suspend the payroll tax. That measure would put immediate cash, up to $127 per week, into hands of every single American worker. It would deliver an additional subsidy of up to $127 per week per employee to every employer.
A payroll tax holiday is not a one-stop magic solution to the nation’s problems. It could be joined to other measures, including the more sensible ideas in the Democratic bill: federal aid to state unemployment plans for example and other measures to put money fast into the hands of consumers.
But Democratic proposals for big government construction projects and other forms of direct government spending are completely irrelevant to today’s problem.
I’m not saying that public investment is inherently and necessarily bad. We’re glad to have the Interstate Highway system and the St. Lawrence Seaway and O’Hare Airport and the Internet.
What I am saying is that good public investment is always slow.
If Democrats have high-return investments to propose – well let them go through the process of proposing and justifying them. But to offer a huge spending program for the years from 2011 through 2014 as a response to a crisis in 2009 … well I’d call that an attack on the wrong enemy.
Image courtesy of scriptingnews.
larryo // Feb 10, 2009 at 8:46 am
You may not know it, Frum, but there is a big difference between throwing money at an economic problem and carpet bombing innocent civilians. Second, Obama did not create the problems he is trying to solve. Bush and his cronies repeatedly and studiously ignored warnings about a pending terrorist attack on the US and then they lied systematically to explain what was at best gross negligence and was at worst – well – treason, to be precise. Example: Do you really believe that on August 6, 2001, the CIA used its unique daily access to the POTUS – flew someone to Crawford with this stark warning about bin Laden preparing to attack – to give him a history lesson? Ms. Rice said so, and under oath. I must say, your deployment of the kind of simplistic sophistry this piece typifies is disappointing.
JJWFromME // Feb 10, 2009 at 9:12 am
“But Democratic proposals for big government construction projects and other forms of direct government spending are completely irrelevant to todays problem.” John Maynard Keynes? Who’s that?
sinz54 // Feb 10, 2009 at 11:16 am
The real problem is this: The unemployment rate is known to be a lagging indicator of the state of the economy. The economy can be on the road to recovery while unemployment remains high. The Democrats are focused on lowering unemployment, a lagging symptom of the problem but not the problem itself. That’s like trying to treat cancer by administering sedatives for the pain. Sure, you can put people back to work doing all kinds of things, some useful, some not. But that doesn’t fix what’s wrong with the economy. A real solution would get our economy recovering by 2010, and sow the seeds for long-term growth. But unemployment might remain high for several years after that. The public should be counseled to be patient–instead of Obama and the Democrats demagoguing the issue to ram their full welfare-state agenda down our throats.
sinz54 // Feb 10, 2009 at 11:21 am
JJWfromME: Big government construction projects are largely irrelevant, because they can’t start up immediately. It takes years for any modern project to hold the hearings, and get the permits, and perhaps even go to court to deal with the inevitable NIMBY and GreenPeace objections. Some of the exact same Obama supporters who are currently cheering his economic program, are the same ones who will start agitating to block new large infrastructure projects on the grounds of environmentalism or NIMBY. Thus you’re not going to get any real stimulus till 2010, or even later. I live in Massachusetts, and I can tell you how long it took to finally get started on depressing and upgrading the Central Artery highway in Boston. Go learn how long it took to start, and how long it took to build. Its development actually crossed over one or two entire business cycles: http://tinyurl.com/2jv3zt
gospelance // Feb 10, 2009 at 11:59 am
Obama did not get us into this situation: Barney Frank and Chris Dodd did. The White House gave warnings to Congress that the mortgage thing was going to blow up. Frank, who was getting some fanny over at Fannie, blew it off. Now he’s in charge. fox/henhouse
JJWFromME // Feb 10, 2009 at 12:03 pm
“Obama did not get us into this situation: Barney Frank and Chris Dodd did.” I did a spit take on my computer monitor after that one. You have to be kidding. Here are some links:
http://www.motherjones.com/mojoblog/archives/2008/09/9718_mccain_lehman_crisis_gramm.html
http://www.ft.com/cms/s/0/8780c35e-7e91-11dd-b1af-000077b07658.html?nclick_check=1
http://tpmcafe.talkingpointsmemo.com/2008/09/14/republicans_and_the_credit_cri/
http://www.nytimes.com/2008/10/24/business/economy/24panel.html?_r=2&hp&oref=slogin
larryo // Feb 10, 2009 at 12:35 pm
“Big government construction projects are largely irrelevant, because they can’t start up immediately. It takes years for any modern project to hold the hearings, and get the permits, and perhaps even go to court to deal with the inevitable NIMBY and GreenPeace objections.” So I assume you support the reinclusion, in the bill, of all the welfare payment supports, teachers’ salary supports and all the other “spending” provisions that were cut in favor of tax reductions, and the elimination of the tax reductions which are the slowest stimulating factors of all. I mean, seriously, sinz. What could you possibly be thinking?
billslayer // Feb 10, 2009 at 2:11 pm
Larryo, ad hominem and non sequitur are for the Politico
forums. Take a deep breath.
Paulie Carbone // Feb 10, 2009 at 2:20 pm
David, when you say spending that hits the ground in 2011 is “an attack on the wrong enemy” and irrelevant to the current crisis, you’re assuming that the recession will be over by 2011. I think that’s naively optimistic. Infrastructure spending has a high multiplier and is highly effective at raising GDP per dollar spent. It’s excellent stimulus, if it gets there in time. Normally, it’s a wasted effort because most recessions are short lived. But this looks quite different. Also, if you assume that the underlying infrastructure programs are worthwhile projects, then there’s really little downside; at worst, it’s insurance against the recession lasting longer than expected.
larryo // Feb 10, 2009 at 5:09 pm
billslayer – there was nothing ad hominem, nor any non sequiturs, in my post. I did not suggest sinz was wrong because of anything personal, and I think it was perfectly logical to suggest that, since sinz didn’t like the long-term stimulus, perhaps short term programs would be more acceptable. I suspect that what you don’t like is not that the logic failed but that my response was completely appropos, that you agreed with sinz to begin with and now you must rethink your position, and that is hard.
Bill Harrison // Feb 10, 2009 at 7:43 pm
At risk of quoting Eliot this stimulus bill is all so much wind in dry grass. The real deal is going on (or not going on) with Geithner’s “plan” and I use that term lightly at this point. I have never in my 54 years seen such a display of incompetence right out of the gate. What in god’s name was Obama doing on television last night promising a detailed plan when Geithner clearly didn’t deliver it today and the market started tanking right as he started speaking. Precisely whose job is it to make sure that the president and the Treasury Secretary are on the same page on such an important day? And at risk of quoting someone else, “Does anybody here know how to play this game”? (I posted the same comment on the economists forum but my thoughts here are the same)
larryo // Feb 10, 2009 at 11:30 pm
Bill, you make a very good point.
trasildo // Feb 11, 2009 at 4:47 am
Mr. Frum,
Unlike President Bush, who promised during the campaign that he was not interested in nation-building and promised to focus on a largely domestic agenda, President Obama clearly stated during his campaign that he viewed the crisis as an opportunity to implement some of the changes he had promised.
I am very uncomfortable with what seems to me as “fear-mongering” coming from the President similar to what we saw from the Bush administration after 9/11. We all remember, “but we don’t want the smoking gun to be a mushroom cloud.” The “downward spiral” of the first press conference had a ring of Condi Rice behind it.
That being said, using the economic situation to address some of the problems in the country does not seem to me as such a bad thing at all. Would you rather see tax breaks that go to the top 5% who could use that money to cushion their lavish lifestyles from a recession or would that money be better used helping laid off factory workers get a job in the retrofitting of a bridge?