[digg-reddit-me]When Obama agreed to the Republicans’ demand for a televised summit to discuss health care, Republican leadership was faced with a quandary: How could they say no and not look like the bad guys?
Eric Cantor and John Boehner – the Republican Whip and Leader – made these demands in a letter that didn’t include an ultimatum that they would boycott the summit if their demands weren’t met. But their tone was clearly meant to agitate. They must know that they didn’t come off well in their last televised back-and-forth with the president – and they must also know that despite recent polling, Democratic health care ideas are far more popular than Republican ones. But they also suspect – rightly in my opinion – that whoever the public blames for scuttling these talks will hold this against them.
The White House is eager to go forward – because it is difficult for them to lose this: The public largely believes reform is needed. The Republicans so far do not agree on an alternative. The Democrats – after great struggle – have coalesced around a “next step,” which is undoubtedly part of the reason the Republicans want this “next step” off the table. This plan the Republicans are trying to scrap is – indeed – similar to the Republican alternative to Bill Clinton’s plan, a point which the president has made. Yet the Republicans cannot endorse this – or any – alternative offered by the Democrats for partisan reasons because it will hurt their prospects in the 2010 midterms, giving Obama and the Democrats something to run on in 2010 and 2012. And in the long term, Republicans have even more to fear, as Will Kristol explained in a confidential strategy memo on the risks of allowing Clinton’s health care plan to pass:
It will revive the reputation of the party that spends and regulates, the Democrats, as the generous protector of middle-class interests. And it will at the same time strike a punishing blow against Republican claims to defend the middle-class by restraining the growth of government.
There is – in other words – absolutely no fundamental incentive whatsoever for the Republicans as a party to endorse any health care reforms Democrats might want.
The Democrats alternatively will be faulted for the perceived shortcomings of the bill should it pass or not in the 2010 elections, and stand to gain significantly if the bill does anything like what it has promised. Passing such a significant piece of legislation also gives them something to rally their base around, even if some portion of the Democratic base is disappointed with the bill itself.
The fundamental politics of this situation has determined what has happened and will happen: that the Democrats will seek a compromise, and be strung along by the Republicans who will never come to an agreement. The President’s summit on health care with the Republicans and Democrats seems the perfect venue to demonstrate these fundamentals to the public – which is exactly why the Republicans are seeking a way out.
I think the administration should release a counter-proposal. They will agree to literally every one of the GOP’s demands — including the ones that don’t make any sense — in return for one, simple promise: The final legislation is guaranteed an up-or-down vote in the House and the Senate. No filibusters. No delays. No procedural tricks. If the GOP wants a clean process, I bet a deal can be struck here.
The problem is that this type of proposal would muddy the waters – and cause those individuals paying less attention to not know who to blame. Whatever the last deal offered was will be the primary focus of attention. Better it be this sham of a Republican proposal.
[digg-reddit-me]Opponents of Obama’s response to the financial crisis have taken a number of approaches their disagreement. As with all political opposition, these approaches begin with a seemingly common-sense question or objection – and use it as a lever to attack their opponents. Governor Bobby Jindal for example used a bit of each of the following approaches to go after Obama – though not quite committing to any of them fully. I’ve paired many of these approaches with the most prominent individuals who have become associated with them – and tried to respond to them. What is common among them all is a desire to tap into the inchoate rage that this crisis is engendering among all Americans – and to try to focus that rage on Barack Obama. What is lacking among these approaches is a compelling or plausible alternative.
I.Do we need to do anything at all? (James K. Glassman)
What Mr. Dow 36,000 failed to account for was that the stability of societies around the world is dependent on economic growth and the opportunity this brings. The opiate of the masses unhappy with their governments is no longer religion – it is the hope that results from economic growth, the miracle and curse of rising expectations.
Mr. Dow 36,000 believes that if our economic heart seems to have stopped beating, the answer is to have faith that our blood will continue to flow. “We don’t need stimulus – we need to calm down,” he says. But the only rational response is to shock the heart back into action, to stimulate it.
II. But do we need to spend all this money?
Yes, if not more. The basic theory of Keynesian stimulus is that when the aggregate market demand for goods and services enters into a decreasing spiral.
Less demand = Lower prices = Less supply = Less jobs = Less demand = Lower Prices = etcetera
When an economy enters this cycle, Keynes believed, the government must step in and increase demand by spending more than it receives in taxes. (If it taxed to make up for it’s increased spending, it would not be adding demand but merely redistributing it.) Projections indicate that the US gross domestic product will fall by $2.1 trillion in the next two years. Which is why some Nobel-prize winning economists were frustrated that Obama’s plan was so small that it will not be able to make up for the drop in demand.
Joe Scarborough pointed out on Meet the Press last Sunday that, as all deficit spending is stimululative, the last eight years of the Bush presidency have been Keynesian stimulus too:
Scarborough uses this point to make out Obama’s stimulus to be more of the same, except with the stimulus directed towards the bottom 95% of Americans instead of the top 2%. He’s not entirely wrong, but to continue the metaphor above – if someone’s lifestyle choices have put enormous pressure on their heart, as they snort cocaine or take speed or otherwise constantly overcharge their heart, the first step to getting them healthy is usually to get them to stop putting so much pressure on their heart. But if their heart beat is dropping rapidly, or their heart has stopped, then the first step is no longer to remove the cocaine from their system but to inject them with someone that will energize their heart. This is a stimulus. And this is the reason Obama’s economic team is increasing our deficit in the short term.
III. What about tax cuts? (Eric Cantor)
The Republicans proposed a $3.1 trillion dollar permanent tax cut as their alternative to Obama’s $780 billion dollar spending/tax cut stimulus. That they continued to criticize Obama for fiscal irresponsibility and accused him of “generational theft” while supporting this bill aptly demonstrates that this was a pure political play. But if nothing else, the sheer size of the Republican alternative stimulus suggests what the reports of the nonpartisan Congressional Research Office concluded: tax cuts work slower and have less stimulative effect than almost any kind of spending measures. This is why more than half of Obama’s bill is spending.
IV. Fine. But even if this works, the deficit will be out of control! (John McCain)
Damn right it will. Hell – after eight years of rapidly decreasing taxes coupled with the largest increase in domestic spending since the War on Poverty and two large and seemingly unending wars, the deficit was already out of control. Even before that, as Bush failed to respect the “lockbox” that Al Gore promised to protect with the extra funds raised by Social Security taxes, we were in trouble. But even if we had saved all of this money paid into the Social Security program which is owed to me and you in a few dozen years (or less) the rapidly escalating cost of health care would leave our government with a deficit of over $60 trillion dollars over the next few decades.
Which is why Obama has been talking about dealing with America’s long-term fiscal problems since he was on the campaign trail – and especially since he was elected. In the weeks before his election, Washington was taken with his idea of a “Grand Bargain.”
But none of this will matter if the economy doesn’t begin growing again. If the first step to recovery is deficit spending to get the economy going again – continuing the above metaphor, using paddles, injections, whatever to get our economic heart functioning again – the next step is to clean up our act and take a fiscally responsible approach to governing and entitlement spending – in other to stop the irresponsible behaviors that helped create the crisis. If our economy is still stagnant, we will need to dismantle a good portion of our federal and state governments. But if the stimulus works, and the economy begins to grow again, adjustments can be made. Another point that Obama and his Director of the Office of Management and Budget Peter Orzag have made clear is that the first step to solving America’s long-term fiscal problems is tackling the problem of our rapidly escalating health care costs – which thanks to their rapid growth make up an ungodly percentage of our unmet future commitments. This is why Obama sees health care reform as one of the first steps that needs to be taken – to stop the rapidly escalating costs of health care.
Yes, we do. Obama has described his economic team as a bunch of mechanics who are trying to fix the machine that is our economy. When a mechanic sees that a spring or a lever or a cog isn’t functioning properly – and this piece is preventing the machine from working – the mechanic knows the problem will not be fixed by lecturing the piece or letting it fail for not properly doing it’s job. The correct thing to do is to replace it or glue it or do whatever is necessary to make the piece function as it must. Yes, the bankers whose job it was to properly calculate risk and make money instead spectacularly failed to understand the risks they were taking and lost money; and yes, the liars and idiots who took our mortgages they couldn’t afford should be punished too. But while one bank failing is just, a failure of our banking system could paralyze the economy. And while an idiot who took out a loan he couldn’t afford should get his house foreclosed upon, too many foreclosures will take down a neighborhood. Both of these are part of systemic problems which has resulted in downward spirals.
Obama, in taking this approach, seems to be combining some elements of Hayek’s warnings about the limits of the discipline of economics and the failure of the best-laid plans with Keynes’s fierce urgency of now – a kind of trial-and-error, scientific approach to financial crisis management as opposed to a more ideological, morality-driven approach associated with partisans of the left and right.
Obama has elected to do what needs to be done to fix the economy as a whole – and this means helping people whose decisions were poor, people who were greedy, people who were stupid, and yes, losers too. No matter how distasteful, the situation bankers and mortgagees must be helped in order to fix the economy.
To reiterate, the Obama plan has several steps:
Fixing the mortgage and banking mess.
Arresting the downward economic spiral touched off by these messes with government spending to stimulate demand.
Put our government on a fiscally sane path by tackling the enormous gap between our spending promises and revenue generation in the area of entitlements – and at the same time, reigning in deficit spending as soon as this crisis has passed. (These steps are necessary to prevent those who we currently owe from panicking.)
VII. I hope he fails! Socialist! Communist! Marxist! Terrorist! Black Hitler! The Antichrist! Nobama! (Rush Limbaugh)
In fairness to Rush, he’s only publicly expressed a few of these sentiments. I’m not sure that he’s called Obama a black Hitler yet – but I’m sure he’s joked about it. This approach presumes that Obama has a quasi-secret agenda he is trying to impose on America – and that this agenda is so awful, it would be better to suffer another Great Depression or worse than to capitulate. Rush has described Obama as acting in bad faith, as being deranged, as having a mental illness (which Rush diagnoses as liberalism), and as all manner of awful and un-conservative things. Rush is a true propagandist and ideologue – and he has become the rallying point for movement conservatives.
His critiques now have power as the anticipatory fear of what Obama might do overwhelms the sense of what Obama is doing – and if Obama fails, Rush will be hailed as a visionary and a leader. But if Obama continues to display the conservative temperament and pragmatism that won him the election, then he will be as little remembered as Father Coughlin with his anti-Roosevelt screeds.
Rush – like proponents of failed ideologies everyone – continues to maintain that the conservative movement did not fail, but rather that it never truly had the power to achieve it’s agenda.