So we have word that some Democratic Senators, such as Iowa Sen. Tom Harkin, are a little less than happy with the economic stimulus plan that the President-elect's people are proposing. There's this gem from Talking Points Memo likening Obama's plans to Reaganomics:
"There's only one thing we've got to do in this stimulus, and that's create jobs," Harkin told me. "I'm a little concerned by the way Mr. Summers and others are going on this ... it still looks a little more to me like trickle-down."
[...] "What I'm hearing from Mr. Summers is that they've got a different approach -- tax breaks, and this and that," he said. Harkin warned that, much like the outcome of George Bush's $600 stimulus package last year, recipients of quick tax cuts "are going to be salting it away, not spending it."
When I asked if he felt his concerns were heard during the meeting, he looked to the floor and slowly shook his head. It was almost forlorn.
I'm guessing many progressives are also concerned about the tax cut element of the plan. If anything, the non-stop disavowal of the New Deal's creation of a tax code that required Americans to contribute their fair share to our national well-being has played right into the hands of conservatives that wish to, in the words of conservative icon Grover Norquist, make government small enough to drown it in a bathtub. Especially when we look at the state level and the quandary of states that must either cut programs or raise revenue, it is rather bizarre to find the incoming federal government want to do the exact opposite: increase spending and cut revenue. Which is not to say that the states, which are required to have balanced budgets by their own stupid laws, are correct; spending is exactly what should be done right now. But spending should be done in a way that revives the economy, not in a way that simply transfers federal revenue intended for the well-being of the nation into the pockets of those oversea manufacturers who got us into this mess in the first place.
Which brings me to this. Loathe though I am to quote TNR, the much more venerable online news outlet
Talking Points Memo points us towards this
thoughtful critique of President-elect Obama's economic stimulus plan. The two main, wonky points: First, Obama is not thinking nearly big enough and the plan does not address the underlying issue--the decline of American manufacturing, and; second, the initial Bretton Woods/IMF system of international monetary stability (albeit imperfect) has broken down completely and must be replaced in order to address the global nature of the current recession.
A couple of key excerpts. First, on how to make the stimulus package bigger in a productive way:
[I]n 1936, unemployment was still at 16.9 percent; by 1942, after two years of war spending, it was 4.7 percent, strongly indicating that it was war spending that did it. I am not suggesting that the United States start a world war in order to solve the world's economic problem. But I am suggesting a strategy that could be called the fiscal equivalent of war.
It would consist not merely of updating or repairing the nation's infrastructure, but in undertaking massive new investments that would expand the scope of American industry, and address other urgent problems in the process: global warming, over-reliance on petroleum, and the need to revive America's domestic manufacturing capabilities--not just to provide jobs, but also to provide tradeable goods that can reduce the country's current account deficit.
One area that is ripe for such investment--and that is not, from what I have seen, a declared priority of the Obama administration--is high-speed rail. [...] [I]nstalling high-speed rail in the Northeast corridor could cost about $32 billion, while California's high-speed rail system would require up to $40 billion. A system that would address the other areas of the country could easily raise the cost to the hundreds of billions. The House transportation and infrastructure committee has currently proposed $5 billion in stimulus funds for intercity rail--not even a down payment on what it would cost to convert the U.S. to high-speed rail.
Second, on what trade deficits and currency speculation means in the near future:
Since 1971, the breakdown of Bretton Woods has given way to a perverse anti-system that combines floating rates, fuelled by speculation, and behind-the-scenes currency manipulation by counties like China and Japan that don't want their exports priced out of foreign markets. [...] This system, which features huge surpluses in China and Japan, and huge deficits in the United States, has not proven viable, and is breaking down right now. If China is "losing [its] taste for debt from the U.S.," as a recent New York Times story reported, the U.S. will have trouble financing its deficit expenditures. Interest rates will go up, investment will go down, income will sink, and more Americans will be out of jobs; on the other side of the Pacific, China will be able to sell less goods to the U.S., its investment will fall, its workers will be jobless, and so on. It's not a pretty picture.