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Such Stimulation 

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The best thing about the stimulus package is that Obama won.

It’s peculiar, as so many things are in American media. Obama has been hailed as a savior, the second coming of Franklin Roosevelt, and the impetus for a vast, world-sized sigh of relief, yet people still underestimate him. What they don’t understand is that Obama knows how to count votes.

During his campaign for the nomination, the twittering classes and the critical twits blathered on that he couldn’t score the knock-out punch! Couldn’t close the deal! Didn’t know how to win. When the dust settled, he was calmly standing there with enough delegates to clinch the nomination.

So, too, with his stimulus plan.

The House Republicans stood united against him! Not a single one broke ranks. They hit the airwaves. They oinked about earmarks, deficits, and “pork!” They cried with delight that they’d “found their voice.” It happened to belong to Rush Limbaugh, a rotund, pink, and sweaty fellow with a big cigar and a fondness for pain pills and erectile dysfunction medication. But by gosh, and by golly, they were pleased with themselves.

The Republicans could not actually stop the bill in the House. But they could in the Senate because there they have filibusters. It takes 60 votes to shut one down. There are only 58 Democrats. If the Republican ranks stand stubbornly solid, they can block any bill.
Ten days later, the stimulus plan passed.
The second best thing, is that the Republicans lost.

The Republicans have a big problem.
They proved that they can’t win a war (let alone two), can’t run a country, and shouldn’t be trusted with our economy. A new round of senatorial elections is just 20 months away, with 36 of the 100 seats to be contested. Right now, the best guess is that the Democrats pick up four seats, possibly even seven. If Al Franken holds on in Minnesota, that gives the Democrats between 63 and 67 seats.

Once that happens, the Democrats have a dominant position and the whole dialogue shifts significantly to the left.
The Republicans have only one hope: for Obama to fail.
General George Patton, in a speech to the troops before the Normandy invasion, said “Americans despise losers. Americans love winners.” (Yes, the movie uses his actual words.)

There’s a certain amount of truth in it. Particularly in people likely to be Republicans. It explains, in part, how George Bush got away with so much, for so long. He won his confrontations and the fact that he did so through deceit and bullying seemed to disappear in the fog of victory. Jimmy Carter, on the other hand, was a remarkably decent man whose ideas were usually correct. He’s still treated with contempt.

If Obama had failed right out of the gate, he would have been labeled a loser. Who was right and who was wrong on the issues would not have mattered. Obama has now demonstrated that he can pass legislation—and get approval of nominations—that are important to him. Barring unforeseen events, he will continue to do so.

In this case, he got three Republican senators to break with their party. There are at least three more he probably could have called on: Chuck Hagel, Richard Lugar, and George Voinovich. Look for them to vote with Obama, when it’s necessary, or because they’re so inclined, in the future.
Right now, the Republican Party is dominated by demented culture war zealots: rich is good, sex is bad, save the fetuses, kill the foreigners. Most of them will retreat further into their bunkers in Limbaughland. A few, in swing states and swing districts, will break away as liberal Republicans.

The worst thing about the stimulus package is that its theoretical underpinnings are weak. The fundamental problem is that the United States has moved from being a production economy to being a consumer society. In order to do that, we have mortgaged and sold off our assets. This is unsustainable. We still hold to the theory that “the market” will magically find a way out of the problem. Since “the market” has eagerly created the problem, that’s like expecting a meth addict to guide us into tranquility.

The necessity is to re-transform America into a production economy. If we produce more than we consume, we can pay our debts. If we don’t, we can’t, and we go bankrupt as a nation. Consumption is not the answer. You cannot consume your way out of debt.

The market can’t figure out how to do that. Nor do the markets have any desire or motivation to do it. It has to be done through a national consensus and a national effort; that means by government.

Production requires investment. If the investment is worth making, borrowing makes sense. But it still must be paid for. Government’s revenue stream comes from taxes. We can’t even pay our current costs (the normal operating costs, not counting the bank bailout and the stimulus package) with our current level of taxation. Not even if there is an economic boom. So taxes must go up. Especially on the wealthy and on corporate profits. Tax hikes, historically, mark the end of recessions and depressions. High top tax rates correlate with strong economic growth.

So the government has to say: We are making an investment in transforming the American economy back to a production economy. That’s a big job. It requires a huge amount of money like fighting a successful war. It will require higher taxes. But the result will be a sounder economy and better conditions for everyone.

Because the theoretical underpinnings are weak, the stimulus package has two problems.
It’s too small.
It does not address how it will be paid for. If we’re not on some sort of track to pay for it, it creates all sorts of new problems.

As a political event, this bill should be applauded.

As an economic event, it’s a good start. If, and only if, it’s followed up a lot more, in theory and in action. If this is the end, not the beginning, it just adds to the fundamental problems.

Speaking of...

  • Larry Beinhart expresses his misgivings about the economic stimulus package.

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