Miscellaneous Thoughts

Before continuing with my broader review of the economy and where it needs to go, a post on current events.

The economic crisis must be even worse than I thought. When I turned on TV this Saturday morning, I found the U.S. Senate debating the stimulus package. Wow! When Senators work on the weekend something is very seriously wrong.

My prior posts have pointed to some of my own dissatisfaction with the House package. In general, I believed it was spending heavy and job creation light, and there was some truth to the Republican complaints that Democrats had included a "shopping list" built up over the eight years of the Bush Administration and the twelve years of a Republican Congress (1992-2006).

That said, Republicans haven't offered much alternative, other than corporate tax cuts and the necessity to restrict spending and consequently "debt."

Of course, any one who isn't brain dead understands that's like the kettle calling the pot black. What ever Congress does with this package, it will be relatively small compared to the debt created by Bush and the Republican Congresses noted above.

I am particularly irked by two points Republicans seem to want to forget: 1) the stupidity of passing tax breaks in time of war and 2) the stupidity in pursuing free trade policies without regard to the fact that the country is running huge trade deficits.

OK, OK, debate is the way the system works. Presumably, the Republicans have all of a sudden found Jesus and want to get back to fiscal conservatism, now that they no longer have the votes to pass their own earmarks. For six years, Bush never saw an appropriations bill he didn't like. But, I don't object to them having their day in court. In fact, I believe if I were Reid, I believe I'd give them the weekend to continue to complain and then take it to a vote.

The Democratic effort to get 60+ votes for the package is based on two things: Obama's desire to make it appear a bi-partisan effort and avoid a Republican filibuster (which is actually what we have going on this weekend; it takes 60 votes in the Senate to "close debate," but only a bare majority to pass legislation).

[Actually, the Senate procedure is more complicated than the above. Filibusters may be prevented through "reconciliation" on budget issues. The "Byrd Rule" further defines exactly when reconciliation may or may not be used. The Byrd Rule may be overturned, but it requires (you guessed it) 60 votes. When all of this is said and done, I believe, Reid could invoke reconciliation and take the package to the floor for a vote, and pass it with a simple majority. Presumably, the only reason he does NOT do this - Republicans invoked reconciliation in each of the three Bush tax cuts - is the broader Obama play-nice and appeal for bi-partisanship approach, which of course wears thinner with each passing day.

My "guess," is that Obama will not ask Reid to use reconciliation to pass the package, until following next week's announcement of his plan for the second tranche of the Wall Street bail-out and will then refuse to bring that legislation forward until the stimulus package gains more Republican support (i.e. the 60 votes).

There are trade-offs in the approach. Obviously, there are items in the stimulus package that can be cut and Obama could have strongly suggested to House Democrats cuts that would have made the whole thing more palatable to Republicans. My opinion is that he has two goals, exclusive of the economic crisis itself, which he feels comfortable with tagging Bush and Republicans. 1) He doesn't want to alienate the House, which he undoubtedly recognizes as further to the left collectively than the public mainstream. He will need these people (Plosi, Wrangel, Conyers, Waxman, Frank, et al) later for other programs. 2) He's perfectly willing to give the Republicans enough rope to hang themselves as "obstructionists." To date, Republicans seem sort of lost in ideology...without any real alternative stimulus package and without focused leadership. If the economy gets worse without a stimulus package, it will be easily blamed on Republicans; if it doesn't and gets better, Republicans will get credit for saving money. The key, however, is that the economy has only a very remote chance of improvement for at least 6-12 months, according to the most optimistic economists (I've given my arguments in prior posts for a time frame of more like a generation, if then) at which time the public will have long forgotten about the current debate. In other words, the Republicans may be talking themselves into a grave.