Wednesday, February 4, 2009

oBaMa'S fIrSt BaTtLe

President Obama's first legislative battle is over his economic stimulus plan. The economy is in trouble, banks have 5.6 trillion in toxic assets(goldman sachs estimate) that must be cleaned up, and in January the country lost 560,000 jobs. Everyone says we need a bill to stimulate the economy.Even though the democrats controll The House of Representatives, =The Senate and the White House the Republicans have filibuster power in the senate. Meaning that the Democrats are 2 votes short in the senate of passing whatever laws and stimulus packages they want without any republican compromise.




Even with this advantage president still chose to have numerous meetings in the oval office with republican leadership to build a bipartisanship bill. In the eyes of many Democrats this compromise was not needed. In fact many progressives thought it should not have happened. The progressives are arguing that the American public has voted for a Democratic stimulus by the way they elected a Democratic Senate, Congress, and President. Not only that but the fact that this election has never been more clear cut. A vote for Mccain meant the country wanted a Reagon style economy. Tax cuts to the wealthy, the corporate, the street on wall. While a vote for Obama meant tax cuts for the poor and middle class. Many republicans framed the election so strongly by calling Obama's policies a socialistic redistribution of wealth. And guess what GOP, Americans chose socialistic wealth redistribution.



But in a spirit of bipartisanship, or some might call it Democratic spinelessness, President Obama still chose to work with his opposition. Yet when the bill came up for a vote in the House of Representatives not one Republican voted for the bill. To me and many progressives this was seen as a stab in the back to President Obama. Yet Greg Palast just wrote an article that was hard to see where he was coming from because of the high level of sarcasm. But I think his point was about President Obama stabbing the republicans in the back by inviting them to the white house to build a bill together, than when they left he created a democratic bill that they would not support. So I guess it depends on what side of the aisle you are on.

So whats in the bill. The Democratic version of the bill is around 800 billion dollars being spent on medicare, unemployment, a huge increase in education, money going to states to help balance their budget deficits, and money going to rebuild the national infrastructure, with some tax cuts for the middle class.


The Democrats are framing their plan as a way to stimulate the economy and create jobs. The president promises the bill will create 3-4 million jobs. Economist Dean Baker believes government spending will create jobs even though the new Chairman of the Republican National Committee Steele argued last week that never in all of history has the government created on job. (Than he rephrased saying all the public school teachers, all the public hospital workers, all the people working in the department of defense and every other government office dont count as government workers). Anyway Baker argues
"The whole point is that the economy has a vast amount of idle labor and capital right now. If the government doesn't spend the money no one will spend it."




The Republicans are framing the democratic plan as a giveaway to reward all the interests that backed the Democratic election win of 2008. Yet the plan offered by the republicans is nothing more than a carbon copy of Bush's failed policies. More tax cuts for the rich, and to cut taxes completely on capitol gains. We just had 8 years of Republican tax cuts how has that worked out in stimulating the economy?



It seems like thats the only economic theories they have. Times are good, lets cut taxes. Times are bad, i know, lets cut taxes. I also find it quite funny to see Republican Senator Lindsey Graham complain that republicans have been shut out of the process when A) thats what he did when bush ran things and B) Obama met more with republcans than democrats on this piece of legislation.


Others are saying that right now, what we need to completely revamp the system. That our fundamentals are broken. We buy more from the world than we sell. Our Federal government and our citizens survive on credit. Our banking system is highly leveraged. Our government does not print its own money it borrows it from the private federal reserve bank and pays interest. And the bottom line is we just dont make anything here anymore.


An easy way to make major changes is to attach strings to the 800 billion dollars in cash to be handed out. Fundamental changes to our country like labour laws. To stop rewarding factories that move overseas with tax brakes. To create more transparency and regulation on wall street. To deal with mortgages that people cannot pay.



How about attaching a string like, if you take stimulus package money from the governement to use to build a new road you must buy your concrete from an envirnmentally friendly company. You must not use workers who have come to this country through illegal means.


Another area in our national budget where money can be found is the defense department. Lets cut defense spending. Yes i said it. We don't really need to spend more on our defense than the whole world combined. There are officially 192 countries in the world, do we need to have 4x this amount of military bases? Do we need to allow the defense department to get away with 300 billion dollars in cost overuns every year? I heard someone argue, wont military spending cuts mean job loss? But we had an increase in military spending since 2001 that has barely been felt by our economy.


Another aspect involed in the debate has to do with the Buy America amendment. The amendment forces, in cases where its an option, companies receiving money via the economic stimulus bill to spend the money on american companies. For example if the stimulus bill gives money to a town to build a bridge the material must be american, when available. The goal is to have the stimulus money remain in the country. Lets face it, we are not try to stimulate china, if you know what i mean.



But for some odd reason their has been resistance to this amendment. On the surface one must wonder why. America needs jobs, so lets only spend the money in America, right? Well since the rise of globalization and free trade philosophy many American companies have moved their factories overseas. The reasons for this move is to save money. Labor costs less in Africa and China, and there are less regulations relating to pollution and Unions. So American firms who wish to cash in on the stimulus would be stopped by this amendment, and we all know how much pressure Corporations can apply to our elected leaders.


Even some European leaders have publicly warned the US to be careful in debating the passage of protectionist policy. Saying that the world follows the US's lead and if we begin protectionism so will the rest of the world until the global network of economic trade will grind to a halt.


David Sirota has a great point in his open left blog, where he thinks ideas of a trade war are just hypotheticals. He convincingly argues that the word protectionism has been redefined by those seeking to stop the Buy America amendment. David goes on to say that for the past 25 years protectionist practices meant tariffs, so by calling a law requiring companies to buy american protectionism, is to invoke an image in the voters mind that is not truthful. This is not a new strategy. Politicians are well versed in invoking images and ideas of the past to win support for legislation, where the ideas invoked really have nothing to do with the legistlation.


For example, a few years ago there was a push to end the estate tax, which was a tax on very wealthy estates that were handed down to children when wealthy parents passed on. The tax was created to stop the developement of dynasty's in this country that dominated Europe for centuries. So if you inherited over ten million dollars, or some very large some from your deceased parents you were taxed. Rich people didn't like this and tried to change it. But how do you convince the public to change a law that will hurt them, while helping the tiny few who are beyond wealthy. It came down to framing the debate. The word estate was changed to death, and the movement to revoke the death tax began. Now every middle class citizen felt effected by the death tax, even though it would not effect them. Very clever.


And to top it all off President Obama has come out against the Buy America bill that he campaigned on. He might have even won states based on this issue alone(according to David Sirota).



An idea floated by Sara Robinson from the ourfuture.org blog is to think big. She lists a few.

1.It would have been cheaper to buy the banks outright than continue to pump them full of money.


2. Reinstitute a stock transfer tax that would bring in a lot of revenue and also penalize sellers who buy large and sell fast, thus moving wall street back to its original intent, to fund companies while investors could earn a little, and not the high flying casino type atmoshphere of present. In fact the IRS just released a report on the top 400 wealthiest American tax returns, and 2/3 rds of their salaries came from the sale of capitol gains. And since the President and the public both believe executives are getting paid too much why not tax it?


3. Closing prisons would bring in a lot of money. Many researchers have noted that while crime is down 15 years straight to a 40 year low, we continue to build more prisons. Sara quotes a CAF Research Director:


The sacrifices we make to build these prisons are astonishing. Between 1987 and 2007, state spending on prisons increased by 40 percent (as a percent of the general fund). State spending on higher education decreased by 30 percent. We are financing our prisons by cutting our colleges.


4. And lastly, every one pays a social security tax, but it is only taxed on the first 90,000 dollars anyone makes. Sara beleives and i agree, that we should tax every day up to infinite. This would bring in huge sums of money

Paul Krugman, columnist for the new york times, also argues that 800 billion is not enough to jump start the economy. He shows that the congressional budget office sees a 2.9 trillion dollar whole in the economy over the next three years. Right now the plan of pumpin in 400 billion a year (the 800 billion dollar plan is over two years.) would be less than half the losses incured.

The Democratic senate needed a few Republicans to break ranks and vote for the stimulus for it to pass. They did get them but they had to cut some spending out of the bill and add some tax cuts. But it seems the most important parts were cut out. Like money going to states to help balance their budgets, money going to help with unemployment and healthcare for unemployed. Economist Robert Reich and Paul Krugman point out that what was cut out of the bill would have the strongest and most immediate impact on the economy. They argue that research shows that money going to unemployment and to states would have been spent immediately.

The daily beast website points out an interesting part of the internal bargaining that went on,

"Krugman lays the blame at the feet of President Obama, who talked a lot about post-partisanship while allowing conservatives to define the debate. “Mr. Obama was reduced to bargaining for the votes of those centrists. And the centrists, predictably, extracted a pound of flesh."

Another interesting note is that the US Chamber of Commerce has come out in support of the bill with Nelson ammendment.(the one that cut out a lot of state funding, healthcare for the unemployed, unemployment funding, education spending.) This is a telling sign because the US Chamber of Commerce, while it has a respectable name does the bidding of their corporate lobbiests. And the legistlation corporate American pushes for, usually does not benefit the rest of America.

Another note is that some are saying that the reason the Republicans are not voting for this stimulus is because they are postering for the 2010 congressional election. This way the bill either passes smaller than required or passes too late to have a real effect on the economy. So Republicans will have strong talking points for their 2010 congressional races by arguing "We told you the democrats could not fix things, vote for us".

To me this action, putting politics above our national interest is unamerican and just as wrong as you could get. I know the Democrats would do the same thing. We need some fundamental changes to our country.




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