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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2766

Washington Commentary: US Spending Billions To Jump-Start Stalled Economy

Ernest Corea, former Sri Lankan Ambassador to the US

Washington DC, 18 February, (Asiantribune.com): President Obama briefly escaped the fierce partisanship of Washington today, taking his road-show to Colorado where he signed the American Recovery and Reinvestment Bill into law at the Denver Museum of Nature and Science. Signing the new legislation among "we the people" in Denver launches a campaign in which Obama will take his programs direct to the public, seeking to leverage their backing into votes in the Senate and House of Representatives for the many new Bills that he will submit or endorse. Currently, his reputation among voters is soaring.President Barack Obama signs the $787 billion economic stimulus bill, as Vice President Joe Biden looks on at left, at the Denver Museum of Nature and Science in Denver on Tuesday, Feb. 17, 2009President Barack Obama signs the $787 billion economic stimulus bill, as Vice President Joe Biden looks on at left, at the Denver Museum of Nature and Science in Denver on Tuesday, Feb. 17, 2009

A recent public opinion poll conducted by the highly reliable Pew Research Center established his popularity rating at 64 percent, higher than that of George W. Bush (53) or Bill Clinton (56) at similar points in their presidencies. Seventy seven percent of those polled consider Obama a strong leader, 76 percent say he is a good communicator, and a whopping 81 percent believe that he "cares about people like me." Not surprisingly, he energizes audiences as few current political leaders do, and people ("just plain folks") have always energized him. Describing the impact of a town hall meeting on him early in his political career, he wrote (in "The Audacity of Hope"): "My time with them is like a dip in a cool stream. I feel cleansed afterward, glad for the work I have chosen." So Denver it had to be, with many more such engagements to come.

The legislation that he signed into law in Denver, popularly known as the "stimulus package" (STIM), rather than by its formal title, allows the Obama government to spend US$787 billion (billion) in efforts to jump start the stalled American economy. This is the highest amount designated for economic recovery in the US, and it was matched by the length of the draft Bill itself – 1100 pages. A Republican Congressman complained about the length, insisted that nobody had read the Bill, and dropped it on the floor of the House, in a petulant attempt at theatrics. No matter. The legislation was adopted by a majority vote of 246 to 183 in the House, and 60 to 38 in the Senate. Three Republican Senators voted with the Democrats, while Republicans in the House remained solid in opposition. For Obama, nevertheless, the adoption of this signature piece of legislation in less than a month from his inauguration represents a major initial success. The hard part is to ensure that STIM actually works. Some experts, notably Nobel laureate Paul Krugman, consider the amount in the Bill devoted to simulative spending too small. Others consider the total amount involved excessive and unlikely to produce the desired results.

Several mishaps and mis-steps preceded passage of the recovery Bill (now an Act), and even Obama's supporters had to ask themselves whether the team that proved so close to perfect during the election campaign was less skilled and practiced at governing. Had they turned into a gang that cannot shoot straight? Nominees for Cabinet positions were confronted with past or continuing blunders, and withdrew from consideration for various reasons including non-payment of taxes, problems that should have been identified before formal nominations were made. Although Obama took personal responsibility for some of the mis-steps ("I screwed up," he said), it was clear that the "vetting" process of nominees for high posts was less than efficient. Ironically, Timothy Geithner appeared to have been baffled by the US tax code when he was a whiz kid working at the International Monetary Fund, but now, as Treasury Secretary (finance minister), he has responsibility for the Internal Revenue Service which implements the tax code. On top of the vetting mishaps, Obama's efforts to seek a bipartisan approach to recovery and reinvestment had minimal results. Moreover, the process took up so much of his time that he was diverted from the task of keeping the public informed and supportive. He had to scramble back into recapturing the initiative.

The recovery legislation, while drafted in the House and Senate, reflects Obama's thinking, and embodies the views of close advisers who outlined what they considered the most appropriate means of turning his policies into action. The Obama policies – now, the nation's policies – are a response to the fact that millions of Americans are hurting as never before. The unemployment rate now at 7.6 percent could reach 10 percent before the trend is reversed. Almost 600,000 working people lost their jobs last month. Chains stores are contracting. Small businesses are closing. Numerous homes have been lost to foreclosure. Elders in the workforce have had to postpone retirement because their hard-earned savings have lost value. Some Americans are so hard pressed that they are either postponing necessary visits to a doctor, or taking medication in less than the prescribed dosage so as to delay the inevitable next visit to and payment at the pharmacy. At the lower end of the economic pyramid, people are being forced to decide between buying food or paying their rent. Requests for assistance from charitable institutions are increasing, and these institutions are sorely pressed because donations are decreasing.

Against this background, the reinvestment program has four broad goals: to provide immediate relief to Americans hardest hit by the recession, to reinvest in areas of economic activity that will save jobs or create new ones, to lay the groundwork for future development that will stabilize and strengthen a sustainable economy, and to reintroduce a regulatory regime that prevents future institutional wreckage. The larger share of the package (US$575 billion) will be used on direct spending, while US$212 billion will be absorbed by tax cuts. Extended unemployment insurance, health care payments, agriculture, construction, education, energy, the environment, transportation, and science and technology, are some of the sectors that will be supported by the new spending. First payments will cover "shovel ready" projects. For instance, transport projects that are ready for commencement in 43 states but are held up for lack of funding could be eligible for support. Also included in the legislation is a provision that restricts unconscionably large payments to fat cats in the private sector when the institutions they work for accept transfusions of public funding. The public has been outraged over indiscriminate spending by such institutions, and a bunch of squirming CEOs summoned for hearings before the House of Representatives Financial Services Committee was asked by committee chair Congressman Barney Frank: "What will you NOT do if you don't get these bonuses? Will you leave early on Wednesdays?"

With conditions as stark as they are, inaction is folly. Disagreements on policy are always possible, indeed, desirable, but obstructionism in the face of a rising tide of poverty and feelings of hopelessness is irresponsible. Why, then, did the Republicans stand opposed to Obama's efforts to turn the tide around, rather than give his policies a chance and seek amendments and adjustments if they were seen to be failing? The charitable explanation is that philosophical differences between interventionist Democrats and market-fundamentalist Republicans cannot be reconciled. Ronald Reagan defined the market-fundamentalist position when he said that the "most terrifying words in the English language" are "I'm from the government and I'm here to help." Reagan also said that the government's approach to the economy could be stated as follows: "If it moves, tax it; if it keeps moving, regulate; if it stops moving, subsidize it." Perhaps today's politicians who pay homage to such views cannot possibly accept the notion of government intervention to rescue the victims of a melting economy. Funnily enough, in adopting that position, they reject a principle enunciated by Abraham Lincoln, the greatest American president ever, a Republican, who said: "The legitimate object of government is to do for the people what they can not, by individual effort, do at all, or do so well, by themselves."

A more hardnosed explanation is that obstructionists have no real interest in political philosophy, only in political survival. Clobbered at the last election, they need to hold their base if they are to rebuild for the future, and their base happens to be at the far right end of the political spectrum. So Obama and the Democrats can amend draft legislation in any and every way possible to accommodate Republican views, and there could still be no bipartisanship. An extension of this assessment is that among some sections of the Republican establishment there is a determination to do all within their power to make Obama fail. Is this personal? Who can tell? The fact is that statistics show the Democrats today in a strong position at the level of presidential elections. A successful Obama presidency could preserve or enhance this strength and keep Republicans out of the White House for many years to come. No political party relishes the prospect of prolonged obscurity, and more obstructionism should therefore be anticipated. Obama himself has said: "You know, I am an eternal optimist. That doesn't mean I'm a sap."

Meanwhile, the caravan moves on. The Recovery and Reinvestment Act is only a beginning. Priorities that will follow close behind, Obama told a group of media columnists are: "Number one is to get the right structure for the successor to TARP (the Troubled Assets Relief Program, initiated by the Bush Administration to support troubled financial institutions); spending the $300-some billion that has already been authorized as wisely as possible, and injecting transparency and trust into the financial system. Having a housing program that provides relief to people who are at risk of losing their homes. Financial regulations that ensure that the crisis doesn't happen again. An innovative and aggressive push for health care reform that focuses not just on access but also on costs, and trying to just provide relief to working families. And a push for an energy policy that puts us on a path to sustainability."

Tomorrow (Wednesday) Obama is expected to announce measures to hold housing markets from further collapse, and save householders from the tragic insecurity of foreclosures. A new panel will be named to help the auto industry streamline itself and its operations. The Treasury Secretary will provide specifics of how he plans to build on the stabilization framework he outlined some days ago. The administration as a whole will gear up, together with institutions in the states, to use the money now available for productive, job creating, spending. The sooner the better, say the experts. There are some exciting and tough days ahead for the new administration, as it reaches for the future with hope while the past continues to snap at its heels.

- Asian Tribune -

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