ECONOMY
Right-Wing Myths About The Stimulus

Last week, House Democrats released an $825 billion economic recovery package, which consists of $550 billion in government spending and $275 billion in tax cuts. The provisions in the plan were marked up by various congressional committees this week, with the goal of passing a full stimulus package sometime in mid-February. Though they voiced some support when President Obama initially laid out his vision for a stimulus plan, conservatives balked upon seeing the bill that emerged from the House. Minority Leader John Boehner (R-OH) made his opposition known by simply saying "Oh. My. God." Conservatives have coalesced around "alternative" stimulus proposals like one crafted by the Republican Study Committee (RSC). But in their opposition, conservatives have propagated several myths about the stimulus and its potential effect on the economy. Here are the three most prominent conservative stimulus myths, and why they amount to nothing more than hot air.

 

MYTH 1 -- SPENDING IS NOT STIMULATIVE: In response to the stimulus plan, conservatives on the House Budget Committee released a report stating that the proposal "pours taxpayers' money" into projects, "many of which may be worthy in themselves, but have little to do with 'stimulating' the economy." Harvard professor Robert Barro derided the plan as "voodoo economics," while right-wing pundit Michelle Malkin claimed that it will "at most be useless." However, an analysis by Moody’s Economy.com found that government spending results in more significant "bang for the buck." For every dollar invested in specific types of spending, the boost in real GDP is more than $1.30. The most benefit comes from extending unemployment benefits ($1.64) and increasing food stamps ($1.73), but strong returns result from infrastructure investment ($1.59) and aid to state and local governments ($1.36), as well. Furthermore, Moody's also noted, "A well-timed, targeted, and temporary stimulus could in fact cost the Treasury less in the long run, since a debilitating recession would severely undermine tax revenues and prompt more government spending for longer." Mark Zandi, chief economist at Moody's and former adviser to Sen. John McCain's (R-AZ) presidential campaign, released his analysis of the House plan on Wednesday, and concluded that it would "provide a vital boost to the flagging economy," without which full employment would not return until 2014.

 

MYTH 2 -- STIMULUS WON'T CREATE JOBS: Last week, Boehner claimed, "When it comes to slow-moving government spending programs, it's clear that it doesn't create the jobs or preserve the jobs that need to happen." Former Massachusetts governor Mitt Romney said that "even if consumption were to bump up, it would not lead businesses to expand and to add jobs." However, as former Secretary of Labor Robert Reich explained, "The stimulus plan will create jobs repairing and upgrading the nation's roads, bridges, ports, levees, water and sewage system, public-transit systems, electricity grid, and schools." It stands to reason that investing in infrastructure is going to lead to job creation, as someone needs to be hired to actually complete the various projects. By investing $100 billion in clean energy infrastructure alone, the Center for American Progress (CAP) has estimated that 2 million jobs can be created in the next two years. Aid to states through bolstering Medicaid also "generates business and gets people into jobs," as a recent report by Families USA showed: "The new dollars pass from one person to another in successive rounds of spending, generating additional business activity, jobs, and wages that would not otherwise be produced." Council of Economic Advisers Chairman Christina Romer and Vice President Biden aide Jared Bernstein, meanwhile -- by using the "1% of GDP equals 1 million jobs rule of thumb" -- estimated that a stimulus plan will create or save three million jobs. According to their calculations, "30% of the jobs created will be in construction and manufacturing," while "the other two significant sectors that are disproportionately represented in job creation are retail trade and leisure and hospitality."

MYTH 3 -- PERMANENT TAX CUTS ARE THE BEST STIMULUS: The only stimulus idea that conservatives are wholeheartedly supporting is permanent tax cuts. At a hearing before the RSC, Romney, former eBay CEO Meg Whitman, and Americans for Tax Reform President Grover Norquist all claimed that the stimulus should include permanent corporate tax cuts, while Barro claimed that fully "eliminating the federal corporate income tax would be brilliant." But CAP'sWill Straw explained, "The track record for such steps is poor in general, but they are particularly ill-suited for a recessionary period. After all, the reason that businesses and individuals are not investing at the moment has little to do with the taxes they may pay in the future and everything to do with a fear of losing money because there is no demand in the economy." The Heritage Foundation, meanwhile, proposed an "alternative" to the House stimulus: "permanent tax reductions such as the ones Congress passed in 2003." "Tax cuts like those have a proven track record of encouraging economic growth," wrote Heritage. But this is simply the same supply-side approach adopted by the Bush administration, and the evidence that it helps economic growth is "weak at best." An analysis by the Center for American Progress Action Fund shows that every $10 billion spent on this kind of cut would create or save just 10,000 jobs, "versus nearly 60,000 jobs which could be created or saved by extending unemployment benefits and food stamps or investing directly in energy, transportation and education infrastructure." Furthermore, permanent measures will exacerbate the long-term debt much more than temporary measures will.

Under the Radar

ETHICS -- CONSERVATIVES START WORK ON NEW K STREET PROJECT: Yesterday, President Obama announced strict new lobbying rules that "could usher in an era of openness in federal government." For example, administration officials are banned from accepting gifts from lobbyists and will have to wait two years before lobbying the government when out of office. Democracy 21 President Fred Wertheimer said that the restrictions constitute "a major step in setting a new tone and attitude for Washington." Congress, however, isn't so ready to move away from the old Washington. On Monday, Senate Majority Leader Harry Reid (D-NV) invited top lobbyists to join him for an inaugural brunch where he pledged that he will still do plenty of business with them. Roll Call also reported yesterday that "Senate Republicans have tasked Conference Vice Chairman John Thune (S.D.) with beefing up the party's outreach to K Street, business groups and grass-roots organizations, hoping to maintain critical alliances built up over eight years of White House control." The previous version of the K Street Project, established by former House Majority Leader Tom DeLay and his cronies, set up a pay-to-play machine that self-admittedly operated by the old adage of "punish your enemies and reward your friends." House Republicans already have a running start on their Senate colleagues. Lobbyists "willing to pay a $25,000 fee will mingle with House Republicans at their annual winter retreat" next week in Hot Springs, VA. 

ADMINISTRATION -- OBAMA TO OVERTURN 'GLOBAL GAG RULE': Today, President Obama will overturn the "Global Gag Rule," also known as the "Mexico City Policy." This policy stipulates that "no U.S. government funding for family planning services can be given to clinics or groups that offer abortion services or counseling in other countries even if the funds for those activities come from non-U.S. government sources." President Reagan first instituted this policy in 1984; it was later overturned by President Bill Clinton, only to be reinstated by President George W. Bush. Obama's reversal of Bush's order -- which U.N. special envoy for HIV/AIDS in Africa said was "doing damage to Africa" -- could help slow the transmission of HIV/AIDS in the region. Unlike Presidents Clinton and Bush, however, Obama chose not to use yesterday's anniversary of Roe v. Wade to take this expected course of action, apparently to avoid looking overly combative. Explaining his support for pro-choice policies yesterday, Obama said that Roe v. Wade "not only protects women's health and reproductive freedom, but stands for a broader principle: that government should not intrude on our most private family matters."

EDUCATION -- 'STRENGTHS AND WEAKNESSES' OF EVOLUTION REMOVED FROM TEXAS CURRICULUM: Yesterday, Texas's state board of education voted 8-7 against an amendment that would have maintained discussion of evolution's "strengths and weaknesses" in Texas classrooms. The phrase had been included in the state biology curriculum until a panel of teachers proposed removing it last September.  Predictably, social conservatives "lobbied heavily" against the change. Board member Ken Mercer (R) argued that removing the controversial language from the curriculum constituted persecution against Christians. But supporters of the change say that "strengths and weaknesses" is simply a slogan designed to sneak creationism into classrooms. "These weaknesses that they bring forward are decades old, and they have been refuted many, many times over," said Kevin Fisher, former president of the Science Teachers Association of Texas. "It's an attempt to bring false weaknesses into the classroom in an attempt to get students to reject evolution."

Think Fast

Today, New York Gov. David Paterson (D) will reportedly announce that he has chosen Rep. Kirsten Gillibrand (D) to fill Secretary of State Hillary Clinton's vacant Senate seat. A congresswoman from upstate New York, Gillibrand "is known for bold political moves and centrist policy positions."

Yesterday, the Senate voted 61-36 -- with all 16 female senators voting "yea" -- to pass the Lilly Ledbetter Fair Pay Act, which makes it easier for workers to fight pay discrimination. The House also passed the bill earlier this month, and it now heads back to the House for final consideration.

President Obama nominated David Kris, a former critic of Bush's warrantless wiretapping program, to lead the Justice Department's national security division. In late 2005, "Mr. Kris wrote a 23-page legal analysis that described as 'weak' and likely unsupportable some of the Bush administration's key legal arguments in justifying the program."

Former Merrill Lynch CEO John Thain spent at least $1.2 million redecorating his office, $800,000 of which was used to hire famed celebrity designer Michael Smith. Last year, the Wall Street bank received federal bailout funds.

"Troubled financial institutions and the Detroit auto makers continue to spend heavily on lobbying Congress while accepting billions of dollars in U.S. government money." However, overall spending on lobbying by auto makers fell 13 percent in 2007. More »

Responding to a report that a former Guantanamo Bay detainee has become an al Qaeda leader in Yemen, Rep. Jane Harman (D-CA) said today that the revelation "should not slow the Obama administration's determination to quickly close the facility." Harman cautioned, however, that Obama has to "proceed extremely carefully" in closing the prison.

Sen. Tom Coburn (R-OK) was named as the new ranking Republican on the Permanent Subcommittee on Investigations. "I plan on going after things hard," Coburn said. The Wall Street Journal reports, however, that President Obama has "identified the Oklahoma Republican as a conservative he can work with, which says much about the president's style and strategy."

A new study from the U.S. Geological Survey finds that the "death rates of trees in Western U.S. forests have doubled over the past two to three decades" and that "higher temperatures and water scarcity linked to climate change" are to blame.

And finally: Victims of the Purple Tunnel of Doom are banding together and demanding justice. On inauguration day, thousands of people with tickets for the purple standing area were trapped in a traffic tunnel and eventually shut out of the ceremony. More than 4,000 unhappy ticket-holders have joined the "Purple Tunnel of Doom" Facebook group, while others have uploaded videos of their experiences onto YouTube. Sen. Dianne Feinstein (D-CA), chair of the Joint Congressional Committee on Inaugural Ceremonies, is now looking for ways to make it up to these shut-out ticket-holders.

Good News

"In a research milestone, the federal government will allow the world’s first test in people of a therapy derived from human embryonic stem cells."

State Watch

MICHIGAN: Michigan gets the "dubious distinction" of being the first state have double digit unemployment in this recession.

MAINE: "New England's largest wind farm went on line Thursday."

TENNESSEE: "Nashville voters rejected a proposal to make English the mandatory language for all government business."

Blog Watch

THINK PROGRESS: Sen. James Inhofe (R-OK) declares victory over the U.N.-MoveOn-George Soros global warming conspiracy: I've prevailed.

WONK ROOM: Center for American Progress Senior Fellow Brian Katulis: Gaza crisis emblematic of President Bush's failure.

YGLESIAS: The envoy that Secretary of State Hillary Clinton didn't announce yesterday.

HARPER'S MAGAZINE: State Department staffers compare former Secretary of State Condoleezza Rice to the Wicked Witch of the West.

Daily Grill

"I checked. We have never had a president sworn into office without a Bible."
-- Fox News's Glenn Beck, 1/22/09

VERSUS

"According to his own version of his Inauguration, [John Quincy] Adams took the oath upon a volume of law.."
-- Senate inauguration history website