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Think Progress

January 29, 2009

by Faiz Shakir, Amanda Terkel, Satyam Khanna, Matt Corley, Benjamin Armbruster, Ali Frick, and Ryan Powers

ECONOMY

The Return To Bushonomics

Yesterday, in a 244-to-188 vote, the House approved an $819 billion economic recovery plan written by House Democrats and supported by President Obama. Despite Obama's aggressive outreach efforts, the entire Republican caucus, along with 11 Democrats, voted against the plan. Afraid of crossing Obama's high approval ratings, conservatives are claiming that they are enthusiastic to work with him. "We've made it clear that we will continue to work with the president to develop a plan that will work," said House Minority Leader John Boehner (R-OH), who led his caucus in opposition to Obama's plan. "We just don't think it's going to work." Instead, Boehner and his colleagues pushed for a return to Bushonomics. "We have said let's do tax cuts, let's let the American people make the decisions on how they'll spend the money," said Rep. Spencer Bachus (R-AL), on CNBC earlier this week."That will stimulate the economy more than bringing all that money to Washington and then distributing it out in all sorts of government programs." The alternative proposed by House Republicans yesterday, which was defeated 266-170, was composed almost entirely of tax cuts. "These are the same people who told us the Bush tax cuts were going to lead to nirvana," said Rep. Earl Blumenauer (D-OR) in response to the conservative focus on tax cuts. On MSNBC yesterday, one of the most prominent proponents of the tax-cut-only approach, Rep. Mike Pence (R-IN), complained that the Democrats' recovery plan would take "America in a new direction." Though conservatives might be happy to be free from the "burden" of President Bush, they still seem to be longing for his failed economic policies.

SAME OLD ARGUMENTS: In 2001 and 2003, Bush pushed massive tax cuts through Congress, claiming that they were "vital" to boosting the economy and creating jobs. Though Bush initially sold his 2001 tax cut by insisting "that the federal government was running an excessive budget surplus," he quickly changed his argument as the economy worsened, claiming they would be "a form of demand-side economic stimulus." "The economy has slowed down, in which case we need to accelerate tax cuts," Bush said in a March 2001 radio address. "You see, tax relief will put money in people's pockets, which will help give the economy a second wind." "By ensuring that Americans have more to spend, to save and to invest, this legislation is adding fuel to an economic recovery," announced Bush in 2003, as he signed his tax cut legislation. "We have taken aggressive action to strengthen the foundation of our economy so that every American who wants to work will be able to find a job."

BUSH'S TAX CUTS DIDN'T WORK: Before he left office this past month, Bush told he U.S. Hispanic Chamber of Commerce that "when people take a look back at this moment in our economic history, they'll recognize tax cuts work." But the fact is that they didn't. As Center for American Progress Senior Fellows Christian Weller and John Halpin noted in 2006, the outcome of the 2001 tax cuts was "the weakest employment growth in decades." The 2003 tax cuts didn't fare much better, resulting in job creation that was "well below historical averages." When Bush's White House proposed the 2003 cuts, they promised that it would add 5.5 million new jobs between June 2003 and the end of 2004. But "by the end of 2004, there were only 2.6 million more jobs than in June 2003." As Paul Krugman has pointed out, the belief that Bush's tax cuts successfully stimulated the economy is a form of mythology. CAP's Michael Ettlinger and John Irons wrote in September, "Economic growth as measured by real U.S. gross domestic product was stronger following the tax increases of 1993 than in the two supply-side eras" that followed Reagan's 1981 tax cuts and Bush's 2001 tax cuts. Indeed, employment growth was much stronger post-1993 than post-2001. The average annual employment growth was 2.5 percent after 1993 and just 0.6 percent after 2001. Unfortunately, the supply-side myth that tax cuts cure all still lives on today, as conservatives complain about progressive approaches to fixing the mess left by Bush.

TAX CUTS ARE INEFFECTIVE STIMULUS: The underlying folly of the conservative push for an all-tax cuts approach is the simple fact that tax cuts are ineffective stimulus. Mark Zandi, a former adviser to Sen. John McCain's (R-AZ) presidential campaign and the chief economist of Moody’s Economy.com, has argued for months that the "fiscal bang for the buck" of tax cuts is significantly inferior to spending increases. According to Zandi's research, a corporate tax cut delivers $0.30 in real GDP growth for every $1 invested. In comparison, infrastructure spending delivers $1.59 in GDP for every $1 spent. Zandi isn't alone in this belief: the Congressional Budget Office "deemed last year that corporate tax cuts are 'not a particularly cost-effective method of stimulating business spending.'" Despite these economic facts, conservatives like Sen. John Ensign (R-NV) continue promoting corporate tax cuts as the solution. "If we could lower the corporate tax rate, that would be one of the best things that we could do to make American business more competitive in the world and actually help stimulate the economy," Ensign claimed this week.

UNDER THE RADAR

MEDIA -- GOP LAWMAKERS OUTNUMBER DEMS 2 TO 1 IN STIMULUS DEBATE ON CABLE NEWS: Media Matters has documented that during the Bush administration, the media consistently allowed conservatives to dominate their shows, booking them as guests far more often than progressives. The rationale was that Republicans were "in power." It appears that old habits die hard. Even though President Obama and his team are in control of the executive branch and Democrats are in the majority in Congress, the cable networks are still turning more often to Republicans and allowing them to set the agenda on major issues. This is seen most recently on the debate over the recovery package. Last Sunday, conservatives began an all-out assault on President Obama's recovery plan. Despite Obama's efforts at good faith outreach, congressional conservatives have continued to attack the stimulus plan with a series of false and disingenuous arguments, and the media have been aiding their efforts. But in a new analysis, The Progress Report found that the five cable news networks -- CNN, MSNBC, Fox News, Fox Business and CNBC -- have hosted more Republican lawmakers to discuss the plan than Democrats by a 2 to 1 ratio this week. In total, from 6 AM on Monday to 4 PM on Wednesday, the networks hosted Republican lawmakers 51 times and Democratic lawmakers only 24 times. Moreover, the cable networks, the Sunday shows and the network newscasts promoted a controversial CBO non-report 81 times before the actual CBO analysis of the stimulus plan was released.  

IRAQ -- IRAQI GOVERNMENT DENIES BLACKWATER'S REQUEST FOR NEW LICENSE:
In one of its  "boldest moves" to date, the Iraqi government yesterday denied a new license for the notorious private contracting firm Blackwater Worldwide. Blackwater gained notoriety in Sept. 2007 after a shooting involving several Blackwater guards that left 17 Iraqis dead. In fact, the denial of the operating license for the security firm was a direct response to the shootout. Ministry spokesman Maj. Gen. Abdul Karim Khalaf said that "the ministry denied the request mainly because of a September 2007 shooting incident," CNN reported today. Since Sept. 2007, the firm "became widely despised" in Iraq. The Iraqi ministry, for example, revoked Blackwater's license following the shootings "and threatened to expel the company's employees." Nevertheless, U.S. officials -- under President Bush -- "ignored the order and renewed the company's contract the following April," notes the Washington Post. Iraqi government officials said that Blackwater "must leave the country as soon as a joint Iraqi-U.S. committee finishes drawing up guidelines for private contractors" under the new Status of Forces Agreement.

ECONOMY -- CIVIL ENGINEERS GIVE 'D' GRADE TO U.S. INFRASTRUCTURE: One of the key components of any economic recovery package needs to be an investment in infrastructure. As Rep. Peter DeFazio (D-OR) said last week, "We want a recovery that's solid and based in investment and productivity, and that points us at building things that will serve us decades to come." Underscoring how desperately needed infrastructure investment is, the American Society for Civil Engineers (ASCE) released a report today in which it "assigned an overall D grade to the nation's infrastructure and estimated that it would take a $2.2 trillion investment...over the next five years to bring it into a state of good repair." The nation's roads, levees, and water infrastructure all got a "D-." Among the report's findings were that Americans spend 4.2 billion hours stuck in traffic a year at a cost of $78.2 billion, most of the nation's levees are older than their designed lifespan and privately owned, with repair costs put at $100 billion, and the nation's water infrastructure loses an estimated seven billion gallons of clean drinking water every day, while aging sewage systems send billions of gallons of untreated wastewater into waterways each year. The ASCE also found that more than 25 percent of the nation's bridges "are structurally deficient or functionally obsolete." CleanTech has put together a map showing the extent of the bridge problem; each green dot signifies a bridge that is "structurally deficient." This parade of bad news illustrates just how necessary infrastructure investment is, economic woes aside. But the bonus is that these investments provide significant fiscal stimulus "bang for the buck," with a return of $1.59 for every $1 spent.


THINK FAST

New data from the Labor Department show that "the number of people receiving unemployment benefits has reached an all-time high." For the week ending Jan. 17, the figure hit 4.78 million, the highest since the records began in 1967. The AP notes that the results "were worse than analysts expected."

Unions across the U.S. grew by 428,000 members in 2008, the "largest amount in a quarter-century," the Bureau of Labor Statistics (BLS) reported yesterday. BLS said that "most of the new members were government employees and that the percentage of workers in unions rose to 12.4 percent of the overall work force last year, up from 12.1 percent in 2007."

A report by the New York State comptroller revealed that Wall Street employees reaped an estimated $18.4 billion in bonuses for the year, "the sixth-largest haul on record." Despite billions lost in revenue this year, "Wall Street workers still took home about as much as they did in 2004, when the Dow Jones industrial average was flying above 10,000, on its way to a record high."

The Senate is expected to approve SCHIP legislation today, "paving the way for President Obama to claim an early legislative victory." The bill makes an additional 4 million eligible for discounted care but leaves Obama about 5 million children short of his promise to insure all kids.

"Officials of Barack Obama's administration have drafted a letter to Iran from the president aimed at unfreezing US-Iranian relations and opening the way for face-to-face talks," according to the Guardian. The letter, addressed directly to the Iranian people, assures the Iranian government that the U.S. is not seeking to overthrow it but merely a change in its behavior.

Defense officials say suicide among U.S. soldiers increased again last year, hitting a nearly three-decade high. The Army told the AP "that at least 128 soldiers killed themselves last year” and “the final count will likely be considerably higher." Officials say "troops are under unprecedented stress because of repeated and long tours of duty due to the simultaneous wars in Iraq and Afghanistan."

Former vice president Al Gore urged lawmakers on Capitol Hill yesterday "to adopt a binding carbon cap and push for a new international climate pact by the end of this year in order to avert catastrophic global warming." Gore noted "that even if the world halted greenhouse gas emissions now, the world could experience a temperature rise of 2.5 to 7.5 degrees Fahrenheit by 2100."

The U.S. Postal Service may be forced to cut a day of service due to "massive deficits," the postmaster general told Congress yesterday, requesting that lawmakers lift the requirement that mail be delivered six days a week.

And finally: Jessica Alba schools Bill O’Reilly. The actress recently told a Fox reporter that O'Reilly was "kind of an a-hole." O'Reilly  then "retaliated by calling her a 'pinhead' for telling a reporter to 'be Sweden about it,' assuming she meant Switzerland." However, it seems that Alba's history knowledge is better than O’Reilly"s. "Last week, Mr. Bill O’Reilly and some really classy sites (i.e.TMZ) insinuated I was dumb by claiming Sweden was a neutral country," Alba blogged, adding, “[S]eriously people…it’s so sad to me that you think the only neutral country during WWII was Switzerland.



GOOD NEWS

"Iceland's next leader will be an openly gay former flight attendant who parlayed her experience as a union organizer into a decades-long political career," Johanna Sigurdardottir.

BLOG WATCH

THINK PROGRESS: Department of Homeland Security publishes 315-page book honoring former Homeland Security secretary Michael Chertoff's "select speeches."

WONK ROOM: Rep. David Obey (D-WI): "We have an obligation to salvage as many jobs as we can."

YGLESIAS: The trouble with lobbyist-bashing.

SHAKESVILLE: MSNBC's Chris Matthew's attack on family planning continues.

STATE WATCH

CALIFORNIA: Court rules that school can expel lesbian students.

ARKANSAS: "A resolution congratulating President Obama on his election was killed in the House."

SOUTH CAROLINA: State House passes legislation to bypass Gov. Mark Sanford (R), who opposes the federal stimulus, "and seek billions in federal money for roads, schools and Medicaid funds."

DAILY GRILL

"I don’t believe Rush Limbaugh has a racist bone in his body."
-- Rep. Mike Pence (R-IN), 1/28/09

VERSUS

"You can't criticize the little black man-child. You just can't do it, 'cause it's just not right. It's not fair. He’s such a victim."
-- Limbaugh, 8/20/08, on Obama


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