Economy -- 'Are These Folks Serious?'

February 6, 2009

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

ECONOMY

'Are These Folks Serious?'

Yesterday, President Obama strongly condemned members of both political parties for characterizing the economic recovery package before Congress as a "pork" spending plan for pet projects: "[W]hen you hear these attacks deriding something of such obvious importance as this, you have to ask yourself, 'Are these folks serious?'" Despite the loss of 600,000 jobs last month alone, debate over the American Recovery and Reinvestment Act of 2009 has been reduced to petty bickering over extremely small portions of the overall recovery plan. Marching to Rush Limbaugh's drumbeat, conservatives spent all week on cable news caricaturing tiny portions of the bill -- including provisions that they had previously supported -- in order to score political points and embarrass the Obama administration. But these antics have distracted Washington from "the reality that we may well be falling into an economic abyss." Today, The Progress Report takes a step back and looks at the key principles that should guide the construction of any compromise on the economic recovery package.

IT SHOULD BE IMMEDIATE: In recent days, congressional conservatives have expressed a desire to slow down deliberation over the economic recovery plan. But as National Economic Council Director Larry Summers reiterated yesterday, "We do not have time to wait." He called comprehensive and immediate economic recovery legislation "imperative for our economic security." Evidence of the need for immediate action is clear. Today, the Labor Department reported that the U.S. economy lost 598,000 jobs in January alone, raising the unemployment rate to 7.6 percent. Yesterday, the Labor Department reported that 626,000 Americans applied for unemployment benefits for the first time last week, a 26-year high. These grim reports add to the 2.6 million jobs lost in 2008, 59 percent of which occurred in the last quarter of 2008 alone. And the rate at which job losses are increasing is reaching historic highs. Indeed, in the first 12 months of the current recession, unemployment rose by 2.6 percent -- "the fastest such increase since the recession that started in January 1970." The effects of these increasing job losses can be seen rippling through the economy in the form of increasing credit card default rates, record decreases in the value of homes, and near record high levels of household debt.

IT SHOULD BE BIG: Last weekend, Sen. Jim DeMint (R-SC) explained his opposition to the current recovery proposal by complaining, "[T]his is the largest spending bill in history." Congressional Republicans made similar complaints again and again throughout this week, but such rhetoric reveals an obvious ignorance of economic policy. Indeed, the size of the spending bill is not arbitrary, but rather is based on the current and expected gap between the nation's economic capacity and its actual economic output. As the Center for American Progress explained, "We are now in a situation where the private sector is unable -- or unwilling -- to use all of the available productive capacity: able people aren't working, machines sit idle, and cubicles stand empty." As a result, there are "millions of families who are cutting back due to layoffs, fear of layoffs, lower home values, or reduced retirement savings," and "demand for goods and services in the entire economy falls." As demand falls, companies are forced to cut back production and employment further, causing additional decreases in demand. Nobel Laureate Paul Krugman explains that economists generally find that every "excess point" of unemployment above the rate that is expected in a healthy economy leads to 2 percent gap between the nation's actual economic output and its potential economic output. To prevent this gap from increasing indefinitely, the government must step in to temporarily increase demand and close the nation's economic output gap. Because unemployment is so high and demand continues to spiral downward, the current package before Congress -- if anything -- is too small.

IT SHOULD LAY THE FOUNDATION FOR LONG-TERM GROWTH: Conservative policymakers and uninformed members of the traditional media suggest that the current economic recovery package is not "stimulative" because it includes spending on public welfare programs that have both short-term and long-term benefits. They argue that relying on tax cuts would provide fast-acting and long-lasting stimulative effects. In reality, tax cuts are less stimulative than public spending. Further, cutting taxes -- unlike spending on social programs -- permanently increases the budget deficit. Instead, and as the current recovery package is slated to do, investment in America's future energy, health care, and education infrastructure puts Americans to work now and yields economic, environmental, and social benefits for years to come. While conservatives characterize the effects of such spending as being "too slow," the current proposal is designed to be fast-acting, but also maintain large (and needed) stimulative benefits through 2010. Unfortunately, a group of moderate senators, led by Sens. Ben Nelson (D-NE) and Susan Collins (R-ME), aim to cut at least $80 billion from the the recovery package with large cuts to science, agriculture, energy, and education.

CONGRESS -- KENNEDY, BAUCUS SAY THEY ARE COMMITTED TO HEALTH CARE REFORM IN 2009: Sen. Ted Kennedy (D-MA), chair of Health, Education, Labor, and Pensions Committee, and Sen. Max Baucus (D-MT), chair of the Finance Committee, sent a joint letter yesterday to President Obama reaffirming their commitment to passing health care reform "this year." "We have a moral duty to ensure that every American can get quality health care. ... Incremental efforts will no longer suffice and we cannot afford to wait any longer," the chairmen wrote. After Tom Daschle's withdrawal as nominee for Secretary of Health and Human Services, "a senior Obama administration official reminded skeptics, 'The most passionate advocate for health reform in the administration is staying put -- right in the Oval Office.'" The chairmen noted that the momentum for reform is already in place. Calling the joint letter a "big deal," The American Prospect's Ezra Klein notes that health care reform in 1994 was in part thwarted because then-Finance Committee chair Patrick Moynihan was not on board. "Even Tom Daschle, then a member of the Senate, couldn't overcome that bit of toxicity," Klein writes. In 2009, Democratic leaders have already begun to act by adding provisions for $100 billion in new spending on health care reform and modernization into the economic recovery package.

RADICAL RIGHT -- LIMBAUGH TO BE FEATURED AS KEY SPEAKER AT CONSERVATIVE CONFERENCE: Yesterday, the Conservative Political Action Conference (CPAC) sent out a "Special Announcement" to supporters stating, "I am pleased to announce that RUSH LIMBAUGH will be the closing speaker at CPAC 2009!" The Progress Report received an e-mail from CPAC's Joseph Logue, who said that this year will be Limbaugh's first appearance at CPAC. He was invited because "he is an important voice in the conservative movement, and he is someone whom the attendees have requested in the past." Limbaugh's prominent role at CPAC underscores his rising presence within the conservative movement, despite his often hateful, racist, and bigoted political commentary. His influence in getting the House GOP to vote against the economic recovery legislation, for example, was undeniable. Other invited speakers to CPAC who didn't get the coveted closing speaker slot include Lousiana Gov. Bobby Jindal, former Massachusetts governor Mitt Romney, former House Speaker Newt Gingrich, and Alaska Gov. Sarah Palin.

NATIONAL SECURITY -- PANETTA PROMISES TO END DISPUTED BUSH-ERA TACTICS AS CIA DIRECTOR: At his confirmation hearing before the Senate Intelligence Committee yesterday, Leon Panetta, former chief of staff to President Clinton and President Obama's nominee for CIA director, "promised a 'new chapter' for the embattled spy agency." Specifically, Panetta declared that "waterboarding is torture" and pledged that the CIA will not carry out extraordinary renditions in which terrorism suspects are transferred to "torture-friendly countries" and held indefinitely for interrogation. Panetta's testimony was a clear repudiation of the controversial tactics used under the Bush administration. Predictably, many conservatives -- most notably Vice President Cheney -- have lashed out against the Obama administration's unequivocal rejection of torture. But Panetta rejected such attacks, saying, "I think we're a stronger nation when we abide by the law and the constitution." Moreover, he expressed his desire to "repair the 'frayed relations' that the Bush administration created between the CIA and Congress."

The Treasury Department's $700 billion financial sector bailout program is shortchanging taxpayers by about $78 billion. Treasury has "received bank assets worth about $176 billion in exchange for capital purchases of $254 billion under the Troubled Asset Relief Program." Rep. Alan Grayson (D-FL) said, "These are massive handouts to favored institutions to try to make up with taxpayer money the mistakes they made with investor money."

President Obama will name the members of his Economic Recovery Advisory Board today, which will be led by former Federal Reserve chairman Paul Volcker. The panel, which is modeled after the Foreign Intelligence Advisory Board, will include businesspeople, labor experts, and academic economists. Obama adviser Austan Goolsbee will serve as staff director and chief economist for the 15-member board.

A bipartisan group of about 20 senators spent yesterday in a committee room on Capitol Hill candidly discussing "how to broker a political bailout of the economic recovery legislation." But "notably absent" from the negotiations was Sen. John McCain (R-AZ) "who has dug in against the stimulus package and on Thursday lost an effort to rewrite it on the floor."

The country's largest labor and Hispanic groups are ratcheting up the confirmation fight over Labor Secretary nominee Hilda Solis. "Enough is enough, the gloves are coming off on Friday," said one official with the AFL-CIO. ThinkProgress has already been engaging in the battle -- check out our posts here, here, and here.

"A growing number of states are running out of cash to pay unemployment benefits, a sign of how far social-welfare systems are being stretched by the swelling ranks of the jobless in the deteriorating U.S. economy," the Wall Street Journal reports. Seven states emptied their unemployment-insurance trust funds in recent months while "another 11 states are in jeopardy of depleting reserves by year's end." More

"Facing a furor in Parliament, British Foreign Secretary David Miliband all but confirmed on Thursday that the U.S. had threatened to break off intelligence sharing if details were revealed about the alleged torture of a British resident held at the Guantanamo Bay military prison." The U.S. embassy denied threatening the British, but a spokesman said that even with a new president, "I don't think the position on the confidentiality principle will change."

The New York Times writes, "With the recession on the brink of becoming the longest in the postwar era, a milestone may be at hand: Women are poised to surpass men on the nation’s payrolls, taking the majority for the first time in American history." Eighty-two percent of the job losses have hit men, although women still earn less than men in the workforce.

President Obama's stimulus plan will pump $1 billion to states to help them hire more police through the Community Orienting Police Services (COPS), a program "all but eliminated" by Bush. "In police hiring, nearly 100 percent of the money goes to creating jobs," Sen. Patrick Leahy (D-VT) said, noting that "many police departments are already reporting increases in crime and cuts in their budgets and their forces."

And finally: The Washington Post reports, "With permission from the Secret Service, the National Park Service has been in hot pursuit of a pack of raccoons spotted roaming the manicured grounds near the White House." These critters are most likely just "passing through" and "looking for food," according to the Humane Society's John Hadidian. President Calvin Coolidge, however, had a pet raccoon named Rebecca, who "often sat on his shoulder or was cuddled by the first lady."

President Obama on Thursday gave lawmakers his "guarantee" that he will sign an executive order overturning President Bush's policy blocking embryonic stem cell research.

THINK PROGRESS: Sen. John McCain (R-AZ) claims that President Franklin Delano Roosevelt "exacerbated the Great Depression."

WONK ROOM: Glenn Beck and corporate front man: Employee Free Choice Act equals "tyrannies and socialism."

YGLESIAS: No logic to many of the proposed cuts to the economic recovery package.

THE PLANK: Joe the Plumber claims that the Club for Growth, the Cato Institute, and the Heritage Foundation are "bipartisan" and "neutral."

ALASKA: In response to climate change, federal government issues "unprecedented plan to ban U.S. commercial fishing in the Arctic Ocean."

MARYLAND: State assembly bans Facebook.

ILLINOIS: State can run out of money, but it can't file for bankruptcy.

"Under executive orders issued by Obama recently, the CIA still has authority to carry out what are known as renditions, secret abductions and transfers of prisoners to countries that cooperate with the United States."
-- LA Times, 2/1/09

VERSUS

SEN. FEINSTEIN: Will the CIA continue the practice of extraordinary rendition...?
PANETTA: No, we will not.
-- CIA Director nominee Leon Panetta, 2/5/09

Think Progress

'Are These Folks Serious?'

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