As featured on p. 218 of "Bloggers on the Bus," under the name "a MyDD blogger."

Monday, January 05, 2009

They ARE Being Ideological

I know that the Obama transition has played the trial ballooon game to a degree, so I hope this is one of those times, though my sense of it is that they're actually quite serious.

President-elect Barack Obama and congressional Democrats are crafting a plan to offer about $300 billion of tax cuts to individuals and businesses, a move aimed at attracting Republican support for an economic-stimulus package and prodding companies to create jobs.

The size of the proposed tax cuts -- which would account for about 40% of a stimulus package that could reach $775 billion over two years -- is greater than many on both sides of the aisle in Congress had anticipated. It may make it easier to win over Republicans who have stressed that any initiative should rely more heavily on tax cuts rather than spending.

The largest piece of tax relief in the new plan would involve cuts for people who pay income taxes or who claim the earned-income credit, a refund designed to lessen the impact of payroll taxes on low- and moderate-income workers. This component would serve as a down payment on the "Making Work Pay" proposal Mr. Obama outlined during his election campaign, giving a credit of $500 per individual or $1,000 per family.

On the campaign trail, Mr. Obama said he would phase out a similar tax-credit proposal at around $200,000 per household, but aides said they haven't settled on an income cap for the latest proposal. This part of the plan is similar to a bipartisan initiative launched in early 2008, which sent out checks worth $131 billion.

These were, for the most part, campaign promises. It's why I remember Kevin Drum and others saying that Obama had not successfully fought against the great Tax Revolt, even as it showed signs of running out of steam. He would insist that we was offering a tax cut for 95% of Americans and tossed out tax incentives like they were candy, even while he was talking about more progressive goals. Now, his plans would make the tax code more progressive, which is good. And this thinly sourced article leaves out some of the details. The tax credits for businesses that don't lay off workers, for example, seems good, as well as eliminating the ability for corporations who paid no federal tax to apply for the credits.

But let's be serious about this. Tax cuts are not only unsustainable at this point, they do not provide the "bang for your buck" that is needed to get us out of this economic downturn. Spending projects that create jobs are much more successful. Devoting 40% to another round of tax cuts, especially if they are like the checks handed out in 2008 which only delayed and did not stop the recession, means that those spending projects will be relatively meager compared to the scope of the problem. Hilzoy has a good piece on this, including the "bang for your buck" chart from Moody's:

Less infrsatructure spending means that an enormous opportunity is being wasted. Not only does such spending stimulate the economy better, now is the cheapest time to do it, as construction costs are at a good value, plus the current infrastructure is crumbling.

But the worst part of all of this is the fact that it appears the Obama team looks at tax cuts as a way to get Republicans on board. Here's the deal: there are only two Republicans in America, at most, that need to be "on board" with something like this, and if a new President and a Democratic Senate can't flip them, I don't know why they even try anymore. Digby thinks this may be about the Blue Dogs, but I'm not sure there are enough to be consequential. No, this looks like an example of a bias that the Obama team has had for a while, that everything has to be bipartisan and attract the support of both parties, because only then can it be legitimate. As Digby says:

But I really hope that something this important isn't being dealt away in the vain hope that "bipartisan support" will help insure success. Success will ensure success and it's far more important to properly fix the economy than change the tone in Washington, which doesn't matter a damn to the average American if he's lost his home and he's out of a job. I would guess that a majority of Republican politicians don't care about anything but making a comeback, but there are probably a handfullwho will give Obama the bipartisan cover he feels he needs without sacrificing the efficacy of the plan. There's a reason for having a real majority and it's for times like this.

Incredibly, there's a quote in the WSJ article from am Obama spokeswoman that goes: "We're working with Congress to develop a tax-cut package based on a simple principle: What will have the biggest and most immediate impact on creating private-sector jobs and strengthening the middle class? We're guided by what works, not by any ideology or special interests."

That's not true. If you were guided by "what works," you would take out the Moody's chart and go with those programs that provide the biggest and most immediate stimulus. But the holy grail of bipartisanship has been intertwined with "what works," leading us to more tax cuts (and magically, the repeal of the Bush tax cuts for the rich have vanished). And so that IS being guided by ideology. It's setting the policy at the midpoint of the Republican caucus to ensure some support from that side of the aisle. That's not only ideological, it's Republican in character.

Paul Krugman is worried about this, and when he gets worried, I get worried.

The biggest problem facing the Obama plan, however, is likely to be the demand of many politicians for proof that the benefits of the proposed public spending justify its costs — a burden of proof never imposed on proposals for tax cuts.

This is a problem with which Keynes was familiar: giving money away, he pointed out, tends to be met with fewer objections than plans for public investment “which, because they are not wholly wasteful, tend to be judged on strict ‘business’ principles.” What gets lost in such discussions is the key argument for economic stimulus — namely, that under current conditions, a surge in public spending would employ Americans who would otherwise be unemployed and money that would otherwise be sitting idle, and put both to work producing something useful.

All of this leaves me concerned about the prospects for the Obama plan. I’m sure that Congress will pass a stimulus plan, but I worry that the plan may be delayed and/or downsized. And Mr. Obama is right: We really do need swift, bold action.

Here’s my nightmare scenario: It takes Congress months to pass a stimulus plan, and the legislation that actually emerges is too cautious. As a result, the economy plunges for most of 2009, and when the plan finally starts to kick in, it’s only enough to slow the descent, not stop it. Meanwhile, deflation is setting in, while businesses and consumers start to base their spending plans on the expectation of a permanently depressed economy — well, you can see where this is going.

And that's BEFORE the tax cuts crowded out the necessary fiscal stimulus.

We're not going to see Obama walk into the Oval Office and sign this bill, so there's some time to bring this around to the right direction. And again, I hope this is just a trial balloon. But that notion of the need for bipartisanship, necessarily setting the bill to the middle of the Republican caucus, is very concerning, not just for this bill but for the future. The reason we have seen an explosion of citizenship in the past year, as this TAP article argues, is actually because of partisanship, because both sides made an argument, because people were excited to line up with either alternative, and because they were enabled through new technologies to break down what were seen as barriers to entry. It was partisanship, however, that spurred the citizenship.

The rebirth of civic participation this year is not a product of experiments in deliberative democracy or a new interest in league bowling. Rather, it is based on party politics, coupled with and accelerated by new opportunities provided by the Internet. Skocpol's claim that "conflict and competition have always been the mother's milk of American democracy" tells part of the story. Just as social-movement theorists might have predicted, the major innovations came from outsiders, like members of, who wanted to challenge the system. At the time when it led opposition to the Iraq War, MoveOn represented a point of view that had little support among political elites, which meant it wouldn't have been able to use conventional tools of interest-group politics even if it had wanted to. Instead, it turned to the Internet and created a new model of mass mobilization.

Unlike the mass-membership national organizations that Skocpol described, which asked for a single act from each member -- a donation -- MoveOn engaged its members through a never-ending flow of transactions -- petitions, letters to Congress, polls, contests. In his book The Argument, Matt Bai writes that MoveOn's members were typically ordinary suburbanites who have been "isolated for too long, entirely disconnected from each other and despondent over the rise of Republican extremism." Thus, MoveOn built exactly the kind of dense local networks Putnam dreamed of and connected them to national debates as Skocpol hoped [...]

Evidence suggests that people who are strongly engaged in politics and hence likely to volunteer for campaigns are strongly partisan and tightly clumped around the ideological poles (they are strongly liberal or strongly conservative). If this is right, online activists are unlikely to follow Obama if he moves toward a post-ideological politics of citizenship and may even use Obama's own machine to organize against him (as they did within when Obama announced his support for controversial wiretapping legislation). By rebuilding the Democratic Party around a model that is friendlier to decentralized online participation, Obama is both making it easier for Democratic activists to organize in protest against overly "moderate" decisions, and forcing Republicans to adopt similar organizing techniques in order to win elections.

That's just a sample, I invite you to read the whole thing.

If the debate in Washington devolves into one side vowing bipartisan love fests while the other side plays the same partisan game, those civic bonds will break down, or at least to the extent that they are tied to Obama. Politics draws its breath from the conflict of ideas in the public square. Those who have been energized over the past couple years will not take kindly to an Administration that calibrates itself at the midpoint of the opposing party to ensure wide support. Even Bill Clinton, who was supposed to be the master triangulator, put out a tax plan that did not receive a single Republican vote. Somehow he, and the economy, survived.

What's most dangerous about this is the effort to corral 75-80% support just for the sake of doing so. Not only is it unlikely, it will end up really eroding Obama's ability to draw on popular support to govern.

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