From the February 13, 2009 The Examiner
February 13, 2009
by Irwin Stelzer
Not all skirmishes are good predictors of the outcome of a war. But the brawl over the so-called stimulus bill, and the Obama administration’s performance in the battle to repair the financial system might be two such skirmishes.
Start with the latter. One reason even conservatives who voted for George W. Bush were not upset by his departure for Texas was the sheer incompetence of his administration. With one important, very important exception: he kept the homeland safe after 9/11.
Along comes Barack Obama. Above all, competent, witness the success of his tightly organized campaign.
But governing is different from campaigning. And the Obama machine remains in campaign mode.
So when the PR wing of the White House decided that this was the week of momentum, and that numerous campaign-style appearances by the President in Indiana, Florida and Virginia, and a nationally televised press conference would not be enough, they scheduled poor Treasury Secretary Tim Geithner for a speech to unveil his new plan to save the banks.
Problem: Geithner didn’t have a plan. Instead, he treated the nation to an attack on his predecessor, and some vague homilies. So the market tanked. And with it confidence in the administration’s competence.
Enter skirmish two. This was about more than the stimulus bill. It was about whether the president could, or cared to, rein in the congressional left of his party. He couldn’t, or at least didn’t.
Speaker Nancy Pelosi and Senate Majority Leader Harry Reid pushed through a bill that included the wish list of every liberal Democrat, about half of the items only tangentially related to stimulating the economy.
Larry Summers, the president’s super-brainy economic adviser, was reduced to defending grants for college tuition on the grounds that they would stimulate the economy by boosting the housing market.
You might ask how that could be. Why, families would not have to sell their homes to finance their kids’ education, and therefore would not add to the inventory of unsold homes.
I can’t help being reminded of the scene in “A Man For All Seasons” in which Thomas Moore, convicted on the perjured testimony of Richard Rich who was rewarded with an office in Wales, asks, “Why Richard, it profits a man nothing to lose his soul for the whole world…. But for Wales?” Or for a White House pass?
The more important implication of the Democratic left’s victory over Obama in this early skirmish is that the president will find it more difficult to rally bipartisan support for the really important business that lies ahead.
Obama’s stimulus splurge, along with a probable $2 trillion more for financial and other firms, will bring the deficit to levels that will drive the dollar down and inflation up.
Unless, that is, markets are assured that current deficits will not be followed by the even more massive deficits that are in store for the country unless Medicare, Medicaid and Social Security programs are put on a firm fiscal footing.
There are some things the president and congressional Democrats can push through without any help from the Republicans. But when it comes to the reform of the entitlements programs that are set to bring the country to the brink of fiscal ruin, he will need political cover from the Republicans.
Few Democrats in Congress will be willing to vote to cut benefits, or raise taxes, or take whatever tough steps are necessary to staunch the flow of red ink unless there is broad Republican support to diffuse voters’ anger.
So here is the worry. Obama has lost his first skirmish with the left-leaning congressional leadership, in the process prompting the previously fractious Republican opposition to rediscover the old-fashioned idea of fiscal responsibility.
Emboldened congressional Democrats will fight any attempt to include a reduction in benefits in an entitlement-reform package.
Emboldened congressional Republicans will fight any effort to raise taxes to pay for those benefits. Result: stasis.
Meanwhile, by fighting so hard for the Pelosi-Reid bloated “stimulus” package, Obama has taken ownership of the recession.
He has asked to be judged by whether the package will create or save 3-4 million jobs. Forget about “save.”
If unemployment is still rising when the voters go the polls next year, they will wonder where their trillions of dollars went. And if not then, certainly by the time the presidential elections roll around in 2012.
A skirmish or two is not a war. But winning still beats losing.
Irwin Stelzer is a Senior Fellow and Director of Economic Policy Studies for the Hudson Institute. He is also the U.S. economist and political columnist for The Sunday Times (London) and The Courier Mail (Australia), a columnist for The New York Post, and an honorary fellow of the Centre for Socio-Legal Studies for Wolfson College at Oxford University. He is the founder and former president of National Economic Research Associates and a consultant to several U.S. and United Kingdom industries on a variety of commercial and policy issues. He has a doctorate in economics from Cornell University and has taught at institutions such as Cornell, the University of Connecticut, New York University, and Nuffield College, Oxford.
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