The Great Mainstreet Bailout Debate

by: Paul Rosenberg

Sat Sep 27, 2008 at 16:00

Oh, wait...

That didn't happen. None of it did.  Not even close.  Harry Reid didn't force the Republican obstructionists to actually fillibuster to kill the $56.2 billion stimulus plan in the Senate this week.  In fact, he hardly did anything to make it more than the briefest of blips on the sharpest of political radar screens.  And therein lies virtually everything you need to know about the political economy of America today, and the sorry, sorry state of our democracy, and the Democratic Party.

When the Democrats gained leadership control of the House and Senate, they were handed enormous power to shape the political debate in our country, and thus far they have utterly squandered that power.  This week was no exception, as they actually had a relatively small, but significant de facto Main Street bailout package not just in the works, but on the floor to be voted on, and they simply let the GOP Senators kill it with a silent fillibuster, and no political costs whatsoever.

Had they chosen to make a fight of it, they could have radically expanded and reframed the narrow Wall Street bailout debate to consitute a real debate about economic philosophies and priorities--one that is long, long overdue, and that would heavily favor the Democracts.

Details on the flip.

Unemployment

The unemployment rate now stands at 6.1%, the highest rate since September 2003. The unemployment rate is up 1.4% since last August, including an increase of 0.4% in the last month alone. The U.S. economy has lost jobs every month this year, a total of 605,000 jobs. The stimulus package extends unemployment benefits by seven weeks in all States and another thirteen weeks in high unemployment states.

High Food Costs

Food prices have increased by 7.5% this year after increasing 4.9% in 2007. In order to help low-income families cope with rising food prices, the stimulus package temporarily increases Food Stamp benefits by 10 percent and includes $450 million for the Women, Infants, and Children (WIC) program (which would allow 625,000 women and children to receive WIC benefits, meet some of the rising demand due to a faltering economy, and allow states to avoid creating waiting lists). $50 million is included for Food Banks, $30 million for the Commodity Supplemental Food program, and $60 million for senior meals programs (18 million more meals).

....

High Energy Prices

Energy prices have increased by 22.4% in 2008 after increasing 17.4% in 2007. In order to help Americans cope with spiraling energy costs, we include $500 million in the stimulus package for weatherization programs. This is in addition to $5.1 billion for Low-Income Home Energy Assistance and $250 million for weatherization provided in the underlying amendment.

• Weatherization Assistance. The stimulus bill also provides an additional $500 million for the Weatherization Assistance Program, which improves the energy efficiency of low-income housing. This amount of funding will support more than 8,000 existing jobs, weatherize about 300,000 homes, and save each household about $400 in energy costs this coming year.

Helping States Deal with a Flagging Economy

Twenty-nine States are facing a $52 billion shortfall in revenues in their FY 2009 budgets, resulting in cuts in health care, education, and other programs. The stimulus package includes $19.6 billion to reduce the States share of Medicaid costs by increasing the Federal share by four percent.
....

Creating Jobs

There are consequences for failing to invest in America. Bridges fall into rivers. Roads and subways are congested to the breaking point. FEMA cannot respond to a major disaster. Fuel prices go through the roof. Our economy slows, and we are less competitive in the world economy.

The stimulus package includes: $10.8 billion for building and repairing highways, bridges, mass transit, airports, and AMTRAK, creating 384,000 jobs; $50 million for the Economic Development Administration (EDA) to help communities impacted by massive job losses due to corporate restructuring; $500 million for the COPS program to hire 6,500 police officers; $600 million for clean water systems that would create 24,000 jobs; $2 billion for school construction that would create 32,300 jobs; and $500 million to address some of the construction backlog for the Corps of Engineers for flood control, navigation, shore protection, and environmental restoration projects - funds that will provide immediate construction jobs around the nation.

There's a lot more, and some of it is arguably questionable.  But the overall thrust is clearly to do important work while pumping money into the real economy, with a lot of resources going to the "little people" rather than the "big boys".

In a White House Press conference just hours before the vote, a clear veto threat was sent:

Roger.

Q OMB just sent out a -- looks like a veto of the second stimulus package. It says it doesn't meet the test like the first one. Can you explain that a little bit?

MS. PERINO: Well, you just got the document. You're a little bit at more of an advantage than I am, sitting here -- standing here. But we have talked before about the best way to stimulate the economy is to pass an energy bill. The best way to make sure that we stimulate the economy is to pass this rescue package.

There's some elements of the package that have been put forward by Democrats for a second stimulus that we do not think would be stimulative to the economy, such as unemployment insurance -- the food stamps, we believe we have met the need and that we were prepared to do more and there is reserve money available for that. So I'll let you all read that document that just came out from OMB, but that's -- our position on the stimulus -- second stimulus package hasn't changed.

Back when the first stimulus package was up for debate, I wrote a diary, "Bipartisanship Vs. Reality: The Stimulus Package", which included a chart from adapted from a presentation by CBO Director Peter R. Orszag.  Here's what my reformatted version of the chart looked like:

Policy		Cost- Effectiveness	Time-Lag	Uncertainty
Individual Tax Proposals
Lump-Sum Rebate		Large	Medium	Large
Temporary Tax Reductions
Withholding Holiday for the Employee Payroll Tax		Large	Medium	Large
Across-the-Board Tax Rate Cut		Small	Short	Small
Deferring or Eliminating Scheduled Tax Increases
Extending the AMT Patch		Medium	Long	Medium
Deferring or Eliminating Tax Rate Increases Under EGTRRA or JGTRRA		Small	Long	Small
Business Tax Proposals
Cut in Corporate Tax Rates		Small	Long	Small
Incentives for New Investment		Medium	Medium	Large
Extending Operating Loss and Carryback Provisions		Small	Medium	Large
Spending Proposals
Direct Transfer Payments to Households
Extending or Expanding Unemployment Benefits		Large	Short	Small
Temporarily Increasing Food Stamp Benefits		Large	Short	Small
Providing General Aid to State and Local Governments		Medium	Medium	Large
Investing in Public Works Projects		Small	Long	Small

As can be seen at a glance, the only options that are marked favorably in all three categories--for cost-effectiveness, speed and certainty--were unemployment insurance and food stamps, the two programs that Perino singled out as reasons for vetoing the proposal.  Thus, this isn't even a matter of cold-heartedness.  It's plain, outright stupidity. And unlike the first package, this one comes up directly opposite the proposed Wall Street bailout, so that the utter perversion of economic reality has a lot more political downside to it.

If only a spotlight were shown on it.

Such as, oh, I don't know.... forcing the Senate Republicans to attack the substance of the bill, and echo the White House's anti-reality economics?  And forcing them to do this for hour after hour after hour....

Let's face it.  The Democrats held all the cards they needed on this one.  And a good number of Republicans knew it.  Dole voted to proceed, as did Coleman and Collins.  OTOH, Evan Bayh voted to block it.

In a post mortem, AP reported:

With the economy still sagging, Democrats have pressed for a follow-up plan that focused on extending unemployment benefits, boosting food stamp payments and building infrastructure projects like roads, bridges, water and sewer projects and school repairs.

They got no interest from President Bush and his GOP allies in Congress. "Record spending that could lead to record tax increases or higher deficits will not advance our economic recovery," the White House said.

So, $700 billion for Wall Street?  To important to even ask questions.  But $56.2 billion for Main Street? "Record spending that could lead to record tax increases or higher deficits..."

What could be clearer?  And what more could a politically relevant opposition party want in the way of a showdown?