Stimulus Debate: What's The GOP's Answer?
As a massive government spending bill aimed at turning the economy around winds its way through Congress, Republicans continue to snipe at it for including wasteful or unrelated spending. They've objected to specific elements within it -- money for family planning or seeding the Mall with grass -- and complained that it's too light on tax cuts.
Last week, citing these concerns and what they said was a partisan process, every House Republican voted against it.
But is it the details they don't like, or do congressional Republicans simply not believe that deficit spending is necessary to stimulate the sagging economy? As Richard Nixon might wonder, are we all still Keynesians now?
"Keynesian economics doesn't hold a candle to the entrepreneurialship (sic) that made this economy so prosperous up until the last six months," Minority Whip Eric Cantor (R-Va.) declared immediately after the shutout stimulus vote.
His declaration, though, leaves the question open. Six months ago, the economy wasn't going gangbusters, but it wasn't in global crisis mode and there were no calls for a nearly trillion dollar stimulus package. Now that it is, the GOP is reluctant to sign the check.
The idea that government spending is not the answer is part GOP DNA but also related to Great Depression revisionist history that has come from places like the CATO Institute in recent years. Rather than revive the economy, goes the new argument, FDR's New Deal actually prolonged it.
"I think it's so important that we slow this bill down in order to do it right," said Sen. Kay Bailey Hutchison (R-Texas) Thursday. "The studies that I have seen lately of the Great Depression and the New Deal, it was shown that too much government money was spent and it probably delayed the ability to come back from the Depression by as much as seven or eight years. We can look at the past and learn from it. This spending bill is too big."
For a good Keynesian, any spending that pumps money into the economy and encourages employment is stimulative. For Republicans, it very much depends on the kind of spending. The only place where the Keynesian debate has apparently been settled is on the construction site.
"I think that if you have infrastructure programs that are meaningful, impactful, and put jobs back into place immediately within the first twelve months, you have a legitimate case for that to be a stimulus," said Cantor.
"Only $30 billion of the $880 billion is going to roads and construction," Sen. James Inhofe (R-Okla.) complained, calling for infrastructure investment to constitute "at least ten percent of the total amount."
Government analysts estimate that only about $60 billion worth of infrastructure projects are ready to be funded.
"If you get a return on an investment, there's no question that you can invest in bridges, highways, military equipment, buildings, water projects. There's no question that can be stimulative. We don't deny that," said Sen. Tom Coburn (R-Okla.) when asked by the Huffington Post if the GOP believes in government spending as an economic remedy.
But the current bill, he said, is "spending money we don't have on things we don't need."
The GOP has popular opinion on its side in the spending argument. Deficit spending is broadly unpopular with the general public, regardless of what economists might think of it. A recent poll paid for by House Republicans found tax cuts twice as popular as spending as a means to revive the economy. The stimulus, backed by a popular president, however, is highly popular -- a phenomenon Republicans hope is due to Obama's overwhelming popularity rubbing off, rather than a public embrace of Keynesian economics.
Attacking spending is a short-term winner for the GOP. Throughout the stimulus debate, Republicans have raised the specter of wasteful spending by Washington bureaucrats -- or worse, the creation of more bureaucrats. "The bill is also creating 600,000 government jobs," objected Sen. Pat Roberts (R-Kan.). "So what is that? One in five to implement these three million jobs? I don't think so."
Those 600,000 government jobs, however, are jobs.
The Republican alternative calls for an expansion of tax cuts. The more than $100 billion stimulus package passed by the last Congress consisted largely of tax cuts in the form of rebate checks. Though the GOP calls for more tax cuts, it also acknowledges that the tax cuts in that stimulus didn't stimulate the economy.
"We have a very, very clear model, because we passed a stimulus package in the last Congress -- bipartisan. Republicans voted for it. Democrats voted for it. It didn't work," said Sen. Bob Bennett (R-Utah), who led financial-industry bailout negotiations for the GOP.
Bennett argued that the last plan "was based on economic analysis of past recessions and past problems and not the depth and seriousness of this one. We saw personal income spike up as a result of the stimulus we put into the economy, and the economy was stimulated not at all."
For Bennett, the plan failed because high debts and the dire economic outlook persuaded people that they should save their money or pay down loans rather than spend. "When you're having an economic crisis, whether you're a company like General Motors or a bank like Citi or an individual, you do what you can to pay down your debt. That's what was done with the last stimulus package. That's the rational thing to do."
Republicans in the House argued that they were shut out of the bill-drafting process and Senate Republicans have complained that their input is heard but not accepted into the package. "We'll get votes on amendments. They'll all lose and the bill will pass and we end up with a totally partisan package," said Minority Whip Jon Kyl (R-Ariz.). "We are too often met with this response: 'We won, and therefore we're going to do it our way.'"
Democrats counter that whatever the polls might say, the crucial debate on the philosophy of government spending was settled on Election Day.
Kyl rejected that argument.
"I don't think that you can credibly argue that the debate that's going on right now about what should be in the stimulus package was ever a part of the presidential debate between Senator McCain and Senator Obama," he said. "I think it would be very wrong to assume that the American people, in electing Barack Obama, were in any way expressing support for any of the particular provisions that are in this bill right now."
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February 2, 2009 10:25 AM