AT least the word “trillion” still has cachet as denoting a lot of money. “Billion” has been surpassed during the past few months, and “million” has long been positively quaint.
The Obama team wants to keep its two-year stimulus plan (just) beneath a trillion dollars, sensing that 13 figures is the price point when the public might balk at the fiscal bacchanal. Meanwhile, Democrats on Capitol Hill have dropped their madcap scheme to have the bill ready for Barack Obama’s signature right after his inauguration, which would have required spending more than the entire Pentagon budget ($500 billion) in a matter of weeks. FDR had his Hundred Days; Obama was going to have his Day.
That Congress will take more time, into February, to pass the bill constitutes a notable act of fiscal restraint in the Age of Obama. Otherwise, congressmen will make like those Germans who lived through the hyperinflation of Weimar Germany – and shove cash out the door in wheelbarrows. Obama’s team wants to get 80 votes for the stimulus plan in the Senate, and took a step toward it with word that it is considering $300 billion worth of tax cuts as part of the plan.
Sure, that’s a tax cut “only” in the hundreds of billions. But consider: President Bush’s first tax cut, $1.35 trillion over 10 years, delivered $174 billion in tax relief in its first two years. Obama is nearly doubling Bush’s cuts that were denounced by Democrats as recklessly profligate.
Obama is engaged in shameless fiscal logrolling, hoping to pick up Republicans by devoting roughly 40 percent of his plan to tax cuts.Yet they are characteristic Obama tax cuts, with a strong whiff of spending about them.
He wants to give people $500 tax credits – a version of the $131 billion stimulus that didn’t work in early 2008 – and throw a bunch of tax benefits at business, including a credit for hiring. None of this is as straightforward – nor will it provide as much economic benefit – as simply cutting the payroll tax for working people or cutting the corporate tax rate for business.
Even with tax cuts absorbing some of his plan, Obama is testing the outer limits of spending. The federal government spends about $60 billion a year on transportation and other sorts of infrastructure. As Harvard economist Edward Glaeser points out, doubling that amount still “would represent only 8 percent of a $750 billion package.”
Obama might be reduced to the expedient suggested by John Maynard Keynes of burying money in bottles and then paying people to dig it up. (Some of the projects on the “shovel-ready” list compiled by the nation’s mayors are only marginally less foolhardy.)
During the campaign, Obama was careful always to say – less than honestly – that his spending proposals were paid for. Now, it doesn’t matter. The spirit of Father Coughlin, who ranted at the beginning of the New Deal that Franklin Roosevelt had “to be stopped from being stopped,” grips the land. Ohio Gov. Ted Strickland left a begging voice message with Obama Chief of Staff Rahm Emanuel that captured the moment perfectly: “Rahm, it’s Ted. You’ve never failed me, and I need $5 billion.”
The Congressional Budget Office is about to release a new estimate of the “baseline” (i.e., if nothing changes) budget deficit of roughly $950 billion a year. That’s before Congress does anything else this year, when it’s about to disgorge Obama’s stimulus plan, and before Obama has even embarked on his expensive campaign promises in earnest.
The stimulus spending – or most of it – will eventually disappear, and Obama will have to raise taxes. The fiction of his campaign was that repealing the Bush tax cuts on the rich would pay for everything. Repeal probably gets $50 billion a year, which in Washington’s newly adjusted fiscal lexicon is negligible. It takes a trillion to get anyone’s attention. And “quadrillion” comes next.
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