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Friday, January 30, 2009

The Stimulus Paradigm

A couple days ago, Bill O'Reilly gave a very matter of fact analysis of the stimulus bill. Essentially, O'Reilly liked the tax cuts. He liked the legitimate spending. He didn't like all the illegitimate spending. Without necessarily trying, O'Reilly gave a blue print for a stimulus bill that would get the support of most of the public. It is important to understand that the current stimulus has support that is fading rapidly. I referred to this as the drip factor. Everyday, there is a new story that illustrates yet another negative aspect of this bill. The culmination of all these stories is eroding support for the stimulus. With about two more weeks before this becomes law, the momentum clearly favors this bill being unpopular when it becomes law.

President Obama has several options. First, he can disregard public opinion. He can allow the Senate to pass a similar bill and allow the stimulus to become law in a way that is rather similar to its current form. In that case, he and the Democrats own it and they own the recession if it fails. He can pivot and try and craft a bill that will get bipartisan support and likely be welcomed by the public at large.

Such a bill has its own pitfalls. Essentially, President Obama needs to listen to O'Reilly. Keep the spending projects like infrastructure, internet, and alternative energy. Keep the tax cuts.
Get rid of everything else. In such a case though, he would need to thread a needle. If he merely cut spending and kept the tax cuts, he would craft a bill with overwhelming Republican support. The Blue Dog Democrats would also overwhelmingly support it. Yet, the rest of the Democratic caucus would overwhelmingly oppose it. It's not even clear if the Democrats in the Senate didn't try and filibuster it. He could set off an intraparty fight that would only lead to chaos within his own party.

On the other hand, he could remove the pork but then increase spending on those projects the public deems worthy. In such a case, he would get mostly overwhelming support from the Democratic caucus. The Blue Dogs would be split, and he would get about 20% of the Republicans. He would craft a bill that would be popular. Yet, he would also again be in a position of owning said bill if it failed.

There's mor though. If he did do a pivot, he would lose serious credibility since he has lobbied so hard for its passage in its current form. If that wasn't bad If that wasn't complicated enough, a bi partisan group of Senators is looking to get together to augment the stimulus themselves.

An influential Senate Democrat said Friday that it's unclear whether President Obama's $819 economic stimulus bill will win enough support to pass in the Senate.

"I don't even know how many Democrats will vote for it, as it stands today," Sen. Ben Nelson, D-Neb., told FOX News.

Nelson, a moderate Democrat, is famous for gathering lawmakers from both sides of the aisle in a so-called "Gang of 14" to avert a shutdown of the Senate over judicial nominations. He is seeking a similar bipartisan effort to improve the stimulus bill.

Lawmakers are unhappy that the bill, passed by the House on Wednesday, contains billions of dollars for programs that arguably won't spark much job growth.

"What I'm hoping to do is bring together a bipartisan group of Republicans and Democrats and offer changes that will attract others and improve the bill," he told FOX News. "People want this to succeed.

It's possible this group would craft a bill with enough support to pass. In such a case, President Obama would take a very serious political loss. He could certainly veto th bill but that would subvert his own argument that things are dire. Either way, this legislation would no longer be his. This group is going to be made up of moderate Democrats and Republicans. If they crafted their own legislation, and that legislation was markedly different from President Obama's. That would seriously undercut his own argument that he is bi partisan and moderate.

So, we have a paradigm for the stimulus. The road to good policy is easy. All you really need to do is listen to Bill O'Reilly. The road, politically, to get good policy is very unclear. If we do get to good policy, it is even more unclear who will be the political winners and losers.

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