President-elect Obama was a U.S. senator himself so he should not have been surprised by recent developments on Capitol Hill.
Congressional Democrats announced last month with some fanfare that they planned to have a major economic stimulus package for him to sign soon after his inauguration, perhaps as early as that same afternoon.
That’s slipped. Obama says he expects to get the package, “By the end of January or the first of February.” But House Democratic leader Steny Hoyer says mid-February is more like it, perhaps around Congress’ Presidents’ Day recess. And even that deadline may slip.
The stimulus package seems to be a work in progress. Over the weekend, Obama aides disclosed that it would have a major tax cut component, around $300 billion out of a package ranging from $675 billion to $775 billion.
The bulk of that tax cut is a $500 credit for individuals and $1,000 for families that seems similar to President Bush’s $152 billion stimulus that had only a short-lived effect. Obama also proposes a $3,000 tax credit as an incentive for employers to keep existing jobs and add new ones. This seems problematic because employers add jobs in response to market conditions and not, as a rule, because of favorable short-term tax consequences.
The president-elect’s transition team cities the need for haste in enacting the tax cuts and stimulus spending because of the dire economic conditions. The Republicans are threatening to slow the package down, which might not be all bad considering the indecent haste of the $700 billion bailout. The public is still not sure where all that money is going.
In 2001, facing the dot-com bust, President Bush called for a 10-year, $1.35 trillion tax cut, which, we were led to believe, would largely pay for itself in economic growth. It did not and that, combined with runaway spending, got us into the budget hole we’re in now. Nobody asked that most basic question: How are we going to pay for all this?
Obama’s team says the short-term cost of this package is not a priority, but, in fact, we would be assuming huge long-term costs in debt and debt service. Obama’s aides talk about “radical reforms” to get control of the federal budget and House Speaker Nancy Pelosi promises similar reforms to crack down on “waste, fraud and abuse.”
Not to be unduly cynical but we’ve heard all this before. The question remains: How are we going to pay for this?
ó Scripps Howard News Service