Republicans Spent Much More on Iraq War Than Obama Wants for Stimulus Package

After the American Century

Those who thought I was too hard on the Republican Party yesterday might want to read Paul Krugman's column today. He also feels that their proposal to substitute tax cuts for spending is a failed Bush policy.

Elsewhere in today's New York Times there is an interesting story about the Japanese economy during the 1990s, when it went into deflation. Then the Japanese government spent a great deal of money on economic stimulus, and there is considerable debate about whether this was successful or not. But one thing is clear. Not all stimulus money is equally effective. Money spent on infrastructure gave the least bang for the yen, while money spent on education was the most beneficial. The test should be whether spending will develop new skills (education), new capacities (spreading broadband more widely), or renew the population (e.g. preventive health care). Such things make the economy more resilient. The least effective way to stimulate the economy is to build more weapons. A row of tanks worth a billion dollars for the most part just sits there, and never creates any new wealth.

However, if you a Republican, then a row of tanks represents a chance to wreck not just one economy, but two, as the economic cost of the Iraq war comes to mind. According to an article in the Washington Post last March, the total cost of that conflict will be more than $1.5 trillion, perhaps even as high as $3 trillion. Thus the Republican Party gladly spent at least twice as much on that war as the Democrats want to use to stimulate the American economy. Is there any logic to Republican thinking? The Republicans have destroyed billions in resources in the deserts of the Middle East, but they will not invest in the future of their own country. They have used billions to defend access to foreign oil, but they will not spend money on green energy which could free the US from dependence on that oil.

A paranoid on the far right might think that subversives (call them economic terrorsits) who hate the United States have infiltrated the Republican Party and twisted its thinking so it will embrace policies that are destructive to the United States. Not being anywhere near that paranoid, I can only conclude that the Republicans are illogical and that they choose badly.

Stimulus Package, or Stimulus Interruptus?

After the American Century

Politics is the art of the possible, and a good politician can parlay one success into widened possibilities. Surely the desire to widen his consensus is what has Obama going to visit the Republicans, seeking their support for the $825 billion stimulus package. The Republicans, having learned nothing much from the failure of the Bush approach to the economy, want more tax cuts, while the Democrats point out that if you don't have a job, a tax cut is useless. The Obama plan does include tax cuts of $275 billion, so that is part of the package, but the majority of the money would be spent on projects. Since a staggering 75,000 layoffs were announced yesterday alone, the need for direct government spending, priming the pump, seems obvious, though not to Republicans, evidently. Most economists agree on this.

But where is the 800 billion going to be spent? The particular projects the Democrats support are in line with Obama's call for a greener society with a comprehensive Internet that reaches all parts of the United States. In effect, he wants to create the equivalent of a Rural Electrification program to link up all parts of the US with cyberspace. This idea has real merit, because studies have shown that better communications reduces the need for as much physical movement, increasing energy intensity. The obvious example would be the shipment of documents as email attachments rather than as special delivery or FED-EX packages. A comprehensive information system will improve productivity and put the entire nation into contact with cyberspace.

Other spending would improve the electrical transmission system, which has not been growing much at all. In fact, deregulation slowed down the building on transmission lines, for reasons that would require a long Blog - actually that required about 3,000 words in chapter five of my new book. But leaving aside the mistakes of the past, the present need is to replace old equipment and expand capacity, because the connections are simply not robust enough.

The Democratic plan does have some pork in it, however, and perhaps Obama can use the Republican complaints to cut out some of that fat. But one man's useless pork is someone else's bacon. Or, in this case, condom. For some of the stimulus plan was originally intended to go to family planning, which included purchase of large numbers of condoms. I call that recontaining the stimulus. Obama has apparently agreed to drop the condoms. (Sarah Palin and her oldest daughter could only agree). After all, a baby boom would stimulate the economy both immediately and in the long run.

Now that the condoms are off, as it were, let us hope the Republicans get more excited. Without their support, we might have a filibuster, or stimulus interruptus.