Obama and the Stimulus

by Eyck Freymann

After the Inauguration, Obama emerged with a groundwell of international goodwill which subverted criticisms of his cabinet appointees. Even as Richardson and Daschle removed themselves for consideration (a sign of terrible vetting), Americans redirected their anger to the general Washington establishment rather than at the new President himself. This is understandable; in a time of deep international economic uncertainty, we face a time, like after 9/11, in which people pull together around a catastrophe.

But Obama's grace period is fast elapsing, and the story of his stimulus package brings into sharp focus the errors that he has made and continues to make. He did the right thing after Daschle and Richardson by telling a parade of TV interviewers that "I screwed up." After eight years of the leadership denying its mistakes and skirting responsibility, it was indeed a breath of fresh air to see a President admit his own shortcomings. But frankness is a one-time get-out-of-jail free card for the results of incompetence, and the next time Obama apologizes for an error the public may not be so forgiving.

Moving on to the stimulus. Obama's initial plan was by many indications not large enough (Nobel Laureate Paul Krugman suggested that a plan of at least a trillion dollars was necessary), the President weakened his package in a series of steps to curry Republican support, and what congress passed today was a watered-down version, littered with ineffective tax cuts, that will ultimately necessitate the passage of yet another near-trillion dollar stimulus.

After passing in the house, the stimulus bill passed to the Senate, where Republican leaders spent several days ripping it to pieces. Obama symbolically reached across the aisle - he held one-on-one meetings with a number of Republican and centrist Democratic senators and addressed the Senate Republican caucus - but ended up with only three Republican votes.

While in the senate sausage-grinder, the bill lost many of its most important features, such as funding for school contruction, alternative energies, and assistance for states suffering from balanced budget requirements. Without these key provisions, I fear that the effectiveness is now in doubt and that this money may evaporate as did the $700 billion we gave to banks in the fall.

I've already made clear that I question whether Tim Geithner is the right person to be Treasury Secretary, but his recent speech on the future of the TARP legislation casts him in more doubt. Going by the capitalist economic theory conservatives have spent the last 30 years lecturing us on, the we should all get what they pay for. This means that if the taxpayers provide enough liquidity to save a bank from bankrupcy, they have purchased a controlling interest in that bank. As such, they (or congress as their elected proxy) should have the right to make decisions as to the fate of their investment.

So when Tim Geithner (a banking man himself) talks about how we cannot lower executive pay, I can feel the nation growing uneasy. Call us socialists: the majority of citizens want to know what's happening with their money.

Obama's first steps have been shaky, but I'm confident that as this situation passes he will regain some sense. But let his artificially high approval ratings not distract him from the truth of the matter: he failed the nation and the stimulus plan for his postpartisan games. The Republicans have not been any better, but by now Obama should know: when you make a deal with the devil, get ready to lose your soul.