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Is the stimulus Obama’s Iraq?

By Christopher Caldwell: Published: January 30 2009 19:25 in FT
As the $819bn stimulus bill passed the House on Wednesday, Mike Pence, the Republican congressman from Indiana, explained why it was doing so without the benefit of a single Republican vote. Mr Pence called the stimulus a “dusty old wish-list of liberal spending priorities”. It is meeting little Republican enthusiasm as it approaches the Senate for a vote next Monday.
Well, tough cookies, one is tempted to say. Liberals are now in power, led by a popular president. It is in the nature of things that the nation’s agenda will be their agenda. But an emergency stimulus is a special case. Mr Pence’s warning should not go unheeded. The problem he mentions is serious, with the potential to divide the country even if the stimulus works.

There are two strands of US liberal activism: on the one hand, there is spending on big public works projects, of the sort that was popular between the New Deal dam-building of the 1930s, through which Franklin D. Roosevelt electrified the south and west, and the space programme of John F. Kennedy, which put men on the moon from 1969. On the other hand, there is welfare, which began with FDR but spread profligately after Lyndon Johnson. Americans never repudiated the public works legacy of the New Deal, even at the high tide of Reaganism. This is what they generally think of when they use the word “stimulus”. But they remain suspicious of post-1960s welfare programmes and this stimulus is in large part a welfare bill.

Stimulus, many economists have stressed of late, is about restoring what John Maynard Keynes called animal spirits. Keynes meant something like “morale”. But there is a more animal sense to “animal spirits” that appeals to the broad public.

They are willing to be excited by what their government can do. But where is the Tennessee Valley Authority in all this? The Concorde-type project? The Apollo programme? Such initiatives work not just on economic fundamentals but also on the public’s entrepreneurial imagination and its optimism. But this bill is about funding babysitters, writing unemployment cheques and installing septic tanks with not enough money left over to give even one city a subway system.

Of course, big projects nowadays are more ethereal, less bulky than they were in the industrial age. The $23bn (€17.6bn, £16.2bn) spent on renewable energy and modernising the electrical grid will lay the groundwork for all sorts of new enterprises. No one who has watched rusty water spurt out of the tap in a declining mill town will begrudge $8.4bn for clean drinking water. The $43bn for highway construction and other transport will almost certainly be squandered. It will be rushed into “shovel-ready” projects and that means highways. As such, it will make more viable a lot of sprawl that ought never to have been built in the first place and help lock in habits of profligacy and gas-guzzling for a couple more generations.

But at least they are a stimulus, which can be spent quickly and stopped quickly once the economy gets stimulated. The Harvard economist Martin Feldstein, who has backed a stimulus programme, warned this week that “spending programmes should not create political dynamics that will make them hard to end”. About a third of the present stimulus bill – the welfare and social service parts – will be exceedingly hard to end. That includes the $92.3bn being spent on labour initiatives, hiring teachers and expanding pre-schools, and the $11bn in bail-outs to states. The core of the bill is $117bn in healthcare spending, which Republicans correctly see as a way of enacting, under false pretences, the national health plan that Democrats have lacked the mandate to legislate in non-emergency times.

The case can be made that the country needs a welfare bill. Even the Bush administration thought so, presiding over the largest expansion in health benefits since the Johnson administration. There is an argument that government in the US is suboptimally small. But that is an ideological argument and both congressional Democrats and the Obama administration are sowing the wind by not making it openly.

Whether reasonable or unreasonable, the Democrats’ spending priorities antedate the financial crisis. Pre-existing agendas in politics are easily painted as evidence of bad faith. In 2004, as the Iraq occupation ran into trouble, a flurry of books presented the Bush administration’s obsession with Saddam Hussein before 9/11 as prima facie evidence of the administration’s crookedness. Democrats were not noticeably quick to call this standard unfair.

President Obama has gone beyond the minimum requirements of bipartisanship to ensure the stimulus is transparent, once enacted. Accounts of the programmes will be posted on an easily accessible website. At his urging, Democrats stripped non-essential measures that could rile Americans needlessly, such as several hundred million dollars for family planning. And Mr Obama is popular, albeit not as popular as George W. Bush on the eve of the Iraq war.

Bipartisanship offers little shelter over the long run. The stimulus will be expensive, more expensive than the Iraq and Afghanistan wars combined and Nancy Pelosi, Senate majority leader, has called it a mere “down payment”. The stimulus bill, whether it succeeds or fails, could be the Democrats’ Iraq. Like Iraq, it is a long-standing partisan project that is being marketed as an ad hoc response to a national emergency. It reflects the pre-existing wishes of the party’s most powerful interest groups more than the pre-existing wishes of the country. Democrats are now liable to be judged by the standard they created when they abandoned the Bush administration over the Iraq war: you break it, you own it.

The writer is a senior editor at The Weekly Standard

Copyright The Financial Times Limited 2009

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