After eight years of tax cuts under President Bush, some Democrats – especially Northeastern liberals like Sen. John Kerry and Rep. Barney Frank – think that giving tax breaks to businesses and middle-class families will not create long-term job growth. Scott Lehigh, writing in the Boston Globe's op-ed page, thinks tax cuts make little sense and wonders whether they exist in Obama's plan as a carrot to Republicans.
Democrats are also leery about heaping more debt on the books. The Congressional Budget Office estimates the deficit will reach $1.2 trillion in 2009, not including Obama's stimulus plan. Some in Washington also believe the total stimulus price tag will ultimately reach closer to $1 trillion. Obama's preliminary estimate is around $775 billion.
With 11 days until inauguration day, Obama, like President Franklin D. Roosevelt 76 years ago, will be afforded a brief honeymoon period in Washington and this is the impetus for the presidential feel of yesterday's speech at George Mason University.
Former labor secretary under President Clinton, Robert Reich, believes the government stimulus should reach upwards of $900 billion spread over two years and urges for it to be done quickly. "Without federal action, next year could be even worse," Reich told congressmen at a forum discussing the stimulus bill in Washington.
Reich will discuss the economic prospects of the country at The Commonwealth Club of California next Wednesday when he gives a special forecast for the economy in 2009.
On his blog, Reich urges Congress to spend without caution of overextending itself.
As the buyer of last resort, the federal government must respond if that cycle is to be reversed. In my judgment, this will require a stimulus of about 6 and a half percent of gross domestic product, or a total of some $900 billion, spread over two years. That’s my estimate for the shortfall in private demand. But the federal government should stand ready to spend larger sums if necessary to get the economy back on track toward full capacity. The danger is not that the government will do too much; the danger is that it will do too little, too late.
Reich agrees with Obama's plan to upgrade the nation's infrastructure as does Paul Krugman, but some disagree with the basic Keynesian approach. Larry Kudlow at the National Review mocks Obama's progressive pedigree by saying his stimulus plan is somewhat Reaganesque. "Nobody really believes infrastructure spending will end the recession or create permanent new jobs. However, it’s interesting just how much the Obama plan has changed since the election," he wrote.
Here lies the problem facing Washington: in the shadow of a clumsily rolled out $700 billion bailout for the financial sector where many do not know where the money went and fewer gained any stimulus from the investment, how will what many people see as a chronically ineffective legislative branch deal decisively with the economy? Obama wants a bill ready to sign from Congress by Feb. 13. Speaker of the House Nancy Pelosi is already pushing to extend the deadline. Meanwhile, unemployment reaches 7.2 percent and the prospect of this year being somewhat better than the last decreases.