- The Washington Times - Tuesday, January 13, 2009

Feeling queasy

“For many liberals, that Obamagasmic ‘tingle going up their legs’ from the campaign season - to paraphrase MSNBC’s Chris Matthews - may have crept upward into stomach-churning queasiness as Inauguration Day nears,” James Pethokoukis writes at www. usnews.com.

“Consider this counterfactual: If John McCain had won the 2008 presidential election (just a scant half-million votes needed to swing the other way in Colorado, Florida, Indiana, North Carolina, Ohio and Virginia…. I know, I know), it’s easy to imagine him picking Bono-approved, ‘new age’ evangelist Rick Warren to give the inaugural invocation, leaving Robert Gates as defense secretary and proposing an economic-stimulus package that included $300 billion in tax breaks for individuals and businesses.

“Yet that’s just the sort of ‘big change’ Barack Obama has provided in the twomonths since winning a near-landslide victory over the man Democrats derided as ‘McBush.’ (Let’s see will.i.am make a YouTube video about this right-turn of events.)

“Even worse for the left, Obama advisers are now signaling, says the New York Times, ‘that they may put off renegotiating the North American Free Trade Agreement, overhauling immigration laws, restricting carbon emissions, raising taxes on the wealthy and allowing gay men and lesbians to serve openly in the military.’ You know, like, pretty much the very heart and soul of the liberal policy agenda,” Mr. Pethokoukis says.

“Even health care reform might only be getting what aides call a ‘down payment’ as a ‘sign of dedication to the broader goals.’ Let the wretching begin, Daily Kossacks. (Fun fact: Obama gave his big economic speech at George Mason University, a bastion of free-market scholarship.)”

Cutting taxes

“The conventional economic wisdom these days seems to be that tax cuts or tax credits are bad because people save the money, rather than spending it,” Michael Mandel writes at www.businessweek.com.

“For example, an article in [Sunday’s] New York Times says: ‘But economists said the tax credit could have drawbacks as an economic stimulus measure, mainly because people usually save part of the money or use it to pay down debt. That makes good sense from an individual’s standpoint, but does nothing to increase economic activity.’

“But this conventional argument misses the whole point. Consumers have a massive hole in their balance sheets these days. Home prices are plunging, incomes are slowing and many families have huge debts. Americans are staggering,” Mr. Mandel says.

“From this perspective, the main purpose of the tax cuts and tax credits is to help repair consumer balance sheets, just like the TARP [Troubled Asset Relief Program] is helping repair bank balance sheets. I don’t want consumers to spend the tax cuts - I want them to save the money, as much as possible, and get their debt back to reasonable levels. That’s the only to ensure that consumers will be on solid ground when the recession is finally over.

“Edmund Phelps, the Nobel Prize-winner, made a similar point at his talk at the recent economics meeting in San Francisco. He said, ‘Stimulating household consumption is not the best remedy for the fallout of the financial crisis. … Weren’t we all saying that households are overconsuming?’

“So the three prongs of the stimulus package serve distinctly different purposes. The TARP recapitalizes the banks, with $700 billion. The tax cut, at $300 billion, recapitalizes the consumer. And the government spending program - say, $500 billion - provides the missing demand and jobs.

“Now, all of these numbers, though huge, are probably just a downpayment. My best guess is that we’ll have to do it at least one more time. But in any event, a tax cut - even if it is saved - is an essential part of any recovery package.”

Imperial Congress

“I would make the point that Obama actually got more of a Democratic majority in Congress than is good for him,” Ian Bremmer writes at www. realclearpolitics.com.

“On Capitol Hill, we also have much more cohesion - and a collective sense that the executive branch of government has seriously overstepped its policymaking authority in recent years. A strongly Democratic (and much more ideologically progressive) Congress will feel the need to respond decisively to the unprecedented nature of the financial crisis to show that it’s doing something. In short, Congress will move from a position of stalling administration-led legislation to attempting to exert actual policy leadership,” Mr. Bremmer said.

“The last time we had serious financial crises, a considerably less cohesive Congress both over-legislated and over-regulated, resulting in, among other things, the Sarbanes-Oxley act. This time around, we’re likely to see a series of hearings and populist policies that favor consumers over producers, as well as congressional ‘showboating’ on initiatives related to solving the financial crisis.”

Don’t worry

“Some American business executives and Republican politicians, cautiously optimistic or in some cases dismissive about Barack Obama, still have their Washington villains: Nancy Pelosi and Harry Reid,” Albert R. Hunt writes at www. bloomberg.com.

“They argue that while Obama may be a moderating influence, a liberal and renegade Democratic Congress will push him, and the U.S., to the left on fiscal and national security issues,” Mr. Hunt says.

“‘Pelosi will be the most powerful speaker in a generation,’ predicted Tom DeLay, the former Republican leader in the House of Representatives. After a ‘little honeymoon,’ DeLay said, the House speaker is ‘going to run circles around Obama.’

“With few exceptions - a push for some tougher financial market regulations and on some trade and social issues - these doomsayers can rest easy; it’s not likely to happen.”

Four open seats

“With Republican George Voinovich of Ohio retiring, the number of open, Republican-held Senate seats in 2010 has now climbed to four,” Chris Bowers writes at www. openleft.com.

“Next year, all four of these seats - Florida [Mel Martinez], Kansas [Sam Brownback], Missouri [Christopher S. Bond] and Ohio - are winnable with a good candidate,” Mr. Bowers says.

“Looking more short term, the four senators vacating these seats could prove to be a vital source of cross-over votes to support Democratic trifecta legislation. This is because retiring Republicans appear far more willing to support Democratic legislation that those who seek to stay in the Senate over the long haul.”

cGreg Pierce can be reached at 202/636-3285 or [email protected]

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