Articles

Obama's Political Stimulus Plan

October 19, 2011

After bipartisan Senate opposition stymied President Obama's latest $447 billion attempt to jump-start the economy, he could have led serious negotiations with congressional Republicans and Democrats over measures for job creation. Instead he hit the campaign trail, claiming on this week's bus tour that the GOP economic plan is: "Let's have dirtier air, dirtier water, less people with health insurance."

This angry, partisan approach hasn't worked well this year and may have helped deepen the decline in the president's approval ratings. Ironically, the president's re-election hopes and the country's economy would both be strengthened if he understood the reason for opposition to his new stimulus: Unemployment went up after his first stimulus. His lavish pledges of growth and jobs didn't pan out, leaving the program widely (and rightly) seen as a failure. A Sept. 1 ABC/Washington Post poll found that 47% believe Mr. Obama's economic program has had no real effect while 34% said it made the economy worse.

For many Americans, another stimulus looks like more reckless and wasteful spending.

Temporary measures like those in Mr. Obama's Stimulus II won't encourage long-term growth. Its biggest outlay—$175 billion—was a one-year extension of the 2% reduction in the Social Security payroll tax. Besides undermining the retirement program's solvency, it has failed to ignite economic growth since it went into effect last December. People are using their savings to pay down debt, not to invest. It is, after all, a tax holiday—and holidays pass quickly.

Mr. Obama also continues insisting on $35 billion to "put teachers back in the classroom" and "make certain we're not laying off police officers and firefighters." But his own National Center for Educational Statistics forecasts that the number of teachers will rise anyway—from 3.66 million this fall to 3.7 million in the fall of 2012, and to 3.75 million in the fall of 2013.

While some communities may face police and fire layoffs, there is no evidence of a massive wave of firings of first responders. Could this $35 billion be a payoff to state and local public-employee unions? Senate Majority Leader Harry Reid seemed to imply this was the case with his curious statement Tuesday that "It's very clear that private sector jobs have been doing just fine." No wonder even Democratic senators like Arkansas's Mark Pryor and Montana's Jon Tester are questioning the president's provision.

Meanwhile, the president is pressing for a one-time, $50 billion expenditure on transportation. Why doesn't Mr. Obama instead get the highway bill reauthorized for its normal six-year term? It lapsed in 2009 while big Democratic majorities in both houses of Congress did nothing, and it has since been funded year-to-year. Experts and state officials say this is an inefficient and unworkable approach to improvement of the infrastructure.

The president's proposed new stimulus is also accompanied by $1.5 trillion in new taxes (for example by letting Bush-era tax rates for wealthy earners lapse, and by placing new limits on their deductions)—though he said in August 2009 that "The last thing you want to do is raise taxes in the middle of a recession." For once he was right. Even Nebraska's Democratic Sen. Ben Nelson complained, saying "I don't think you increase taxes for new spending." Permanent tax increases simply enable Washington to keep spending at record levels.

The president is increasingly at odds with members of his own party, especially those up for re-election in 2012, like West Virginia Sen. Joe Manchin. Voters see what Mr. Obama, the most rigidly ideological modern president, cannot: It's time to limit government's size, scope and reach.

Voters are demanding growth and jobs. Mr. Obama, by contrast, seems most intent on transforming America to fit his liberal worldview. But we can't have growth and jobs if the priority is to transform the country into a European-style social democracy.

Back in 2010, Mr. Obama told ABC's Diane Sawyer, "I'd rather be a really good one-term president than a mediocre two-term president." The outcome he didn't mention is that he could turn out to be a really bad one-term president.

This article originally appeared on WSJ.com on Wednesday, October 17, 2011.

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