By Watson Scott Swail, President and CEO, Educational Policy Institute
“A failure to act, and act now, will turn crisis into a catastrophe.”
–President Barack Obama, February 4, 2009
Two weeks ago in my Commentary, I wrote about the state of the economy and the stimulus package. Today I will go at it again because I am so dismayed at the way Congress and the Obama Administration are handling this record-breaking spending spree.
I read Charles Krauthammer’s Op-Ed column this morning in the Washington Post. I typically don’t appreciate Charles Krauthammer’s columns or statement on the TV talk shows. I find him unsettlingly right-wing, albeit not near as far as Rush Limbaugh. Krauthammer’s piece is titled “The Fierce Urgency of Pork.” Given the title of my column today, “pork” is an appropriate word. Krauthammer states that the President, who declared in his inaugural address that “we have chosen hope over fear,” is now using fear to pass his first major bill. The Op-Ed also lists examples of pork spending buried in this bill… this, the economic stimulus bill. For better or wore, Krauthammer has it dead on.
The stimulus bill is now well over $900 billion. A bipartisan group is now trying to trim about $200B off the price tag. Even so, it still amounts to a second $700B spending spree for Capitol Hill. As I will explain, this is perhaps the worst bill ever written by Congress, with the exception of two others—the Patriot Act and the Iraq War Resolution.
No one can deny that the US is at an economic crossroads. The discussion has focused mainly on mortgage and bank failings, which, in turn, spurred a whole lot of additional issues. This has turned into a global financial disaster, even though the average “Joe” may not be feeling the pinch. He will, in the form of food price increases and other consumables, which is the only way trickle down theory ever seems to work. The sad truth is this is America’s fault. We created this mess through poor judgment and poor public policy at the federal level. (Note to readers: when you hear the word “derivative,” run!).
The worst part is that our effort has caused international dominoes to fall, upsetting the economic apple cart of major industrial nations across the world. Now the entire globe is feeling the economic pinch and bailout packages are being enacted in every major industrialized country, with the possible exception of Iceland, which I hear will be up for sale on eBay early next week.
Clearly the President has entered office at a difficult time, and I think many Americans felt, or at least hoped, that he was the right person to handle this situation. Level headed, stable, think-before-you-act type of guy. But the rollout of this bill was failed from the start. As Krauthammer wrote, it was based on fear, and fear was supposedly ousted from office on November 4.
My problem with the bill is twofold: first, how big should a stimulus package be? What is the appropriate response to the current crisis, which in its own is difficult to measure? Second, what is stimulus? What strategies have an immediate impact on private and corporate spending, which is essentially what you want a stimulus package to do?
With regard to the first, President Obama had put forth that the original figure was “roughly in the 800 range.” He went on: “There have been some changes to our framework both in the House and in the Senate, but that’s, I think, the scale that we need to deliver for the American people.”
I’d like to know how they came about that number. That, somehow, $800K was the magic number. Which then leads directly into the second issue: what constitutes stimulus? Because, as I read through the package, it seems much more pork than stimulus. And if $800k is the “scale that we need,” then how did they calculate the use of pork?
We can argue the merits of tax cuts. We can argue the merits of tax credits. I don’t like either as stimulus because they don’t happen immediately and don’t have a significant, if any, effect on personal or corporate spending. The only people who take advantage of tax cuts are those who have significant federal tax burden AND actually restructure their withholdings to effectively increase take-home pay. Otherwise, it’s an end-of-the-tax-year thing. Still, let’s argue that those are tied to stimulus. That still leaves over half of the package in non-related stimulus efforts.
If the federal government really wants to stimulate the economy, they need to send every taxpayer a check for $2,000 and require them to spend it in the retail marketplace within 60 days. If they don’t, they lose the money. I’m not sure how you do this, but that’s a true stimulus. A few years ago, the Bush Administration sent large checks (about $1,000) to taxpayers. The mistake is that almost all taxpayers used this to pay off their current debt. It did not stimulate the economy.
This leads to a major conundrum. The last election hinged, in part, on “pork.” Senator McCain talked about eliminating all “pork.” On the surface, this sounds good. Nobody likes the idea of frivolous spending. But that’s if you assume that all pork looks like Bridges to Nowhere (or Madison County). In the election, McCain spoke (ad nauseam) about a $3 million overhead projector for the Adler Planetarium in Chicago, neglecting the fact that this “projector” was the main projection system that shows stars, planets, and solar systems on the planetarium ceiling. Hardly an “overhead projector.”
So, pork is relative. Most pork is necessary funding that can’t be received in other ways from the federal government. We can’t write bills for every small piece of funding that is appropriate from the feds.
But this is a stimulus bill, and, for the most unfortunate reasons, the Democrats are acting like Democrats. Spend. Perhaps because they haven’t had a chance to do so since pre-1994, the House members are eating far too much candy. Or drinking too much Kool-Aid. In fact, while writing this commentary, I received a letter from an education advocacy group intended for Congress to support the stimulus bill and their little piece of it. While the Educational Policy Institute believes that the specific funds are well needed and would be appropriately used, we didn’t sign on because it shouldn’t be part of this Bill.
The Obama Administration and the Democratic House need to learn several lessons. First, the last Administration failed because they cut taxes and increased spending. That formula doesn’t work. Do one or the other, but you can’t do both. Second, the electorate understands that we are in a severe recession. I don’t know anyone who thinks we should be receiving tax cuts or credits after years of significant tax cuts. Nor do I know anyone who subscribes to increasing federal spending to the tune of several trillion dollars.
If Congress wants to do this correctly, if not prudently, please design three separate Bills: the first is a short-term stimulus bill of perhaps $400B. This would include very targeted tax cuts/credits (convince me, though) and special spending to inject the economy with necessary funds to increase GDP and increase employment.
The second bill would be a mid-term stimulus, if you really want to call it that, which could include some of the spending items being presented as stimulus items. The $140 billion in education funding, including Pell Grants, school construction, increases in Title I funding, and on and on aren’t stimulus pieces. They may be argued as important federal priorities, but they shouldn’t be in this stimulus package! Put them in a separate, albeit important, package, and then let’s debate those on their merit, not forcefully because we have a “catastrophe” at hand.
And finally, a third bill that focuses on long-term solutions, which may include revamping workforce and training strategies and a redefinition of the federal-state relationship in education. I don’t subscribe to the notion that the federal government should be layout out billions of dollars to states to do what the states should be doing on their own. If the states believe that education is a state-right supported by the constitution, then learn to run your business such that you can do it well. Unfortunately, 39 states have balanced-budget legislation, and this little piece of law has caused significant challenges across the country. Forty-six states (plus DC) will have budget shortfall this year, and that is the real crux of the economic problem. It isn’t the federal governments problem that states can’t fund their own programs. They need to better manage their budgets (and this isn’t just a short-term, economic crisis issues—it happens every decade). Either get rid of the balanced-budget legislation (with carefully-designed red tape), or quit cutting taxes and start filling up their rainy-day funds. Because this will happen again and again and again. This time it is due to derivatives. Next time will be a Hurricane or some disaster. There is always a need for more funds. They better start saving.
In closing, it was announced this morning that the unemployment rate hit 7.6 percent in January, the largest one-month job loss since 1974. You can expect to hear the President using this to push the stimulus forward. This afternoon he said that any delay in approving the bill would be “inexcusable and irresponsible.” He couldn’t be further from the truth.
Here’s the truth. The country is in bad economic straits because of severe mismanagement at the government and corporate levels. The current stimulus bill in the Senate doesn’t solve these problems and isn’t a well-targeted piece of legislation. Contrary to the President’s push for a quick solution, we need to rethink what constitutes a stimulus and focus on that. Get rid of the pork, as well intentioned as some of it is. We need to tighten belts, get smarter, and take the hurt.
For those of us in education, as much as we want funds for pet projects that have been underfunded or not funded for years or decades, we can’t stoop to a lower level just “to get our cut.” That isn’t prudent government.
The current economy is unsettling. But not as unsettling as personally acknowledging that Krauthammer and John Boehner are the voices of reason. May this all come to an end.