Obama Asked For Some Ideas About Improving His Economic Stimulus Plan-- Here Are A Few

Last week, after withering criticism of his less than dynamic plans to rescue the economy the Bush Regime has virtually destroyed, President-elect Obama went on TV and said he is open to new ideas that will help make his plan more ambitious. Before we get to the serious proposals he virtually invited from Nobel winning economist Paul Krugman, there's time for a chuckle at the expected reaction from way out in right field, where the Republican Party Daily has their all too predictable suggestion: eliminate the estate tax so that the rich and their offspring can get much richer. That is, in the end, all the GOP-- or any right wing party anywhere-- ever really stands for. As Thomas Frank puts it in his excellent new book, The Wrecking Crew-- How Conservatives Rule, in GOP-land the interests of the ownership class "are central and defining, while every other aspect or strategy of the movement is mutable and disposable. Indeed, even the cult of the free market, which appears to be such a solid, fixed element of the business mind, is malleable as well, with conservatism whining for bailouts and high tariff walls when those seem like the way to maximize profits."

So... Krugman, about whom the reporter posed the question to Obama last week in the first place and who has put some thought-- beyond whining-- into the question. In responding to Obama's request of “how to spend money efficiently and effectively to jump-start the economy,” Krugman starts with a great suggestion that Obama will surely ignore as he continues to cultivate the enemies of working families-- not the implacable fascists like Jim DeMint (R-SC), Mean Jean Schmidt (R-OH), Tom Coburn (R-OK), Johnny Isakson (R-GA), Michele Bachmann (R-MN), Eric Cantor (R-VA), and Jim Bunning (R-KY), but the mainstream conservatives like Dick Lugar (R-IN), Olympia Snowe (R-ME), Ben Nelson (D-NE), Mike Castle (R-DE), Chris Smith (R-NJ), Max Baucus (D-MT), Ike Skelton (D-MO), and Frank LoBiondo (R-NJ): make the plan bigger and scrap the proposal for $150 billion in business tax cuts, which would do little to help the economy.

Money not squandered on ineffective tax cuts could be used to provide further relief to Americans in distress-- enhanced unemployment benefits, expanded Medicaid and more. And why not get an early start on the insurance subsidies-- probably running at $100 billion or more per year-- that will be essential if we’re going to achieve universal health care?

...So how can Mr. Obama do more? By including a lot more public investment in his plan-- which will be possible if he takes a longer view.

The Romer-Bernstein report acknowledges that “a dollar of infrastructure spending is more effective in creating jobs than a dollar of tax cuts.” It argues, however, that “there is a limit on how much government investment can be carried out efficiently in a short time frame.” But why does the time frame have to be short?

As far as I can tell, Mr. Obama’s planners have focused on investment projects that will deliver their main jobs boost over the next two years. But since unemployment is likely to remain high well beyond that two-year window, the plan should also include longer-term investment projects.

And bear in mind that even a project that delivers its main punch in, say, 2011 can provide significant economic support in earlier years. If Mr. Obama drops the “jump-start” metaphor, if he accepts the reality that we need a multi-year program rather than a short burst of activity, he can create a lot more jobs through government investment, even in the near term.

Still, shouldn’t Mr. Obama wait for proof that a bigger, longer-term plan is needed? No. Right now the investment portion of the Obama plan is limited by a shortage of “shovel ready” projects, projects ready to go on short notice. A lot more investment can be under way by late 2010 or 2011 if Mr. Obama gives the go-ahead now-- but if he waits too long before deciding, that window of opportunity will be gone.

It will be telling to see if Obama listening to the Nobel laureate or to the folks whose ideology (and self-interest) drove the country to the brink of bankruptcy. Very telling.


UPDATE: GROVER HAS SOME SUGGESTIONS FOR OBAMA TOO

Even further right-- if that can be imagined-- than the editorial page of the Wall Street Journal is grasping, self-serving Republican crook/Abramoff business partner Grover Norquist. And ole Grover's not a fan of President-elect Obama's plans to save America from, basically, all the crap Norquist sweet talked the GOP into over the last decade. Big surprise.

According to today's CongressDaily Norquist isn't even excited about Obama's tax cut proposals! The lunatic fringe extremist, who makes his money sucking up to society's rich parasites says Obama is "the prisoner of the three interest groups-- the trial lawyers, the unions and the big city political machines-- that have 'captured' the Democratic Party and control its agenda. He said the president-elect had 'never done anything in his entire life to cross one of these three groups,' all of which he argued, are wealth consuming rather wealth producing entities.

As a result, Norquist said, Obama is poised "to repeat all the mistakes ... including protectionism" made by President Herbert Hoover in the early 1930s. Norquist added he held out some hope that Obama will be "less destructive on trade" because of his Chicago connections but said that if the new president intended to "part company" with the unions on the issue, he had to do it soon. Norquist dismissed as ineffective Obama's proposal to spur the economy by providing tax credits of between $500 and $1,000 to low- and moderate-income households. "If you are going to write a check, that is not a tax cut, it is a subsidy," Norquist said, arguing that such credits "do not affect behavior" and do not generate economic activity. As his own recommendation for reviving the economy, he urged reductions in capital gains taxes. He said cutting the 35 percent capital gains levy on businesses to 15 percent would free up as much as $2 trillion in capital for investors and reap a huge windfall in tax revenues. But he said it would be politically risky for Obama to take this route because "then the headlines would say-- Democrats lose, Republicans win."

UPDATE: BOB HERBERT AND DEAN BAKER HAVE A SUGGESTION TOO

In today's Times Bob Herbert puts forward a stunning proposal for Obama to consider.

The economist Dean Baker is a strong advocate of a financial transactions tax. This would impose a small fee-- ranging up to, say, 0.25 percent-- on the sale or transfer of stocks, bonds and other financial assets, including the seemingly endless variety of exotic financial instruments that have been in the news so much lately.

According to Mr. Baker, the co-director of the Center for Economic and Policy Research in Washington, the fees would raise a ton of money, perhaps $100 billion or more annually-- money that the government sorely needs.

But there’s another intriguing element to the proposal. While the fees would be a trivial expense for what the general public tends to think of as ordinary traders-- people investing in stocks, bonds or other assets for some reasonable period of time-- they would amount to a much heavier lift for speculators, the folks who bring a manic quality to the markets, who treat it like a casino.

“It raises money in a way that comes primarily at the expense of speculation,” said Mr. Baker. “The fees would be a considerable expense for someone who is buying futures, or a stock, or any asset at 2 o’clock and then selling it at 3. The more you trade, the more you pay.

“For the typical person holding stock, who is planning to hold it for a long period of time, paying the quarter of one percent on a trade is just not that big a deal.”

The fees, though small, could amount to a big deal for speculators because in addition to the volume of their trades they often make their money on very small margins. Someone who buys an asset and then sells it an hour later at a one percent appreciation might feel quite pleased. He or she would be less pleased at having to pay a quarter-percent fee to purchase the asset in the first place and then another quarter percent to sell it.

This, according to Mr. Baker, is part of the beauty of the transfer tax; it tends to curb at least some speculation. “It’s a very
progressive tax,” he said, “that discourages nonproductive activity.”