Obama's Spending Spree

Barak Obama won congressional passage Friday of his spending plan (I am not going to call it a "stimulus" plan because it is mostly just a spending spree). He implored its urgent passage, yet is waiting until Tuesday to sign it.

As with the original House bill, no Republican representatives voted in favor of it and a few Democrats even voted against it. But Obama won victory in the Senate when three liberal Republicans joined with the Democrats and provided 60 votes in favor -- the requisite number to avoid a filibuster that would have killed the bill.

These liberal Republicans (Olympia Snow and Susan Collins of Maine and Arlen Specter of Pennsylvania) were able to extract a few spending cuts and increased tax cuts, but the bill still amounted to over $780 billion -- the largest in American history -- with little of the so-called stimulus occurring in the first year or two, if at all. Obama had dropped the Buy American provision in order to avoid an economically damaging trade war with our allies. But the radical group ACORN, infamous for voter fraud, still received $2 billion, although the figure was half the original amount. In short, Obama won a token amount of bipartisan support, despite some bipartisan opposition in the House, by making a just a few concessions.

There is little protection against illegal aliens receiving some of the money from this plan. The health insurance bureaucracy that would ration health care will be established by this legislation. The work requirements that were essential to the Clinton/Republican Congress welfare reform are essentially repealed, and even apart from the welfare aspect of Obama's tax rebates that would exceed workers' taxable incomes, making the rebates a net welfare check. States will once again be rewarded for how many people they add to the welfare rolls instead of how many they are able to remove from them. Obama has quietly won the debate on welfare reform that hardly arose during the presidential campaign through legislative legerdemain. Obama seems intent on buying off the lower economic classes -- at the expense of those who pay most of the taxes -- with targeted tax cuts or rebates.

The few tax cuts contained within Obama's spending plan are more Keynsian in their emphasis on encouraging spending by the poor and lower middle class instead of the proven Reaganesque supply-side tax cuts that spur people to work, invest and hire more. Obama did not cut taxes for upper-middle class workers. Because proprietorships usually file taxes as individuals, tax cuts for the upper classes would have included small businesses, who will receive a relatively paltry $4 billion in cuts, even though small businesses have been responsible for all of the job growth this decade (Obama, Congressional Democrats and their liberal allies in the media would like us to forget the 8 million jobs created after George W. Bush cut income tax rates across the board). Unlike Bush, Obama offered no capital gains tax cuts, nor even any reduction in the corporate tax, which is among the highest in the world -- a rate that is making the United States increasingly less competitive in attracting or retaining businesses. Indeed, Obama still plans to allow the Bush tax cuts to expire, which is part of the reason the stock market has decreased 2,000 points since Election Day -- hardly a policy intended to inspire confidence to invest.

In short, public opposition to parts of the plan, as well as the successful buy-off of a few liberal Republican Senators, improved the bill slightly. Yet the massive increase in budget deficits the legislation will cause, despite the lack of stimulative tax cuts and the kind of rapid stimulative spending (e.g. such as on infrastructure) that even some conservatives could have supported, deprived Obama of the broad bipartisan support he wanted for his plan. In fact, it was more of a congressional Democratic plan than even an Obama plan.

Thus, Obama and the Democrats will have to accept the responsibility for the effects of the plan. Although there might be some slight positive stimulative effect in the short term from the legislation, the long-term cost in debt will be fiscally and economically harmful. The greater disappointment is in the lost opportunity to have passed a more effective stimulus, at least for now. It is likely that the economy will recover on its own and thanks in part to the policies set in place by the Bush Administration (i.e. the financial rescue plan in particular) and the Federal Reserve, instead of because of Obama's record spending spree. Yet he and the Congressional Democrats will try to take the credit for any recovery. We must remind the American people of the facts.