Liberals Should Chill Out About the Compromise Stimulus Bill

The left-wing blogosphere has hurled so much vitriol at the centrist senators who lopped off $80 billion from the stimulus package you’d think the legislation was mandating that every American give up their first-born child or something. These liberal voices may genuinely believe that they are trying to save the economy by passing a $900 billion bill instead of the compromise $800 billion bill. But if they were to take a step back for a second and think about what they saying, they’d realize how preposterous it sounds to the non-liberal ear that the fate of “the economy” hinges on this recently axed $80 billion. For starters, the efficacy of the plan Tim Geithner will unveil on Tuesday to bailout the banks will likely have a much greater impact on how quickly the economy recovers than the stimulus bill. And government spending, let’s remember, is not something that happens once a year. If the economy is still in the tank when this $800 billion runs out, well, then we can spend another $100 billion at that point. In fact, it’s probably a good idea to try not to max out the Treasury’s line of credit with the Central Bank of China all at one go. As I’ve argued before, endless $1 trillion budget deficits must be financed in large part by foreign central banks, and unless they see that the American government is at least TRYING to spend prudently, those central banks will be very reluctant to buy our Treasury bonds at extremely low interest rates. And let’s not lose perspective here: a $800 billion spending bill, even will all the wasteful tax cuts and even without the Head Start funding, is not chump change. Not since Brewster’s Millions has so much been spent so quickly. So I think some toning down of the rhetoric against Olympia Snowe is in order.

But the best argument of all for why we liberals should zip our lips when it comes to losing this $80 billion is that this compromise bill is good politics. It's easy to overlook how much anger there is out there directed at the government for bailing out Wall St. with the TARP. And while we may think that this stimulus bill is a Main St. bailout that will “make up for” the TARP debacle, not a whole lot of other folks see it that way. Much of the rest of the country will see this bill as a “Democratic Party pet project bailout,” especially if there are zero Republicans on board. Just because most economists agree with Paul Krugman that the government must use deficit spending to create jobs does not mean that people won’t notice that the stimulus bill will create jobs largely through spending on projects that make liberals smile. After Bush won in 2000, we suffered through a period in which one party claimed a mandate and then passed all kinds of legislation that they had wanted to pass for many years but couldn’t. And the Republicans paid dearly for that strategy when many of those blatantly partisan policies went bust. Democrats should not make the same mistake by packing the stimulus with lots of goodies they love. If the economy doesn’t recover quickly (or if it does recover but there is lots of inflation), Democrats will never hear the end of the complaints about how they “wasted all that money on pet projects like Head Start when they rammed through that monstrosity of a stimulus bill.” This compromise provides some defense against that future argument.