A tragic subtext to the deficit lunacy / ignore-unemployment lunacy in Washington is that Republicans secretly understand Keynesianism and the need for economic stimulus, even if they pretend not to on TV.
If Democrats do nothing to address high unemployment, they will pay for it in November 2012.
Republicans will see clearly that results on the job front will matter, that they'll need a major stimulus (though they will insist on calling it something else) to make any progress, and that they will have a terrific new chance through all of it to really complete the K Street project and finish putting the final ornamentation on the baroque "outsourcing/privatization/revolving door" spoils system they have been creating since the mid 1990s.
Perry Announces Plans for Economic Growth Package
By Ulysses Cipher, New York Times
January 12, 2013
Washington DC – After weeks of trial balloons, President-Elect Perry today announced details of his promised “growth package,” an ambitious set of spending programs and tax cuts designed to pull the US out of the current “double-dip” recession and to try to make a dent in the worsening unemployment rate, which topped 13% in last week’s survey.
The total growth package will include extensive new spending on national security, including homeland security, natural resource exploration and extraction, and what has been dubbed “agricultural renewal and modernization,” sketched out in what would be a vast expansion of the so-called “farm bill”, as well as provisions to make all the Bush tax cuts permanent, and provide extensive new tax cuts on capital gains tax rates.
Among the provisions:
• $390 billion in subsidies for oil exploration and extraction, including funding for a 10x increase in the capacity of the new Keystone XL “tar-sands” pipeline
• $425 billion in additional homeland security spending, including fully manned guard-towers every 500 feet along the Mexican border “triple-fence”
• A $220 billion increase in spending in the farm bill for agricultural renewal and modernization
• An incremental $690 billion toward “renewal” of our armed forces, including several new state-of the art military bases strategically located to better enable rapid response to new security threats from emerging “rogue” states such as Venezuela, as well as seven new aircraft carriers, and restoration of full funding for the F-35 Joint Strike Fighter
• Making the Bush tax cuts permanent, and further reducing the capital gains tax rate, at a cost of approximately $3 trillion over the next 10 years – though the White House disputes this estimate
All told, the Perry proposal calls for approximately $1.8 trillion in new spending and $3 trillion in tax breaks, all designed, according to Perry, “to unleash the power of free markets and free enterprise.”
The Perry Administration claims that this program will not increase the long run deficit, for a variety of reasons.
First, the new Administration is calling for offsetting savings, which will also be included in the detailed proposal he will deliver to Congress at the end of the month, and which are expected to be well-received by the Republican-controlled House and the new Republican Majority in the US Senate:
• Repeal of most provisions in the so-called “Affordable Care Act” passed in 2010 (assuming that the Supreme Court does not invalidate the whole law first)
• Privatizing all of Medicare and Medicaid through new voucher programs
• Privatizing the US Postal Service
• Cutting funding on several regulatory agencies, including the EPA, SEC, and FDA, by 50-60%
• Eliminating the Departments of Education and Labor
• Cutting the budgets of the National Institutes of Health, Department of Interior, and other Agencies by 50-80 percent
Moreover, the Administration has cited a new analysis by the Heritage Foundation that uses an advanced economic technique called “dynamic scoring” to evaluate the full stimulative impact of Perry’s proposed tax cuts. When modeled using dynamic scoring, the new Administration promises that the proposal will be deficit neutral by 2022.
Controversy Over the Cost
Some critics have charged that the Administration is grossly understating the costs of the proposals. The Congressional Budget Office, and analysts at liberal think tanks, have found that the new Perry proposals will more than triple the deficit over the next 10 years, even if all of the proposed cuts are enacted (which is considered unlikely).
However, the official Heritage analysis, supported by several additional analyses from George Mason University and the University of Chicago find that the huge boost in the pace of economic growth from the tax cuts should offset the large increases in spending.
But while some economists are enthusiastically embracing the proposal, overall economist reactions are mixed. Most acknowledged that the large implied investments will likely be stimulative for the economy - though Perry is adamant that the program not be called a "stimulus" - and will help address the slide toward a 21st-century great depression, many also questioned whether proposed investments were being well-targeted to bolster future growth.
Democrats Cautious
Democratic lawmaker reactions to the proposal have been cautious.
“While I would question President-Elect Perry’s persistent claims to a ‘Mandate’ when he won by less than 1% of the popular vote in an election where 15 million fewer voters turned out than in 2008, we definitely have to do something about the unemployment crisis,” said new Senate Minority Leader Charles "Chuck" Schumer.
“Furthermore, while many elements of the Perry proposal are questionable, we Democrats are morally superior to Republicans and wouldn’t want to see our new President fail when the very future of our country is on the line…”