Economic Stimulus Bill Is Not a Slam Dunk For Hill, White House

Posted January 14, 2008 at 4:43pm

In the current political environment, the White House and Congress would have trouble agreeing on legislation reaffirming that today is Tuesday, especially if tax and spending changes were included in the bill.

[IMGCAP(1)]So why does anyone think an economic stimulus package, which will be nothing but tax and spending, is a sure thing?

Actually, it’s hard to see how an economic stimulus package can be enacted this year. Unless the economy gets so much worse that not doing something becomes a far greater political problem, Republicans and Democrats are not likely to have the reason they need to compromise from their current positions to make a bill possible. Everyone will have a proposal and there will be lots of talk. But, for a number of reasons, getting an agreement on a single stimulus plan may well be impossible.

First, the Bush administration has clearly decided that its legacy is not getting its own policies enacted, but rather preventing Congressional Democrats from enacting their own.

This unstated but remarkably obvious strategy emerged last year when, especially on anything having to do with the budget, tax and spending, the White House repeatedly refused to negotiate or compromise with Congressional Democrats and nothing less than total capitulation was acceptable. This was the case even on fights that could have been avoided. The $22 billion increase in domestic spending over the level included in the Bush fiscal 2008 budget Democrats wanted was irrelevant as a percentage of total spending in the budget and certainly as a percentage of the gross domestic product, and was virtually the same as what the president proposed. But rather than declaring victory, the Bush administration refused to meet Democrats half or even a quarter of the way. With no ability to get the president to the table and no way to get the votes needed to override a veto, Congress had no choice but to agree to the president’s meaningless line in the sand on spending.

Second, Congressional Democrats have less incentive to compromise with the White House in 2008 than they had in 2007.

In addition to the residual bad feelings caused by last year’s budget debate and the growing realization by their leadership that the White House is more interested in winning than governing, House and Senate Democrats are starting to look at the predictions showing them making substantial gains in the 2008 elections and are realizing that they may have a much better opportunity to enact their preferred policies next year. That has a number of Representatives and Senators thinking that not acting this year may be the best strategy.

An economic stimulus plan is not the only bill that could be delayed for this reason: Every other major authorization and most of the fiscal 2009 appropriations could be treated similarly.

Third, Congressional Republicans do not want to make it easy for the Democratic majority to get anything done.

After being called a “do-nothing” Congress in the 2006 elections, Congressional Republicans won’t want to make it possible for the Democratic majority that replaced them to have a series of legislative accomplishments in 2008. Because it will deal with taxes and could include some type of spending increase — which Republicans believe are their two signature issues — this especially will be the case with an economic stimulus package. They will have no reason to compromise.

These very poor prospects for a stimulus bill may not be readily apparent at the start of the year. The president will likely announce a specific proposal close to or during his State of the Union Address, which will then be included in the fiscal 2009 budget he will release on Feb. 4. Democrats either will try to match the White House plan by revealing their own just before or shortly after the president’s announcement, and Congressional Republicans may want to do something separate from what the president proposes.

Wall Street might cheer because in early February it will look like the stimulus die has been cast. But that look will definitely be deceiving. The Bush plan will likely include tax cuts that are anathema to Democrats and the Democratic plan will include provisions the White House won’t accept. If, like last year, the White House sees no reason to compromise and this year Congressional Democrats see no value in rushing, nothing will be enacted.

But the expectation that something could happen might extend a bit longer. A budget resolution can’t be filibustered in the Senate and can’t be vetoed by the president, so it may be the one time all year Democrats have the ability to put their plan on a legislative pedestal for all to see. But as was the case last year after the budget resolution was adopted, that will bring threats of filibusters and vetoes. These should be taken seriously: Much of what will be needed to implement the budget resolution’s policies will be subject to a filibuster and everything could be vetoed.

That means the budget resolution could be the high-water mark of the stimulus debate.

This will all change if the economy gets so much worse that the White House and Congress can’t afford not to do something. For example, in the immediate aftermath of Hurricane Katrina, President Bush had to drop his insistence that federal spending be cut and instead channeled Lyndon Johnson as he requested tens of billions of additional dollars. The Republican majority then emulated the 1965-66 Congress that approved most of the Great Society.

The Katrina aid was provided only after a catastrophe occurred that was impossible to ignore; so far, Congress and the Bush White House are being asked to anticipate and prevent an economic disaster. In the current political setting, that will be far tougher to do.

Stan Collender is managing director at Qorvis Communications and author of “The Guide to the Federal Budget.” His blog is Capital Gains and Games.