What happened to “I won”?
This is a pivotal week for the Obama administration’s two-track program to stem the continuing collapse of the U.S. economy, and it’s going to be ugly. The Senate has larded the new president’s stimulus package with an even higher proportion of tax cuts. They’ve excised $40 billion in direct aid to states at a time when a growing roster of states and cities are staring at insolvency. (See the two EPI links below on why this is a very bad idea.) And on Tuesday Treasury Secretary Tim Geithner is due to announce plans for a round of bank bailouts that will far outstrip the remaining $350 billion in TARP money while steadfastly avoiding the takeover of failing banks.
For all the talk of years’ worth of pent-up Democratic spending proposals in the bill, it’s the tax-cutters who have won the most outsized victory in this fight. This is a pretty stunning achievement. Even as all eyes turn to government to concoct a solution, an ideology born of the wish to make government small enough to “drown in a bathtub” (Grover Norquist) still has one hand, if not both, firmly on the reins. But then no Democrat, including Barack Obama, has really advanced a competing ideology. All through the age of Bush, the Democrats have sought to distinguish themselves from Republicans as the party of greater managerial competency. Iraq and Afghanistan? The Democrats would manage the war better! The economy? Same answer.
Recommended reading: Paul Krugman’s column (“[H]ow did this happen? I blame President Obama’s belief that he can transcend the partisan divide–a belief that warped his economic strategy”) and blog (“This is really, really bad”). The AP offers a side-by-side summary of the House and Senate bill provisions; Brad DeLong runs down the cuts in the Senate version. The Economic Policy Institute explains why the proposed cuts in aid to states are disastrous  .