The Stimulus Tragedy

"(An idea)so manifestly false that we doubt Mr. Obama really believes it."

Everyone agrees that some kind of fiscal stimulus might help the economy, and that running budget deficits is appropriate in a recession. The stage was thus set for the popular President to forge a bipartisan consensus that combined ideas from both parties.

A major cut in the corporate tax favored by Republicans could have been added to Democratic public works spending for a quick political triumph that might have done at least some economic good.

Instead, Mr. Obama chose to let House Democrats write the bill, and they did what comes naturally: They cleaned out their intellectual cupboards and wrote a bill that is 90% social engineering, and 10% economic policy. (See here for a case study.) It is designed to support incomes with government payments, rather than grow incomes through job creation.

We should add how different this is from the 1980s or even the 1960s. Democrats added business tax cuts to the Reagan package of 1981, while Jack Kennedy's chief economist (Walter Heller) promoted marginal rate tax cuts on stimulus grounds in the 1960s.

Yet Mr. Obama, on Thursday, dismissed any such tax cuts as "the same tired arguments and worn ideas that helped to create this crisis." That's rhetoric for a campaign, not for a President hoping to rally bipartisan support.

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