The Stimulus: Bad Luck Comes in Threes?

By Jon Kraushar Communications Consultant

There is a troubling pattern of threes bedeviling the stimulus bill.

First is the return of the unholy trinity that brought us the Depression: Smoot, Hawley and Keynes. The Smoot-Hawley Tariff Act of 1930 was protectionist legislation that led to ruinous trade disputes between the U.S. and its trading partners, notably in Europe. We are seeing the second coming of Smoot-Hawley protectionism in the "Buy American" requirements in the House version of the stimulus bill and in the supposedly watered-down but dangerously murky language of a Senate bill just hammered out, with passage expected very soon.

The House bill requires that American iron and steel be used for all infrastructure projects. After Europe, Canada and Australia expressed alarm, President Obama said, "We can't send a protectionist message." But the Senate only muddied the waters saying in its draft bill that the "Buy American" provision would be"applied in a manner consistent with U.S. obligations under international agreements."As Sheldon Richman of The Foundation For Economic Education writes:

"The U.S. government is a party to several trade agreements with which the 'Buy American' provision would seem to be in conflict. On the other hand, why have the provision at all if it may not be carried out in violation of trade agreements?"

Next is the return of the Keynesian "multiplier" theory used to justify massive government spending as in the New Deal stimulus during the Depression. The Wall Street Journal recently explained the theory and then refuted it:

"...each $1 of spending the government 'injects' into the economy yields 1.5 times that in greater output. There's little evidence to support this theory, but you have to admire its beauty because it assumes the government can create wealth out of thin air. If it were true, the government should spend $10 trillion and we'd all live in paradise."

In his weekly radio address on Saturday, President Obama disparaged arguments to minimize government spending and maximize tax cuts in the stimulus as "tired old theories...a losing formula...that...doubled the national debt, threw our economy into a tailspin, and led us into this mess in the first place." Yet by embracing the unholy trinity of Smoot, Hawley and Keynes this is precisely what the president is repeating.

That brings us to the next grouping of troubling threes. Driving this misbegotten stimulus plan are the three top Democrats currently running our government: President Obama, House Speaker Nancy Pelosi and Senate Majority LeaderHarry Reid.

[caption id="attachment_6339" align="aligncenter" width="218" caption="House Minority Leader Rep. John Boehner, R-Ohio, Speaker of the House, Rep. Nancy Pelosi, D-Calif., and the President. (AP Photo/Charles Dharapak, File)"][/caption]

Not a single Republican voted for the House bill. But three turncoat Republicans helped secure the Senate version: "moderates" Arlen Specter, Susan Collins and Olympia Snowe. Moderate is a euphemism for a Republican who would vote for a stimulus in which, according to The Wall Street Journal,"...about 12 cents of every $1 is for something that can plausibly be considered a growth stimulus."

The next troubling threesome is the formulation by Lawrence Summers, the president's top economic adviser, who tried to build the case for the New Deal-like stimulus plan by saying it would be "timely, targeted and temporary."

While this sounds good what is really going on is that Obama keeps issuing daily catastrophic warnings to pass a stimulus bill with such "speed, spending and scope" (my words) that the legislation will be "precipitate, pervasive and permanent" (again, my description).

In using increasingly alarmist language about the need to quickly reconcile the House and Senate versions of the stimulus bill, President Obama keeps referring to "games" of power that should not be played. Yet the final troubling threesome is the game that Obama and the Democrats are playing in trying to pass the stimulus hastily, before public belief in it crumbles, as is happening, with public supportdropping in a recent poll to 37%, from 42% last week.

That game is "blame, shame, and explain." Obama and the Democrats are attempting to blame, shame and explain as they paper over the return of Smoot, Hawley and Keynes and ludicrously justify their continued support for three ethically-challenged drivers of the stimulus plan: Treasury Secretary Timothy Geithner (who has admitted to failing to pay his taxes on time), Chairman of the House Ways and Means Committee Charles Rangel, and Senator Christopher Dodd (both of whom are targets of inquiries into their shady financial dealings).

With House and Senate versions of the stimulus plan still to be reconciled, there is a small window of opportunity for the Court of Public Opinion--and you as a jury member--to expose this pattern of troubling threesomes and to insist that whatever stimulus bill moves forward it will be in the public'sinterest rather than just the politicians' interest.

Communications consultant Jon Kraushar is at