In his YouTube address this week, President-Elect Obama kicked off his economic programme. The announcement spoke to his determination to enter the Oval Office on January 20th with his first major piece of legislation ready (almost) to be signed: a large stimulus bill, the American Recovery and Reinvestment Plan. It will be the principal business for the first week of the 111th Congress: a large package, probably worth around $800bn, designed to make any forthcoming recession less harsh and less lengthy.
It forms the latest step in the US government’s response to the current economic climate, and the Obama administration’s first major initiative. The President-Elect had remained pretty quiet on the economy (with the exception of a very general discussion of FDR-style public works initiatives), perhaps (understandably) preferring to allow a clear division to be formed in the minds of the public between President Bush’s economic legacy and his own.
Obama’s team should be careful to draw lessons from the current administration’s handling of the Wall Street bailout process back in October. Happily, it seems they have.
What went wrong back then? The major criticism of the Bush administration was that, whilst they were ultimately successful in passing a bailout bill, it took too long. The mainstream American press contrasted Gordon Brown’s approach with Bush’s, concluding the former had responded far better, chiefly because his response was faster. That’s perhaps unfair, and a little too simple — of course Bush wanted to act fast, but Congress, in an election year, prevented him from doing so. A consequence, perhaps, of the difference between the British and American systems of government.
That said, the Bush administration made Congress’ mischief more probable. The White House sold the bill as a “bailout”, emphasising its size, “$700bn”, and that the recipients would be “Wall Street”. A Congressman in a tight re-election race can’t sell a “$700bn Wall Street bailout” to his or her constituents. That led to opposition, and votes against.
It’s all semantics, of course, but it’s massively important stuff. There was a poll the other day asking respondents whether or not they’d support two policies. The two policies were precisely the same, but the first was described as a bailout, the second as a stimulus. The second was supported by twice as many respondents.
Obama’s new stimulus bill is about “job creation”, “strategic investment”, “economic recovery”, “bipartisan solutions”, and will involve “vigorous oversight”. The big figure is never in the headlines, because they’ve been vague about how much it’ll be — which was smart, because the public will have been warmed to the idea of a stimulus (and its necessity) before they hear how much it’ll cost. Frank Luntz, the Republican pollster, yesterday told Politico.com that “Obama’s team are the best linguists I’ve ever seen. Republicans aren’t in his league right now.” If politics is about perception, the Obama team’s adeptness at shaping the wider narrative will pay dividends.
I tend to think a government stimulus package is a strong case of damned if you do, damned if you don’t — if government does nothing, the economy craters, and people hate the government; if government intervenes, opposition parties yell about debt, and the squandering of tax money. And it’s one of those issues, I think, where picking a position in the middle is not really an option: a small stimulus package will do very little, but still give opposition parties an opportunity to scream. Not wishing to oversimplify, but governments have to make a choice something like “all or nothing”.
Obama has picked the former, so the stimulus should be large, done fast, and, crucially, sold well. The American people have to think it’s the right thing to do; that it’ll make them and their economy better off. Only then will they start to spend again.
A final note, if only for the sake of humour. President George H. W. Bush conducted a rare interview with Chris Wallace of Fox News Sunday. His message: Jeb for President.