Economic Recovery: Devil Is Not In The Details, He's Lurking Across The Aisle

Several core truths have emerged several months into the worst economic crisis since the Great Depression:

Giving free money to key perpetrators in the crisis has been a costly mistake.

Nationalization is a band aid and not a cure.

The heart of any recovery and stimulus program must be a combination of job creation and tax cuts.

That combination must be engineered to have maximum immediate effect.

The entire Wall Street regulatory apparatus has to be junked and blameworthy officials sent packing.

Nobody, including President-elect Obama, really knows that they're doing.

With Congress dithering -- as opposed to debating -- over what to do and there being little hope that Obama will have urgently needed legislation on his desk anytime soon, let alone on Inauguration Day as it once had been hoped, it is imperative that monies already available -- the remaining $350 billion from the troubled Troubled Assets Recovery Program (that's TTARP to you) -- be withheld from the unrepentant culprits who got us into this mess.

It is darkly hilarious that John McCain had rushed to Washington in October to bail out the economy -- and, of course, his foundering presidential campaign -- with the result being TTARP, a piece of legislation so shoddy that the initial $350 billion might just as well have been stuffed into a burn barrel in Lafayette Park across from the White House and set afire to keep homeless people warm.

TTARP has not triggered new lending or hiring, and the private sector has failed to match that taxpayer money with its own. Worse yet, there not only has been no accountability, but Treasury Secretary Henry Paulson has given himself unprecedented powers to do as he damned well pleases.

If there's good news in any of this, it's that there is only a week left on the clock for the Bush Failure Team. That is some comfort because Treasury Secretary nominee Timothy Geithner has indicated that remaining TTARP funds should go to municipalities, small businesses, homeowners and other consumers where they can have the greatest immediate impact.

But that's the easy part.

The hard part will be to push through and then make work Obama's so-called American Recovery and Reinvestment Plan, a stimulus-tax cut package now estimated to cost about $775 billion. Economists Jared Bernstein and Christina Romer, working with Geithner and the Obama transition team, have the best analysis of the package, in itself a breath of fresh air after the fuzzy math of the last eight years:

* Creation of between three and four million jobs by the end of 2010.

* Tax cuts that are mainly expanded deductions and credits.

* Fiscal relief to the states, which is likely to create fewer jobs than direct increases in government purchases, but is crucial nonetheless because it can be implemented quickly.

* Strong job growth in certain industries such as construction and manufacturing with an emphasis on infrastructure, energy, and school repair, with jobs being created in other areas as tax cuts and fiscal relief to the states take hold.

* More than 90 percent of the jobs created are likely to be in the private sector, will have a wide range of pay scales and will move many workers from part-time to full-time work.

There will have to be considerable give and take between the White House and Congress as the dithering ends and the debating begins. Indeed, Obama already has made some key concessions in private meetings with legislators.

While I don't have the chops to ascertain whether the plan is too big or not big enough, let alone what kind of tax cuts are best, I am concerned that there are not enough "shovel ready" infrastructure improvement projects.

I also understand that the devil is not in the details.

The devil is lurking across the aisle in the form of newly-minted Republican deficit hawks, the very guys who are itching to get back at FDR for the New Deal but rolled over on the enormous deficits that President Bush has run.

Incidentally, the federal deficit was a not puny $5.7 trillion the day that Bush took office; it will be a gargantuan $10.6 trillion the day that Obama takes office.

Images courtesy of Michael Mehl