SYNOPSIS: Krugman criticizes a Republican stimulus package that has nothing to do with addressing our current crisis and everything to do with paying off W.'s wealthiest campaign contributors
Remember California's energy crisis? It illustrated, in particularly stark form, the political strategy of the Bush administration before Sept. 11. The basic principle of this strategy — which was also used to sell that $2 trillion tax cut — was that crises weren't problems to be solved. Instead, they were opportunities to advance an agenda that had nothing to do with the crisis at hand.
It is now clear that, at least as far as domestic policy is concerned, the administration views terrorism as another useful crisis.
Let's recall the California story. Between November 2000 and June 2001 — or, if you prefer, between last year's election and James Jeffords's defection, which gave the Democrats control of the Senate — a shortage of electric generating capacity, exacerbated by the puzzling fact that much of this capacity stood idle, led to power outages and extremely high prices.
The appropriate response was obvious. First, encourage conservation until new capacity could be added; second, temporarily cap prices, both to limit the financial damage and to discourage power companies from manipulating the market.
But Dick Cheney dismissed conservation as a mere "sign of personal virtue," and administration officials waved aside pleas for a price ceiling. Instead, they used California's woes to push for large subsidies to the coal industry, and, of course, drilling in the Arctic National Wildlife Refuge. We never did learn what all this had to do with electricity generation.
Eventually, price controls were imposed, and the idle capacity mysteriously came back on line; meanwhile, conservation led to a sharp drop in demand, and the crisis evaporated.
Now to the present. After Sept. 11, we need to spend substantial sums on reconstruction and homeland security, and the sagging economy could use a temporary stimulus. But George W. Bush has threatened to veto any additional domestic spending beyond the $40 billion already agreed upon — "We wage a war to save civilization itself," he declared on Thursday, but apparently this war must not cost more than 0.4 percent of G.D.P. And the administration favors "stimulus" proposals that have nothing to do with helping the economy, but everything to do with its usual tax-cutting agenda.
The stimulus package introduced by Senate Democrats isn't perfect, by a long shot — it contains billions of dollars for things like agricultural price supports, which don't belong there. But at least $70 billion of its $90 billion is real stimulus, in the form of temporary investment incentives, temporary grants of income support and medical care to the unemployed, and checks to low-income families who are likely to spend them.
The administration, however, favors the Senate Republicans' proposal; while that bill is less lurid than the one passed by the House, with its huge retroactive tax cuts for big corporations (according to Ari Fleischer, Mr. Bush was "pleased" with the House bill), over all it's just as bad. It would cost $220 billion over three years; less than $20 billion of that total seems to have anything to do with economic stimulus.
The rest of the proposal consists of tax cuts for corporations and high- income individuals, structured in such a way that they will do little to increase spending during the current recession. For example, tax incentives for investment are valid not for one year — as in the Democratic bill — but for three years; this is an open invitation to companies not to invest now, when the economy needs a boost, but instead to delay investments until the economy has already recovered.
Why does the administration's favored bill offer so little stimulus? Because that's not its purpose: it's really designed to lock in permanent tax cuts for corporations and the wealthy, using the Sept. 11 attacks as an excuse.
Ten months into the Bush administration, we've all gotten used to this. But politics, while never completely clean, didn't used to be this cynical. We used to see bills like the Democratic stimulus package: mostly serving their ostensible purpose, with the special-interest add-ons a distinctly secondary feature. It's something new to see crises — especially a crisis as shocking as the terrorist attack — consistently addressed with legislation that does almost nothing to address the actual problem, and is almost entirely aimed at advancing a pre-existing agenda.
Oh, by the way: the administration is once again pushing for drilling in the Arctic. You see, it's essential to the fight against terrorism.
Originally published in The New York Times, 11.11.01