Krugman: Obama to Blame for Severely Weakened Stimulus Bill

As noted in an earlier post, I’ve long respected centrist Republican Senators Snowe, Collins, and Specter for their hard work over the years in efforts to move the senate out of gridlock on important legislation. The three played leading roles in the agreement on the stimulus bill reached last Friday.

This morning, however, Nobel prize winning economist Paul Krugman is furious with these same centrists for what he considers the gutting of important spending from the bill, and he blames President Obama for allowing the Republicans to take control in the first major challenge of his new administration.

Krugman argues:

Even if the original Obama plan — around $800 billion in stimulus, with a substantial fraction of that total given over to ineffective tax cuts — had been enacted, it wouldn’t have been enough to fill the looming hole in the U.S. economy, which the Congressional Budget Office estimates will amount to $2.9 trillion over the next three years.

Yet the centrists did their best to make the plan weaker and worse.

One of the best features of the original plan was aid to cash-strapped state governments, which would have provided a quick boost to the economy while preserving essential services. But the centrists insisted on a $40 billion cut in that spending.

The original plan also included badly needed spending on school construction; $16 billion of that spending was cut. It included aid to the unemployed, especially help in maintaining health care — cut. Food stamps — cut. All in all, more than $80 billion was cut from the plan, with the great bulk of those cuts falling on precisely the measures that would do the most to reduce the depth and pain of this slump.

On the other hand, the centrists were apparently just fine with one of the worst provisions in the Senate bill, a tax credit for home buyers. Dean Baker of the Center for Economic Policy Research calls this the “flip your house to your brother” provision: it will cost a lot of money while doing nothing to help the economy.

All in all, the centrists’ insistence on comforting the comfortable while afflicting the afflicted will, if reflected in the final bill, lead to substantially lower employment and substantially more suffering.

But how did this happen? I blame President Obama’s belief that he can transcend the partisan divide — a belief that warped his economic strategy.

To read Krugman’s entire column in the NY Times, go here.