Paul Krugman on the unstimulating stimulus package:
What do you call someone who eliminates hundreds of thousands of American jobs, deprives millions of adequate health care and nutrition, undermines schools, but offers a $15,000 bonus to affluent people who flip their houses?
A proud centrist. For that is what the senators who ended up calling the tune on the stimulus bill just accomplished.
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.
The centrists, however, are only partly at fault. President Barack Obama has earned his share of the blame by trying to be all things to all people — including those who wanted nothing to do with him whatsoever. So rather than being bold, Krugman notes, and pushing “a really strong stimulus plan, reflecting both the economy’s dire straits and his own electoral mandate,” he has “offered a plan that was clearly both too small and too heavily reliant on tax cuts.”
The reason?
Because he wanted the plan to have broad bipartisan support, and believed that it would. Not long ago administration strategists were talking about getting 80 or more votes in the Senate.
The debate reminded me of something I learned while working retail — I managed a tuxedo shop — in my early 20s: Never undersell a potential customer. If a customer were to come in looking for a tux, we were taught to put him in the most expensive one in the store. Let him direct you downward. If you start with the cheap suit, you’ll never get him in the more expensive ones, no matter how much nicer they might be.
The same goes for contract negotiations, selling a house or a car, etc. Always ask for more than you expect to get. If you put your best price on the table, you have no room for negotiations and you will have no choice but to take less than you might otherwise have received.
President Obama failed to follow this basic rule of negotiations and sales. His original plan was compromised before he sent it to Capitol Hill, leaving him with nowhere to go during negotiations — especially with a recalcitrant Republican minority in the Senate having just enough votes to filibuster his plan.
The result was a stalemate in the Senate that left Obama turning to a handful of centrists.
So Mr. Obama was reduced to bargaining for the votes of those centrists. And the centrists, predictably, extracted a pound of flesh — not, as far as anyone can tell, based on any coherent economic argument, but simply to demonstrate their centrist mojo. They probably would have demanded that $100 billion or so be cut from anything Mr. Obama proposed; by coming in with such a low initial bid, the president guaranteed that the final deal would be much too small.
Such are the perils of negotiating with yourself.
Hank Kalet 