Note to Congress: Doing nothing is not an option

Note to Congress: Doing nothing is not an option

The U.S. House has spoken — at least for now — on the proposed economic stimulus bill, passing a version that turned out to be far more politically divisive than it had to be or should have been.

The fact of the matter is that most members of Congress recognize the need for the government to do something at a time when the economy is stalled and showing dangerous signs that it could slip backwards.

The only voices calling for a hands-off approach are coming from a handful of free market and libertarian think tanks. Most Americans aren’t ready for the tough love that those voices are espousing. And few in Congress are willing to gamble on what could happen if the markets were allowed to correct themselves. It’s easy for an economist to predict that such a correction would be painful but short; if he’s wrong, he may be embarrassed, but he’ll still have a job. Not so the congressman who takes the gamble and loses.

A first step

On what was close to a party-line vote — no Republican voted for the House version of the stimulus bill and a handful of Democrats voted with the Republicans against it — the House took what can only be seen as a first, imperfect step toward doing something about a looming economic crisis. It is going to be up to the Senate and President Barack Obama to do the heavy lifting on this bill. Then it will be up to the House leadership to support a reasonable compromise.

Certainly any congressmen is obligated to fight for those parts of the bill that he or she feels is vital. We discussed one such provision yesterday, a Buy American provision covering steel that would be used in road, bridge and construction projects financed by the bill. The thousands of steelworkers who are out of work aren’t all in Ohio, and they are not all in Democratic congressional districts. “Buy American” should get bipartisan support.

With U.S. economic output at a 25-year low, it would make no sense to spend U.S. tax dollars on steel from China, Japan or Brazil. And with the U.S. stock market coming off its worst January in history, it is obvious that Congress and the administration must take action to shore up the damaged banking system.

Some of the pork in the House bill will have to go. Some of the tax breaks are going to have to be realigned. The bill must contain relief for those already hardest hit, people who have lost their income and medical coverage and are approaching expiration of their unemployment coverage.

But the thrust of the bill must be to put money back into the economy by encouraging people to spend (wisely) and companies to invest (in domestic production).

The three T’s

President Obama’s economic adviser, Lawrence Summers, said that any stimulus bill should be targeted, timely and temporary.

It will be up to the administration and the Senate to work toward that goal. The administration and Democratic leaders have the upper hand politically, but they must reach across the aisle. Republicans must recognize that they have an opportunity to negotiate what they would see as a better bill, but if they overplay their hand, they run the risk of being seen as obstructionists.

Too much is at stake for either party to be inflexible. Unless they want to gamble on doing nothing — and see whether a “natural” recovery would really be painful but brief.