MSNBC hosts ask "how do you justify" recovery funds spent after FY 2010 without noting CBO head's response

››› ››› LILY YAN

On MSNBC Live, Melissa Francis cited what she called the "legitimate" "complaints" of opponents of the economic recovery plan and stated, "Only 64 percent of the money is going to be spent within the next 19 months." Contessa Brewer replied, "And how do you justify that?" However, the CBO director has stated in congressional testimony that unlike ordinary "periods of economic weakness" that "are fairly short-lived," "CBO projects that economic output will remain significantly below its potential for several more years, so policies that provide stimulus for an extended period of time may be appropriate."

On the January 29 edition of MSNBC Live, citing what she called the "legitimate" "complaints" of opponents of the economic recovery plan, CNBC's Melissa Francis stated, "Only 64 percent of the money is going to be spent within the next 19 months." MSNBC anchor Contessa Brewer replied, "And how do you justify that?" Francis responded: "How do you justify that is the real question." But neither mentioned that economists, including Congressional Budget Office (CBO) director Douglas W. Elmendorf in written congressional testimony submitted days earlier, have addressed this "complaint[]."

As Media Matters for America has noted, in his January 27 written testimony for the House Budget Committee, Elmendorf said that fiscal stimulus in 2011 or later would be effective in the current economic situation, in which economic output is projected to remain below its potential long after the technical beginning of the recovery. Elmendorf stated that unlike ordinary "periods of economic weakness" that "are fairly short-lived," "CBO projects that economic output will remain significantly below its potential for several more years, so policies that provide stimulus for an extended period of time may be appropriate." From Elmendorf's testimony:

Timing. The economic effects of fiscal stimulus should occur during the period of economic weakness, all else being equal. When, as now, a recession is clearly already under way and aggregate demand is declining, it is better if stimulus affects spending quickly in order to mitigate further deterioration in the economy. Different types of policies may differ greatly in how quickly they can be implemented.

Because most periods of economic weakness are fairly short-lived, it is generally preferable that stimulus policies be short-lived. Currently, however, CBO projects that economic output will remain significantly below its potential for several more years, so policies that provide stimulus for an extended period of time may be appropriate. Indeed, a fiscal stimulus that ends before the economy has started to regain its footing runs the risk of exacerbating economic weakness when the stimulus ends.

Likewise, in a January 27 blog post, New York Times columnist and Nobel laureate Paul Krugman wrote that because of the particular circumstances of the current economic situation, it would not be a problem even if "some or even most" of stimulus spending occurred after the recession technically ends.

From the 2 p.m. ET hour of MSNBC Live on January 29:

BREWER: Not a single one of them voted for that --

FRANCIS: Not one.

BREWER: -- $819 billion stimulus package.

FRANCIS: Not a single one. This despite President Obama's huge effort to reach out to Republicans on the plan. Will we see the exact same thing when the Senate takes up the proposal next week?

Jonathan Allen is a reporter for CQPolitics.com. Jonathan, thanks so much for joining us.

ALLEN: Good afternoon, ladies.

FRANCIS: What's the takeaway on the Hill right now?

ALLEN: Well, I think you've got a lot of different things going on. Certainly, there's some question as to whether Republicans made a good strategy in all voting against the bill. It certainly denied Barack Obama the sort of big bipartisan vote he would have liked after campaigning on his ability to bridge this partisan divide.

But at the same time, obviously, the American public put Obama in office. He's very popular right now. This is his first major legislative item that he's trying to get through. And I think we'll have to see what happens in terms of who wins this battle.

But, again, these House Republicans are going to get a second bite at the apple, too. This will come back as -- in final form as a conference report, and I think the expectation is that some Republicans will vote for it then.

BREWER: Well, it had to have been awkward last night when some of these House Republicans accept the president's invitation to a White House cocktail party, when just hours earlier, they had voted against the package he so sincerely pleaded with them to vote for.

The Senate Republicans seem more willing at this point to at least entertain the notion of voting for this. And Harry Reid, the majority leader of the Democrats, says he expects that he will get more Republican support, but what's that going to take?

ALLEN: Well, you know, it's an $888 billion package on the Senate side right now. It's a little bit bigger because it's got a patch of the Alternative Minimum Tax. That's something that's very popular with Republicans.

We've already seen Republicans voting for components of this in committee -- in the Finance Committee and in the Appropriations Committee -- so the expectation is that there will be Republican votes for it in the Senate. Probably not a whole lot -- I talked to a senator earlier today who said he'd be surprised if it was more than half a dozen, but, of course, even a few senators is a big number after the House vote.

FRANCIS: You know, Jonathan, I'm wondering, though, who is the negativity really targeted at? You know, one House Republican told MSNBC.com's First Read that they had more meetings with President Obama over the plan than they did with House Speaker Nancy Pelosi. You know, was this really directed against Speaker Pelosi?

ALLEN: Well, I think what they're trying to do is separate Barack Obama from Nancy Pelosi. Barack Obama is extremely popular with the American public; Nancy Pelosi is not. And to the extent that they can make her the enemy, make her the villain, say that she's the one that's really standing in the way of the bipartisanship, that they -- I believe, they think that will help them in congressional elections down the line -- try to tie themselves closer to Barack Obama than to Nancy Pelosi.

BREWER: Although -- I mean, the Republican senators -- I talked to several House of Representatives lawmakers who said, "No, this was a vote on the actual issues. The fact of the matter was the House Democrats -- excuse me -- put too much pork in this."

Harry Reid's like, "Well, you know, come on. Stimulus is in the eye of the beholder." But, I -- looking at this, did the House Democrats do Barack Obama a disservice --

FRANCIS: Yeah.

BREWER: -- by adding so many programs --

FRANCIS: Yeah.

BREWER: -- that had nothing to do with the stimulus?

FRANCIS: And weren't very stimulative.

ALLEN: Well, I think that it's a careful balance they have to play. Obviously, they don't want to give away the store to Republicans. They don't want to miss out on the things that they've been trying to get into law. Certainly, there are a lot of items that you can look at in this bill and argue about whether they're stimulative -- Pell grants, for instance. There's a lot of money for education, and there's some concern about that.

Some of the items were pulled out -- re-sodding the National Mall, for instance, got pulled out of the package. But there's a lot of argument over whether these items are stimulative. And I think that's going to be the discussion going forward between the House and the Senate, Democrats in both chambers, and also, maybe the inclusion of Republicans at the request of the president.

FRANCIS: Yeah. I mean, you know, Jonathan, it strikes me that a lot of the complaints are legitimate. We're looking at less than 5 percent of the money's going towards highway and roads; you know, $66 billion going towards education, which is fantastic, but is not necessarily stimulative right away. Only 64 percent of the money is going to be spent within the next 19 months. I mean, it seems like those --

BREWER: And how do you justify that?

FRANCIS: How do you justify that is the real question.

ALLEN: Fortunately, I don't have to put my vote up on it. But I think that I --

FRANCIS: I know I wouldn't.

ALLEN: I think we've heard a lot of justifications during the floor debate on the House floor. A lot of things that don't appear to be stimulative may, in fact, be that. But there are some good arguments on the other side, as you point out. A few billion dollars of this is not even going to be spent within the next 10 years, according to the Congressional Budget Office. Obviously hard to see how that money being spent outside or after 2019 is going to have an effect on this recession. Hopefully, it's not affecting this recession in 10 years.

BREWER: Jonathan, thanks a lot.

FRANCIS: All right.

BREWER: You know, it's interesting, because one of the senators told me today -- the Democratic senators -- he said, one way they're hoping to get their Republican colleagues in the Senate on their side is they're -- they are going to focus more on the tax. And they said, specifically, that AMT, the alternative minimum tax --

FRANCIS: Yeah, that's a good one.

BREWER: -- which a lot of them say, you know, look, middle class taxpayers are getting crushed by this thing. He said, "I think that we'll get some Republican support on this."

FRANCIS: Yeah. And we are seeing a pretty big tax mix in here.

Posted In
Economy
Network/Outlet
MSNBC
Person
Contessa Brewer, Melissa Francis
Show/Publication
MSNBC Live
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