The 'stimulus' should be shelved

Lawrence Kudlow:

Wednesday night's House tally on the Democratic stimulus package, where not a single Republican voted in favor, was another shot across the bow for this incredibly unmanageable $900 billion behemoth of a program that truly will not stimulate the economy. Sure, the Democrats won on a party-line count. But Team Obama is now regrouping in the face of mounting criticism of this package.

GOP economist Martin Feldstein revoked his prior support of a stimulus plan in Wednesday's Washington Post. "In its current form," Feldstein wrote, "[the plan] does too little to raise national spending and employment. It would be better for the Senate to delay legislation for a month, or even two, if that's what it takes to produce a much better bill. We cannot afford an $800 billion mistake."

Clinton economic adviser Alice Rivlin made the same point in testimony before the House Budget Committee. Her message: Divide up the package and slow down the process.

And Sen. Richard Shelby told CNBC that Washington should "shelve the stimulus package" and instead attack the banking and credit problem first -- probably with a government-sponsored bad bank that would relieve financial institutions from their toxic-asset problem. Mr. Shelby believes the credit crunch remains the biggest obstacle to economic recovery.

Later in the day when I interviewed Senate Republican leader Mitch McConnell, he agreed with Shelby that the stimulus plan should be shelved. For the first time -- as far as I know -- McConnell pledged to vote no on the package. Instead he wants larger tax cuts and smaller spending. McConnell might be willing to change his mind if the package changes, but he told me he didn't expect that to happen.

And in what may prove to be the biggest stimulus-package hurdle of all, news reports suggest that Team Obama is contemplating as much as $2 trillion in TARP additions to rescue the banking system in one form or another. That would be $2 trillion on top of the nearly $1 trillion stimulus package.

Government spending, deficits, and debt creation of this magnitude is simply unheard of. So the added TARP money will surely imperil the entire stimulus package as taxpayers around the country begin to digest the enormity of these proposed government actions. Financing of this type would not only destroy the U.S. fiscal position for years to come, it could destroy the dollar in the process. What's more, the likelihood of massive tax increases -- which at some point will become front and center in this gargantuan funding operation -- would doom the economy for decades.

By the way, Scott Rasmussen's latest poll shows that already -- before the new TARP money is included -- public support for the humongous stimulus package has dropped to 42 percent.

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I posted on the Rasmussen survey earlier and it shows that the Democrats are the ones out of touch with the voters. This mess is piling up to be as big a Democrat screw up as the Clinton health care debacle. If the Republican Senators can hold tight they can defeat this package and maybe even get one that makes more sense. This package could be setting the GOP up for big gains in 2010.