Obama's tax gambit

TNR's Noam Scheiber has some interesting insights with respect to Obama's reported proposal to include as much as $300 billion in tax cuts in the economic stimulus package. Scheiber sees Obama's gambit as an attempt to undermine Republican opposition to the stimulus. This makes sense, and I think it's a big part of the story. But Obama isn't simply floating these proposals through the media to communicate with Republicans in Congress. He's sending a message to moderate Democrats and Republicans who might be skeptical about the massive amounts of new government spending that he understands their needs and concerns. He's also fulfilling a major campaign promise.

The devil's in the details, of course, but my concern remains that the stimulus will end up being a combination of tax cuts and conventional spending meant to sustain the status quo. An opportunity exists to direct spending toward reform-minded initiatives in the health care and energy sectors. I'd hate to see it be wasted. Then again, $500 billion is a lot of money, and at present no one knows exactly how it will be allocated.

One other point here. Mitch McConnell's notion of providing loans, rather than grants, to cash-strapped states is a horrendous idea. A loan program would be likely to mean no program at all, since many states would be reluctant to leave themselves hamstrung in this manner, potentially for years to come. I do think it would be wise, in providing the grants, to impose a condition that the states submit to some kind of efficiency audit, to be performed by outside experts and made public afterwards.