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Obama's Deficit Attention Disorder

January 26, 2010

During his first State of the Union address Wednesday, President Barack Obama will apparently endorse two bad ideas whose time hasn't come. The first, a freeze affecting $477 billion in domestic spending, has been rightly labeled "appalling" (Paul Krugman), "a mistake on par with John McCain's 'suspending my campaign' gaffe" (Nate Silver), "fundamental unseriousness" (Brad Delong) and worse. The second, an executive order creating a "deficit commission," is just the latest in a generation of Potemkin crusades against the national debt designed to substitute a façade for real action and responsibility in controlling the budget.
To be sure, the latest manifestation of Obama's dangerous fetish for bipartisanship couldn't be worse for what the economy requires and his political survival demands. Still recovering too slowly from a deep recession which Obama's stimulus has helped reverse, American economy needs more - not less- government spending in the near-term. As Krugman lamented:

"It's bad economics, depressing demand when the economy is still suffering from mass unemployment...
It's bad long-run fiscal policy, shifting attention away from the essential need to reform health care and focusing on small change instead."

Worse still, President Obama is sending Americans precisely the wrong message by suggesting he wants to begin slamming on the brakes when the economy and his agenda alike demand he keep the pedal to the metal. Nate Silver succinctly summarized the looming communications disaster for Obama and Democrats:

"What concerns me more is the politics. Specifically, the sort of cognitive dissonance that is going to be created in the mind of the average voter when the White House is promising to freeze spending on the one hand (or, more accurately, this will be the media caricature of their gambit), and on the other, trying to defend its stimulus and its health care reform package, trying to excuse the bailout package as a necessary evil, and perhaps trying to champion new programs."

Now is not the time to worry about the deficit. And when it is time - after the economy rebounds and job creation ramps up - gimmicks like deficit commissions and spending freezes (for which candidate Obama rightly mocked rival John McCain) shouldn't be part of the solution.
Many of the ingredients are already known, much as partisans of both parties refuse to acknowledge them. First and foremost (as the chart above shows), all or at least most of the Bush tax cuts must be reversed. Charitable tax deductions should be lowered while capital gains taxes are raised to at least their Clinton-era levels. Entitlement reform will almost surely require a delay of the retirement age to at least 67, while payroll taxes should be assessed on incomes above today's $100,000 plateau.
What is also certain is that Obama's Republican foes are not serious about cutting the deficit. (After all, Dick Cheney in 2002 proclaimed, "Reagan proved that deficits don't matter.") The Gramm-Rudman Act's mandatory "sequestrations" in the 1980's, George H.W. Bush's offhand rejection of his own deficit commission in 1989 and the GOP's paeans to a budget balanced amendment in the 1990's all were designed to create the appearance of action on the debt while absolving the White House and Congress from responsibility for the pain it would entail. In 1993, every Republican in the House and Senate voted against the Clinton deficit reduction plan that washed away the red ink by 1999. After tripling the national debt under Ronald Reagan and doubling it again under George W. Bush, listening to Republicans lecture on the federal budget deficit is akin to "watching arsonists calling the fire department reckless."
And at the worst possible time, President Obama is playing directly into their hands. His posturing is economically counterproductive and politically cynical, and virtually everyone (or at least, among Democrats) knows it. For a generation, Republicans have been digging a deep hole on the deficit. This week, Obama grabbed the shovel from their hands - and hit himself in the head.

2 comments on “Obama's Deficit Attention Disorder”

  1. Conservative media spin and the powerful, jaded aura it has cast upon Americans in a year's time is just as detrimental as conservative policy itself.

  2. The spending freeze is a horrible idea and the libertarians are jumping up and down on how great it is, and are praising Obama for it. If he fails in it, I guess they can't blame him, but congress, so it's probably a win-win for him if it doesn't pass muster. Which I hope it doesn't.
    In any case, I don't think lowering charitable tax deductions is a good idea, especially at this time when more people are in need of charity and wealthy people use it to help reduce their tax rates. It's one of the more legitimate and less specious ways for them to do it.


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Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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