Obama Spending Freeze
My colleagues Alex Knapp and (in the comments) Dave Schuler have already outlined the most obvious centrist qualms about President Obama’s discretionary spending freeze proposal: That, by omitting Defense, DHS, and Veterans Affairs, it leaves most of the money on the table and that it does nothing to solve the problem of spending growth from rising health care costs (something, incidentally, it has in common with the ailing healthcare plan).
As one would expect, Republican-leaning bloggers are having a field day, pointing to this as an example of Obama’s amateurism, inconsistency, cluelessness, and fecklessness.
More interestingly, many prominent Democrat-leaning bloggers are piling on, too.
Economist Brad DeLong excoriates “Barack Herbert Hoover Obama,” albeit softening that somewhat with an update noting, “An administration source says that he believes that discretionary non-security is not frozen at 2010 ex-stimulus levels for 2011, but is instead bumped up from 2010 to 2011–that the freeze part applies to fiscal 2012, 2013, and 2014.”
There are two ways to look at this. The first is that this is simply another game of Dingbat Kabuki. Non-security discretionary spending is some $500 billion a year. It ought to be growing at 5% per year in nominal terms (more because we are in a deep recession and should be pulling discretionary spending forward from the future as fast as we can)–that’s only $25 billion a year in a $3 trillion budget and a $15 trillion economy.
But in a country as big as this one even this is large stakes. What we are talking about is $25 billion of fiscal drag in 2011, $50 billion in 2012, and $75 billion in 2013. By 2013 things will hopefully be better enough that the Federal Reserve will be raising interest rates and will be able to offset the damage to employment and output. But in 2011 GDP will be lower by $35 billion–employment lower by 350,000 or so–and in 2012 GDP will be lower by $70 billion–employment lower by 700,000 or so–than it would have been had non-defense discretionary grown at its normal rate. (And if you think, as I do, that the federal government really ought to be filling state budget deficit gaps over the next two years to the tune of $200 billion per year…)
And what do we get for these larger output gaps and higher unemployment rates in 2011 and 2012? Obama “signal[s] his seriousness about cutting the budget deficit,” Jackie Calmes reports.
As one deficit-hawk journalist of my acquaintance says this evening, this is a perfect example of fundamental unseriousness: rather than make proposals that will actually tackle the long-term deficit–either through future tax increases triggered by excessive deficits or through future entitlement spending caps triggered by excessive deficits–come up with a proposal that does short-term harm to the economy without tackling the deficit in any serious and significant way.
Statistician Nate Silver piles on, dubbing the plan “The White House’s Brain Freeze.”
I’ll let the economists talk about the wisdom of curtailing government spending in the middle of a massive consumption deficit, but 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. Sure, the story is probably being somewhat overreported, and the spending “freeze” will only apply to certain types of spending. And it’s applied relative to the already-elevated levels of spending from the FY2010 budget, and not some earlier baseline. There’s more bark here than bite, in other words: “freeze on discretionary spending” means something different on K Street than it does on Main Street. But that’s precisely what will make the White House (or at least the Democrats collectively) look flip-floppy. Every time the Democrats propose a jobs bill, or a big investment in alternative energy, you’re going to have Krauthammer and Kristol chomping at the bit to go on Fox News and proclaim Obama to be a hypocrite. Pity Robert Gibbs trying to parse his way out of that. This is not how one wins news cycles — or elections.
Marc Ambinder joins in with, “Obama’s 3 Year Freeze; Democrats Brain Freeze.”
This amounts to about a sixth of the entire budget. Liberals fear that discretionary spending cuts are like fig leaves with sharp edges. They’re designed to cover something ugly and yet they hurt — they hurt those who most rely on government services, who tend to poor and non-white. The administration insist that important programs will be kept alive and functioning, and that funding for, say, education initiatives will rise, while funding for other programs will decline — and that the president’s priorities will be well-funded. The freeze is irrelevant to health care because Medicare, Medicaid and taxes are all mandatory. So too are many of the programs for the neediest, such as unemployment insurance and Pell Grants. And many of the other programs were plussed up recently so the White House is freezing them at a very high level. A second stimulus package wouldn’t be included either.
He offers a longish analysis of the potential political fallout, concluding, “The big if — IF the president really fights for this…fights against his own party, and does so with conviction — if Democrats decide to embrace this (which is doubtful), then it could help both his party and himself.”
A big If, indeed.
My standard position on these things is that they’re political cowardice aimed at creating the false illusion of political courage. That was true of Gramm-Rudman and all of the freeze this, across-the-board that proposals that have come along since. Sure, they force cuts, which I generally favor. But they do so willy-nilly, without any analysis of costs and benefits. Much better, in my view, is to cut bad programs (various corporate subsidies, including farm subsidies, for example) and keep the good ones.
Granted, in the current polarized environment, it’s virtually impossible to do anything even remotely courageous and rational. But presidents can make their case to the public — Obama has a State of the Union address tonight, I seem to have heard somewhere — and then lead.