The national debt has been a cudgel used to hit the administration since even before the 2010 midterms, but one comment that Obama repeatedly makes on the subject of government spending is just maddening.From his convention speech:
My opponent — my opponent said that it was tragic to end the war in Iraq. And he won’t tell us how he’ll end the war in Afghanistan. Well, I have, and I will. And while my opponent would spend more money on military hardware that our Joint Chiefs don’t even want, I will use the money we’re no longer spending on war to pay down our debt and put more people back to work — (extended cheers, applause) — rebuilding roads and bridges and schools and runways, because after two wars that have cost us thousands of lives and over a trillion dollars, it’s time to do some nation building right here at home.
This is a terrible thing for Obama to say. Why? Because it directly grants the premise of his critics, that one of the problems facing the government right is a spending constraint, and that there’s a big need to decide between national security and roads and bridges.
In the next paragraph of the speech, he says:
You can choose a future where we reduce our deficit without sticking it to the middle class. Independent experts say that my plan would cut our deficit by $4 trillion. And last summer I worked with Republicans in Congress to cut a billion dollars in spending, because those of us who believe government can be a force for good should work harder than anyone to reform it so that it’s leaner and more efficient and more responsive to the American people.
Again, Obama cedes a big point to Republicans, that a key feature of future economic policy is cutting the deficit by $4 trillion.
In the debate, he talked about deficits over and over again, in context like this.
So my approach is to say, how do we strengthen the system over the long term? And in Medicare, what we did was we said, we are going to have to bring down the costs if we’re going to deal with our long- term deficits, but to do that, let’s look where some of the money is going. Seven hundred and sixteen billion dollars we were able to save from the Medicare program by no longer overpaying insurance companies, by making sure that we weren’t overpaying providers.
Obama can’t stop talking about the deficit.
The problem is, he’s always talking about cutting it, and never talking about what he should be proud of, which is that adding to our national debt has allowed the private sector to cut its debt (without the floor completely falling out of the bottom), while also enabling the entire economy to shrink its debt as a whole.
This chart shows debt to GDP for the federal government (red line) vs. debt-to-GDP for households. The Federal Government exploded its debt so that households could climb out from under the rock.
Obama’s deficits have done a lot of good.
So why doesn’t Obama defend the deficits?
Probably two reasons.
One is that he may not think he can win the argument actually defending deficit spending. Perhaps he thinks the argument is just too complicated to make, and that it’s better to talk about phony issues like “war savings” rather than really make the pro-deficits argument. Obama doesn’t seem to have an easy time swaying the public on any issue, so this is plausible.
Another possibility is that he, himself, just doesn’t buy the argument.
Remember, very early on in his administration he announced a Federal Government worker pay freeze. There were also reports that The White House was worried about bond auction failures during the crisis, even though this was never a possibility.
Also, David Leonhardt has reported that Obama got seduced early on in his administration by the work of Carmen Reinhart and Kenneth Rogoff, which warned that high government debts were an impediment to growth.
And to be fair to Obama, it’s not just him, but pretty much all Democrats and mainstream liberals that have a hard time defending deficits. The Clinton surpluses (as harmful as they were) are a Democratic party prize possession.
The Democratic party line on deficits is basically: Republicans are right, we’re just going to be a little less severe in how we do fiscal consolidation.
Not a big winner.
If Obama wants to learn how to defend deficit spending, he should really take a page out of a certain Congressman from Wisconsin, who gave an impassioned and dazzling defence of counter-cyclical deficit spending in 2002. Watch this video, and you’ll see how it’s done.
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