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Posted by on Jan 26, 2010 in Breaking News, Economy, Health, Politics, Society | 22 comments

Déja Vu Again and Again and Again

Ezra Klein made this point on Countdown last night:

The devil here is in the details. The administration is proposing specific cuts in the budget. Most expect those cuts to be pretty unobjectionable. Some programs — particularly in the education and health spheres — will even see increases. But it’ll be hard to evaluate the policy until we see where the savings are actually coming from. “Non-security discretionary spending” is a big category.

Then comes the collision between the budget and Congress. And here things get dicier. Congress can stick to the administration’s freeze but throws out the administration’s proposed cuts. The way this works is simple: The administration will target worthless programs, like agricultural subsidies, in order to preserve good programs. But the reason worthless programs live in budget after budget is they have powerful backers. And those backers will rush to Congress to protect their profits. You think Blanche Lincoln, who chairs the Senate Agricultural Committee and is behind in the polls for her 2010 reelection, is going to let her state’s subsidies get gored?

Now you’ve removed some of the cuts, but you still want to hit the overall target. So the cuts could get reapportioned to hit programs that lack powerful constituencies. Many of those programs help the poor.

The danger of proposing a freeze is that the focus is on the freeze, not the precise mix of policies that leads to it. And so it’s a lot easier for Congress to change the mix than reject the overall freeze. But a freeze is very hard to do right, particularly in tough economic times. Doing it wrong would be a catastrophe.

Doing it right would be a catastrophe, too. Either way, Obama is putting a big sandwich board on himself and his party with “KICK ME” written in black Magic Marker. I mean, I think this is what is called “asking for it.” Ezra Klein, in a different post, resurrects this video of Obama challenging John McCain in the first debate about the efficacy of spending freezes in a recession. Ezra’s commentary is below the video.

… you can’t look at this as anything less than a tremendous defeat for the Obama administration. It’s not the policy itself. The freeze locks in a post-stimulus, and potentially post-jobs-bill, level of spending. It’s not terribly onerous. But it’s also the administration’s white flag on the argument that the deficit must be understood as a health-care reform problem rather than a taxes and spending problem. This was their most audacious effort to change the way Americans think, and it didn’t work. For all the effort Democrats put into building a health-care bill that cuts the deficit, a full 60 percent of Americans think (pdf) the legislation increases the deficit. Only 15 percent think it’s a deficit reducer.
This is one of those moments when liberals and conservatives agree — but not in a way that should make hearts glow in the White House. Here is Rich Lowry at The Corner:
I’m delighted by Obama’s freeze. Not because it will make much difference in the federal budget, as has been ably pointed out by many in this space. But because Obama has given away important intellectual and political ground. It’s not true that politicians can really “say anything.” Spin has to have some connection to reality and a politician’s case has to cohere. What Obama has just done is blow a huge hole in the argument for his own governance over the last year. If the economy is still weak but we can freeze discretionary spending anyway, it’s much harder for him to argue that massive government spending is the predicate for economic growth in defense of the stimulus. And if the deficit is such a threat that he needs to swing around to supporting a spending freeze, it’s much harder for him to continue to push for a new $1 trillion entitlement. He can try to square all this — stimulus spending was necessary in the dire conditions of 2009, but less so now; the new $1 trillion health-care entitlement is actually a deficit-reduction measure — but it’s going to be very difficult.
Those on the right who do not think Obama’s freeze is a boon, think it’s a joke — too little to make any difference, and purely symbolic — as do many on the left, such as economist Brad DeLong:
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.
It’s hard — actually, it’s impossible — to overstate the lashing Obama is getting from his base. Paul Rosenberg at Open Left calls him “an idiot”:

… After passing a stimulus that most economists (not just liberal ones) said was too small, and that was made even more inadequate by being heavily tilted toward poor-performing tax-cuts, Obama is now intentionally recreating FDR’s mistake of 1937, when he prematurely cut back spending to try to balance the budget, and sent the country into a new recession.Let me repeat that. …:

Obama is now intentionally recreating FDR’s mistake of 1937, when he prematurely cut back spending to try to balance the budget, and sent the country into a new recession.

Specifically: He’s going to announce a spending freeze on domestic programs (but not, of course, on the military) that is “projected to save $250 billion.”  The rationale is that he wants to appease folks worried about runaway deficits.  Which is just what FDR was worried about in 1937.

This is Bush-style idiocy.  There is no other word for it.

Nate Silver calls it “a mistake on par with John McCain’s ‘suspending my campaign’ gaffe.”

In a perfect bit of poetic irony, John McCain announced his support for Pres. Obama’s proposal-to-be.

Finally, Paul Krugman is, as usual on this subject, scathing:

It’s bad long-run fiscal policy, shifting attention away from the essential need to reform health care and focusing on small change instead.

And it’s a betrayal of everything Obama’s supporters thought they were working for. Just like that, Obama has embraced and validated the Republican world-view — and more specifically, he has embraced the policy ideas of the man he defeated in 2008. A correspondent writes, “I feel like an idiot for supporting this guy.”

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