December 5, 2011

December 5, 2011 | Commentary on Budget and Spending

Obama Plays the Card of Financial Responsibility

LAST summer, the world momentarily panicked at the possibility that the United States would default on its debt. The panic was exaggerated, but the spending that caused it was real enough.

From 2007 to 2009, the US added an extra $2.6 trillion of debt. From 2009 to 2010, it added another $1.9 trillion. That $4.5 trillion in new debt was more than the US accumulated from 1917 to 1990.

Since the Democratic-controlled Senate has refused to accept the budget passed by the Republican-controlled House, and President Obama’s budget was laughed out of the Senate in May by a vote of 97 to zero against, the US last summer had no plan, except to go on spending as before. Having won the 2010 elections with the argument that this was unacceptable, the irresistible force of the deficit-cutting Republicans met the immovable object of the spend-happy Obama administration.

The result was the Budget Control Act of 2011. A typical Washington effort to achieve by back-room deal-making what cannot be done by the normal process of politics, it mandated the creation of a bi-partisan Congressional super committee to recommend at least 1.2 trillion dollars in deficit reduction over the next 10 years. The alternative was enforced cuts starting in 2013 in discretionary spending – all the programmes that don’t run on autopilot. About half of this will fall on defence spending.

Predictably, the super committee has failed to reach a deal. The committee was thought to be necessary for the same reason that it was ineffective: the government is divided between conservatives, who want to spend and tax less, and liberals, who want to spend and tax more. No amount of political cleverness can finesse this difference.

But the outcome is still revealing. The committee was supposed to find $1.2 trillion in deficit reductions over a decade. This is a huge amount of money, but it is less than the amount of debt added, under President Obama’s leadership, in just the last year alone.

The fact that the cuts will fall on discretionary spending means that America’s entitlement programmes – Social Security, Medicare, and Medicaid, the cause of our long-term fiscal mess – will not be trimmed. The Pentagon spends only about one sixth of the budget, so the impact on America’s defences will be both disproportionate and damaging.

The short-term political consequences are equally important. Having spent his first three years borrowing unprecedented amounts of money and making a sustained case for the importance of stimulus spending, the President is now casting himself as a deficit hawk and an eager supporter of the Budget Control Act.

For the White House, this is a no-lose proposition. Deficit reduction could come in the form of higher taxes, which would fire up Obama’s base and destroy the Republicans who voted for it. Or it could come in the form of cuts on discretionary spending, particularly to defence, for which Obama’s base has no great affection. It won’t come in the form of significant changes to our entitlement programmes, which are what his base prizes, and what will drive government spending remorselessly higher in the coming years.

Playing the responsible spender card is shrewd from another point of view. Americans naturally look on Congress with a degree of disdain, while according the President the respect that goes with his office.

By positioning himself as the adult in the room, Obama plays to the American tendency to view Congress as a collection of squabbling children.

If the American people are willing to forget Obama was the Cheerleader in Chief for higher spending, and simply hear him demanding a deficit deal, the blame for the committee’s failure will fall on Congress in general, and on the Republican opposition in particular. This is bad fiscal policy, but great politics.

It’s particularly important for Obama to start positioning himself as a responsible moderate now. After the 2010 elections, a lot of commentators thought Obama would move, Clinton-like, to the centre. That didn’t happen. Instead, Obama embraced the Occupy Wall Street movement, describing himself in mid-October as “on their side”.

As the far-Left, violent, criminal, and anti-Semitic elements in that movement have come to the fore over the past weeks, that embrace became a political blunder. By posing as a deficit cutter, Obama recovers from the blunder and positions himself nicely as the supposedly responsible alternative to both the Republicans and Occupy Wall Street.

The most depressing aspect of this sorry saga is what it reveals about the American political system. It is not true that America is more partisan today than it was in the past. But it is true that the parties are better sorted: the Democrats are reliably liberal, and the Republicans are reliably conservative. The only way to get anything done in American politics now is to win, as President Obama did by using his control in 2009 to secure $800bn of stimulus spending.

If no one wins, the system continues on its pre-programmed course.

When America was founded, the default option was small government.

Today, unfortunately, it is big government. It is a tremendous irony, and for conservatives a painful one, that all the checks and balances of the constitution, so carefully crafted by the founders to restrain the government, now make it extraordinarily difficult to rein it in.

And that is the final reason why the super committee’s failure suits the Left just fine. If nothing changes, they win. They have no incentive whatsoever to accept a compromise deal, because all the programmes they like are on automatic pilot, just like the cuts that will result from the super committee’s failure.

The failure of the super committee is ultimately not about spending. It is a failure to agree on the first principles of American government.

Ted R Bromund is a senior research fellow at The Margaret Thatcher Center for Freedom, based at The Heritage Foundation.

About the Author

Theodore R. Bromund, Ph.D. Senior Research Fellow in Anglo-American Relations
The Margaret Thatcher Center for Freedom

Related Issues: Budget and Spending

First appeared in the Yorkshire Post