In last night's State of the Union, Obama hit soaring populist high notes--on jobs, on taking on the big banks, on equality. Unfortunately, that strong message on trying to rebuild the economy for the American middle class was severely undercut by his misplaced preoccupation with the deficit.
We will continue to go through the budget line by line to eliminate programs that we can’t afford and don’t work. We’ve already identified $20 billion in savings for next year. To help working families, we will extend our middle-class tax cuts. But at a time of record deficits, we will not continue tax cuts for oil companies, investment fund managers, and those making over $250,000 a year. We just can’t afford it.
Now, even after paying for what we spent on my watch, we will still face the massive deficit we had when I took office. More importantly, the cost of Medicare, Medicaid, and Social Security will continue to skyrocket. That’s why I’ve called for a bipartisan, Fiscal Commission, modeled on a proposal by Republican Judd Gregg and Democrat Kent Conrad. This can’t be one of those Washington gimmicks that lets us pretend we solved a problem.... I will issue an executive order that will allow us to go forward, because I refuse to pass this problem on to another generation of Americans. And when the vote comes tomorrow, the Senate should restore the pay-as-you-go law that was a big reason why we had record surpluses in the 1990s.
I know that some in my own party will argue that we cannot address the deficit or freeze government spending when so many are still hurting. I agree, which is why this freeze will not take effect until next year, when the economy is stronger. But understand – if we do not take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery – all of which could have an even worse effect on our job growth and family incomes.
The dual gimmicks of a spending freeze and the inane deficit commission directly contradict the strong message Obama gave on the impact of the stimulus--on the infusion of government spending. With unemployment still too high, with the housing crisis still a crisis, and with states still struggling, now is not the time to argue against the federal government making critical investments that will create jobs and stabilize our economy.
The freeze and the abominable deficit commission, a tool created by Senatorial tools to gut Social Security and Medicare and one of the most undemocratic and irresponsible proposals imaginable are gimmicks that won't solve the fundamental problems of our economy. Dean Baker argues convincingly:
In the short-term we need large deficits to sustain demand. Smaller deficits mean higher unemployment, it is that simple. The people who are yelling about deficits right now want to raise the unemployment rate. He should then acknowledge that the country has a longer-term problem, but this is almost entirely due to the high cost of our broken health care system. We currently pay more than twice as much per person for our health care as do people in countries like Germany and Canada and we have nothing to show for it in terms of outcome. In coming decades we are projected to spend three and four times as much as people in other countries.
The investments President Obama outlined early on in his speech are critical, but in light of this spending freeze, there's absolutely no guarantee that the nation will have a strong enough financial footing a year from now to make that freeze even feasible. But now his hands are tied for justifying the larger investments the nation will likely need to actually create those jobs he wants.
There's a better solution, one that will not leave our most vulnerable citizens in jeopardy. It's a progressive and populist solution. Oregon just showed us the way. Representative Mary Nolan, Oregon House Majority Leader, explains how right here at Daily Kos.