On economic matters, President Obama has introduced a new theme to his agenda in 2010: deficit reduction. Recently, he has formed a Commission to focus on the deficit and promised to freeze discretionary spending. His new economic outlook is very inconsistent with his still current defense of the stimulus. Deficit spending either helps the economy or it doesn't, and his new approach says that it doesn't. The inconsistent juxtaposition of his ideas on spending and the economy are causing much of the anger and confusion over Obama on the left and right.
Obama's supporters that hoped that he finally conquer the Free-Market ideology of the Reagan Revolution have been disappointed by his inability to articulate a competing vision for Government's place in America. He can start to fix this by properly framing the deficit and his economic policies.
Join me as I share four ideas I have for Obama and anyone arguing for his policies.
- Don't denounce the deficit as a whole, only individual parts that are especially wasteful. Any serious economist knows that the deficit is the only thing keeping the country out of depression, even now. Let people know this. Explain basic government policy in economic crises. Government should be running surpluses when the economy is healthy, and run deficits when the economy is poor or in times or war. That is the reason we have the ability to run deficits and is nothing new in terms of policy or politics.
- Denounce Bush for hindering Democrats' ability to respond to the crisis. Explain to them that if Bush thought the economy was going well(which by 2007 he was pretty sure it was) it was his responsibility to make sure that economic well-being translated into surpluses or deficit reductions in the budget. Obama's hands are tied because of Bush's poor budget record. The structural deficit he inherited prevented the stimulus that Liberals would have wanted and caused the inability to raise expenditures "responsibly" when those deficits are needed more than they have been for 30 years
- Don't apologize. Don't rationalize. Deficit spending is what the government is supposed to do during a recession/recovery. Deficits are a vital lifeline to the scores of millions of Americans who would be jobless, homeless or dead without them. The real tragedy is that because the $100 billion surpluses of ten years ago became recurring $400 deficits, attacking Republicans on this record could prove fruitful.
- Announce a plan to reduce the deficit based on positive economic triggers. Just as there are automatic triggers to increase spending when the economy is faltering, an idea for mandatory deficit reduction would be an easy sell. Propose a plan for income tax or payroll tax increases that would trigger when unemployment reaches 5% for example.
The key to this strategy is authenticity. Explain your ideology and stick to it because it is genuinely what you think is the right thing to do. Voters will respond.
The current strategy is ideologically incoherent and confirms the fears of his supporters and detractors: he's not on their side. Deficit Hawks worry that he is not serious about long-term or short-term deficit management; there is nothing he could do to allay this fear. Liberal economists/activists worry that he doesn't understand the importance of short-term spending and that his rhetoric is undermining the ideological underpinnings of 50 years of liberal thought.
Obama's current strategy of railing against the deficit indiscriminately while embracing the stimulus is confusing and off-putting. If he wants to lead a Liberal coalition to counteract the free-market/Conservative ideology ushered in by Ronald Reagan, Obama must be clear and unapologetic about his economic outlook.