StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

Deficit Barely A Footnote In SOTU

25 Jan 2012
Posted by Stan Collender

Last night' State of the Union Address almost certainly made deficit hawks very unhappy, extremely angry and, from a policy perspective, close to suicidal. After pushing hard for so long to make the deficit the issue, it was barely a footnote in the president's hour-plus address and wasn't missed that much.

It took less than an hour for the Committee for a Responsible Budget to send out a statement excoriating the White House for missing " opportunity to throw down the gauntlet to Congress on the debt and demand a large, bipartisan debt reduction plan this year."

If the speech is an indication, the administration has no interest in throwing gauntlets or anything else on the budget this year.

I was surprised. With Congress unwilling or unable to do much of anything on the budget, I had expected the White House to call for the House and Senate to deal with the budget and to offer to meet anytime, any place, etc. At the very least this would have put it in a good position to be critical when that didn't happen.

But the SOTU turned out to be even more of a campaign speech than I had expected (If you have any doubt about that just listen with your eyes closed to the over-the-top soaring rhetoric at the end and ask yourself if it doesn't sound like the president was accepting his party's nomination.) and campaign speeches don't promise to impose pain (Ask Walter Mondale). That meant that the budget, deficit, and national debt were out and proposals that make you feel good about the future were in.

The subtext was clear: The president was saying to congressional Republicans that this year he'll be happy to let them propose the spending cuts that will cause the political pain. They can appeal to the tea party wing of the GOP; he'll take everyone else.

The speech confirmed what anyone but the most wishful thinkers who follow the budget already knew: barring a crisis, there is next-to-no chance there will be any legislated change in the fiscal policy outlook before the election. The deficit will fall by several hundred billion dollars from fiscal 2011 to 2012 because of what's already on the books and because the economy is likely to continue on its current path.

Anything beyond that will have to wait until a lame duck session of Congress at the earliest. The next session of Congress in 2013 is probably more likely.

I'm surprised that you are

I'm surprised that you are surprised by this. Do you think Obama is a stupid politician? I'm pretty sure he has realized that putting the deficit front-and-center after the 2010 electoral shellacking the Democrats took didn't do *any* good whatsoever politically, and only could have possibly got him points with people who are never in a million years gonna vote for any Democrat anyway.

And one hopes that he is receiving decent economic advice that tells him that the long-term deficit and debt consequences of budget-cutting now are *worse* than those of borrowing-and-spending now to try to get the economy back on a virtuous cycle of growth.

Why should more deficit reduction be enacted?

What is "on the books" will already stabilize the debt/GDP ratio at ~80%. That's fine for now. Lets work on that denominator and produce growth and employment.

Gee, there's more to economic life than a budget deficit!

Deficit DOES NOT Need to be Reduced

There is NO deficit/debt "crisis" at all. Interest rates on 10-year T-Bonds are LESS than they were during the budget surplus years of the Clinton Admin. In fact, with interest rates at 2% and inflation at 3%, bond investors are paying us to take their money.

Cutting the deficit now would be counterproductive to economic growth and job creation. Has nobody been paying attention to the austerity-induced crisis in Europe?

He did talk about

... tax reform at least...

Deficit Hawks

What deficit hawks? There's no deficit hawks in Congress, just hollow talking points. The GOP? Hardly...

Obama is not going to win any votes by trying to work with the GOP and their racist Tea Party pit bull. How many times does he have to fail to understand this?

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