UK: Obama's budge, dealing with the debt

The Economist

Barack Obama's budget
Dealing with the debt

Mr Geithner's comments suggest that the administration is taking a two-track approach to America's debt problem. The first track involves whittling down America's short-term deficit to reasonable levels. So the budget released on Monday reduces the deficit to 2.8% of GDP by 2019, and maintains that level for the rest of the ten-year window. As my colleague notes, "That's close to primary balance—the government's books would nearly balance net of interest costs." Not bad, but it's on the second track that the administration really disappoints. That track involves dealing with America's out-of-control spending on entitlements, and this year's budget largely avoids the problem. Hence, you get Tim Geithner telling Paul Ryan that the administration doesn't have a definitive solution, "we just don't like yours". And it didn't like the one put forward by its own deficit commission. Which leaves Mr Pethokoukis to conclude that "Obama has no interest in being Clinton 2.0, the Debt Cutting President. He wants to be FDR 2.0, the Expanding Welfare State President."

Actually, it seems he wants to be both. Mr Pethokoukis forgets that Mr Obama pursued a grand bargain with John Boehner that would've raised taxes and cut the safety net. And he forgets that Mr Obama's largest new programme, health-care reform, was fully paid for (and then some). Moreover, in the early days of Obamacare there was a real effort to include significant cost-cutting measures in the final bill. The Republicans, in turn, demagogued the issue, alluding to death panels and forsaken seniors. Still today the president is paying a price, as Mitt Romney nonsensically criticises him for ignoring America's "entitlement crisis" while "cutting Medicare benefits for seniors". But I imagine if Mr Obama does win re-election, making the electoral ramifications of his actions a second thought, and the economy stays healthy, he'll push to curb entitlement spending, and put Republicans on the spot. I could be wrong, but there seems to be just as much evidence pointing to Mr Obama as being Clinton 2.0 as FDR 2.0. And I think Mr Obama's team realises that if another Democratic president embraces the mantle of fiscal responsibility, the party will have earned ownership of the issue for some time to come.

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http://www.economist.com/blogs/democracyinamerica/2012/02/barack-obamas-budget