article

06.18.09

The GOP's Deficit Bluff

If Republicans keep criticizing Obama for running up deficits, Clinton Budget Office veteran Matt Miller says, he should tell them to put their money where their mouth is: Pass a law.

With new polls showing voters are worried about soaring debt and deficits—including 65 percent of independents, who’ve been known to flirt with Perot-style movements in the past—and even former President George W. Bush joining the GOP in attacking Obama’s spendthrift ways, it’s clear the White House has to do something to take the steam out of this issue.

This is especially the case at a moment when even Obama’s prudent call for deficit-neutral—that is, fully paid-for—health reform won’t take the sting of any health plan’s $1 trillion 10-year price tag out of the headlines.

Trouble is, the president can’t do anything real about the deficit just yet. For starters, even if the public doesn’t agree or understand, we actually need to be running epic deficits for the next couple of years to make sure the economy gets on track toward recovery. The point bears repeating: In a situation in which business and consumers have slashed spending after years of excess, only Uncle Sam has the wherewithal to boost aggregate demand until we’re safely past the worst.

Obama should insist Congress pass a law that says that once unemployment is back down below 5 percent, it would take a supermajority vote of Congress to run deficits larger than 3 percent of GDP.

But beyond that, Obama can’t talk honestly about what the country will inevitably have to do once we’re past the recession to put our fiscal house in order. Why? Because even with (one hopes) new restraints on the growth of health-care spending, any fix will involve higher taxes, and not just on the “rich.”

For the White House to utter this inconvenient truth in a season when Obama is already being tagged a socialist for his health-care and energy plans would be to put the presidential head in a political noose. If you’re Obama, far better to wait until some bipartisan commission you empanel comes back with that grim news later in your first term.

So what’s a president in a fiscal pickle to do? The answer is a proposal that lets Obama aggressively frame the debate in the right substantive terms while not committing his administration to any problematic specifics. Obama should insist Congress pass a law that says that once unemployment is back down below 5 percent—recall we’re closing in on 10 percent today—it would take a supermajority (say, two-thirds) vote of Congress to run deficits larger than 3 percent of GDP. That’s the number most economists agree is a perfectly sustainable level—as compared to the scary 10 or so percent we’re going to run this year.

Budget fetishists will scoff that this idea has all the appalling hollowness of the old Gramm-Rudman-Hollings deficit-reduction targets from the 1980s, which “committed” to deficit numbers that were then perennially revised when they got too tough to meet. But my idea is actually a much more substantive version of a hollow political gimmick, if you can tolerate that paradox for a moment. Properly linking the goal of reducing the deficit to the performance of the economy as reflected in the unemployment rate would let Obama use every fiscal utterance to reinforce the fact that we’re running up this red ink to create jobs and end the recession he inherited.

When critics (rightly) say he’s offering no specifics on how to get the deficit down, the president can reply that the important first step is to commit the country to the right framework for fiscal sanity. Today White House aides say 3 percent of GDP is, in fact, the president’s long-term deficit goal, but there’s a big difference in our political and media culture between just saying that (who cares?) and putting forward an actual “proposal” that can be debated on cable and on the Sunday shows, form the centerpiece of sober congressional hearings, be hailed and assailed by the interest groups, and dissected on all sides by columnists.

It puts the administration on the front foot with a “plan” to restore fiscal sanity once the economy has recovered. Toss in a bipartisan commission to develop options to meet the 3 percent goal and you’ve got more than enough illusion of action to quash GOP momentum on this issue and satisfy the capital’s hunger for presidential initiative. Whether such a measure actually becomes law is beside the point. That it can be chewed over for months by the political establishment is.

To those who say I’m offering nothing more than a cynical ruse to push the issue off while health care gets negotiated this summer, I’d say this: What do you have against basic health coverage for every American? Plus, as empty proposals go, this one—a version of which was first suggested to me by Bob Litan, an old Office of Management and Budget hand now at the Kauffman Foundation—has more virtues than most. It tells the world Obama is serious about long-run fiscal sanity. It makes a concise public argument for deferring deficit reduction until durable growth resumes. And, done right, it’ll divert enough anti-Obama energy into a harmless sideshow at a critical moment while some real work gets done.

Xtra Insight: Finally Some Straight Talk on the Deficit by Peter Beinart

Xtra Insight: A Warning from Reagan’s Economist by Arthur Laffer

Xtra Insight: Obama’s $100 Million Question by John Avlon

Matt Miller is a management consultant, a senior fellow at the Center for American Progress, and the host of public radio’s popular political week-in-review, Left, Right & Center. His new book is The Tyranny of Dead Ideas, named this week by the U.S. Chamber of Commerce as one of the top books "Driving The Debate" in 2009.