David Coates

Tomorrow’s Presidential Budget: Questions of Judgment?

The President is likely to have a bad week with his progressive base, if what we are told to expect in his budget tomorrow turns out to be true. We are told that his budget will trade “modest entitlement savings,” including future reductions in Social Security payments, for immediate tax hikes on the corporate-rich.[1] If that is so, the trade that will be proposed tomorrow will reflect poor judgment on the Administration’s part – poor moral judgment, poor economic judgment and poor political judgment.

Such a trade will certainly be morally problematic. No matter how quickly Obama technocrats like Peter Orszag move to tell us that the changes proposed will only be slight,[2] they will nonetheless bring reductions in the money made available to Social Security recipients over time. The trade being proposed, if what we are told is true, involve future cuts to a pension program for which people have already paid ahead of time (through payroll taxes on the wages they earned during their working lives): future cuts to a pension program, moreover, that for many low-paid workers and now low-paid pensioners is a vital lifeline in these difficult times.[3] There is no parallelism here between the marginal impact on the lives of the rich that will come from any tax-hike acceptable to Republicans, and the significant impact on the lives of the elderly poor that any reduction in Social Security will inevitably bring. And because there is no parallelism, there should be no proposal that pretends otherwise. Indeed it will be doubly ironic if what ultimately saves us from this particular deal is not White House flexibility but Republican intransigence – no chained CPI because its use fails to cut Social Security heavily enough!

The budget offer, if made, will also reflect a deeply flawed economics. Offering to curb the growth rate of Social Security spending keeps at the center-stage of American politics the on-going Republican claim that it is deficit reduction, rather than job creation, which is the prime economic need of the day. But in reality it is not. Federal deficit reduction would be the key issue of the day if government spending was squeezing out private sector investment; but no such squeezing out is currently underway. On the contrary, corporate profits and cash holdings are at record levels again. Private sector investment and job creation is blocked right now, not by resource shortages, but by uncertainty about future consumer demand. The President’s top budget priority should therefore be the creation of a large economic stimulus through public spending. Rather than conceding the key principle here – the principle that Social Security should not be treated as part of the entitlement budget because it is separately funded and already paid for – the Administration would serve us better by examining the economic and moral case for increasing Social Security payments over time rather than reducing them. The new team at the Treasury currently faces at least four existing budget models to which it can relate its own: two Republican, two Democrat.[4] By proposing this horse-trade, the Administration will position itself to the right of the more moderate of the two Democratic budgets, and put itself as far away as possible from the more progressive of the two center-left alternatives. That positioning cannot be the proper ground on which a newly-returned Democratic Administration ought to raise its flag. After all, it was Obama, not Romney, who won in November – and the budget proposals need to reflect that.

The budget offer, if made, will also be bad politics. It will be bad politics in the short-term, and it will be bad politics for the long haul. All that the offer will do immediately is reward Republican intransigence by attempting to strike a deal with a set of conservative politicians who have no interest in genuine bipartisanship. Such an offer will make no political sense, because no such deal is available. Instead, and as the Obama charm offensive on the Republicans intensifies, the intransigents will simply retreat further into their right-wing bunker, sucking the Administration after them.[5] A Republican Party knocked back on its heels by electoral defeat last November will thereby be helped up again by an Administration keener on deals than on principles. And it will be bad politics long-term because such a budget offer will alienate the very foot-soldiers whom the Administration will need actively on its side when the next mid-term elections arrive. Indeed such a budget offer will give that mid-term campaign a preliminary double-whammy. It will drive progressives into inactivity through frustration, while reinforcing in the public mind the Republican claim that federal over-spending on entitlement programs is the prime cause of our present difficulties. Such reinforcement can only mean that, should progressives swallow hard and fight actively again, their task will already have been made more difficult by the budget strategy of the very administration that they will be campaigning to strengthen.[6]

Now it just may be that the Obama Administration is more subtle than we give them credit for: and that this budget move will be a cleverly-designed and last attempt by the White House to demonstrate the reasonableness of the Democrats and the unreasonableness of the Republicans – a last demonstration of this key difference between the parties before the President opens an eighteen-month campaign to win back the house by unseating Tea-Party Republicans. But somehow I doubt it. Somehow I suspect that, unfortunately, this will be simply more of the same – the latest episode in what is by now a long-running pursuit by this Administration of some elusive bipartisan middle-ground agreement – a pursuit led by a President whose political instincts are more centrist than center-left. If so, it will be a pursuit which is not only fruitless but also politically damaging to the progressive cause. In the President’s first term, the endless horse-trading necessarily involved in seeking some middle-ground accord so alienated key sections of the progressive electorate that it cost Democrats the 2010 mid-term election.[7] We have to fight now to make sure that such horse-trading does not also cost us the 2014 mid-term election, a mid-term in which a strong Democratic surge is absolutely vital if any progressive legislation is ever to find its way successfully through the Washington political maze.

Barack Obama may have no elections left to win, but we do. In fact, we have lots of them to win, starting with those 2014 mid-terms. So the President might at the very least use his position not to make the progressive task more difficult. Ideally he would use it to make our task a little easier. He says he wants to. He fund-raises on that basis. But success in 2014 will not be simply a consequence of funds, no matter how plentiful those ultimately prove to be. We will win in 2014 only if a progressive program has by then been sufficiently strongly canvassed to sway the sympathies of undecided voters. That canvassing can only be undermined by any White House decision to trade future Social Security increases for modest tax hikes on the super-rich.

The President must know that, and ought therefore to act accordingly. He says he is proposing things that he really doesn’t want to do. If that is genuinely the case, he should simply stop proposing them. Barack Obama may not have our vote to lose, but he can still lose our respect. Right now, on this issue at least, he is in danger of doing so.

[1] Zachary A Goldfarb, ‘Obama budget would cut entitlements in exchange for tax increases,” The Washington Post, April 5, 2013: available at http://articles.washingtonpost.com/2013-04-05/business/38289096_1_house-speaker-john-a-budget-request-boehner

[2] Peter Orszag, “Chained CPI’s Diminishing Returns for U.S. Budget, ‘ Bloomberg, April 7, 2013: available at http://www.bloomberg.com/news/2013-04-07/chained-cpi-s-diminishing-returns-for-u-s-budget.html

[3] Lynn Stuart Parramore, 7 Chilling Facts About Retirement in America That Should Make Obama Tremble Before Cutting Social Security and Medicare, posted on Alternet April 7, 2013: available at http://www.alternet.org/economy/7-chilling-facts-about-retirement-america-should-make-obama-tremble-cutting-social-security

[6] If cutting is so vital, the Republicans appear correct to argue that the cuts are not enough.

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David Coates holds the Worrell Chair in Anglo-American Studies at Wake Forest University. He is the author of Answering Back: Liberal Responses to Conservative Arguments, New York: Continuum Books, 2010.

He writes here in a personal capacity.

One Response to “Tomorrow’s Presidential Budget: Questions of Judgment?”

  1. Barry Clendenin says:

    Dear David —

    Thank you for your preview.

    The President’s FY14 budget proposal may be closer to what could be achieved — if anything can be — than the FY14 House or Senate Budget Resolutions. The choices mentioned in David Stockman’s new book –The Great Deformation (2013) — for more revenues and revised entitlements may be a result. It will be worth following closely as the environment reminds me of the late 1990s when President Clinton and the Republican leadership reached agreements that helped bring the budget into balance.

    I suspect Peter Orszag would be surprised to be decribed as a technocrat.

    Best Regards —

    Barry Clendenin

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