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Posted at 3:59 PM ET, 01/25/2011

Obama looks for a compromise on spending cuts

By Ezra Klein

PH2011012304357.jpg

The president will call for a five-year non-security discretionary spending freeze tonight. This is worth about $400 billion to the budget over 10 years. Is it a good idea? Depends on how you look at it.

The argument among House Republicans is whether spending should be frozen at 2008 levels, as most of the leadership thinks, or 2006 levels, as the Republican Study Committee called for. The Obama administration's proposal is better than that, to be sure. But it also feels more like the policy you'd get at the end of a compromise process, not the beginning.

This goes to the Obama administration's theory of negotiating more generally: Do you start with a reasonable compromise? Or do you end with a reasonable compromise?

In this case, they're starting with one. The idea is that they'll get credit with voters for being serious about cutting spending, which will both help them fend off Republican demands to go further and strengthen their hand when they argue for targeted investments in areas such as education and infrastructure.

The usual liberal critique of this approach is that starting with a reasonable compromise just means you end with a less-reasonable compromise, and the Obama administration would be better off rejecting calls for across-the-board cuts or freezes and trying to persuade Americans that the Republican approach here is wrong, and tax cuts for the wealthy are a much bigger contributor to the deficit than spending on food safety (which is true, incidentally). They might not win that fight, but maybe they'd end up with a three-year spending freeze rather than a five-year spending freeze.

Photo credit: By Pablo Martinez Monsivais

By Ezra Klein  | January 25, 2011; 3:59 PM ET
 
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Comments

The old liberal critique was the Obama is a bad negotiator who should not start at his compromise position, as negotiation will mean ending up in a worse place.

The new liberal critique is that Obama is not a liberal and realizes he will be negotiated.

Posted by: fuse | January 25, 2011 4:21 PM | Report abuse

I think it's healthier for the Democratic party in the long run to be the more reasonable party. To say there should be no cuts whatsoever (in this political climate, not economic climate) is absurd and potentially damaging to the party image.

Also, if Obama offsets the freeze with investment in America's future, the nation would be better served anyway. I'd rather have better schools. Too bad the security apparatus isn't being pruned!

Posted by: will12 | January 25, 2011 4:34 PM | Report abuse

I hope he is not proposing a freeze from NOW. Don't lock in $1.5 trillion deficits for five years.

Posted by: kitchendragon50 | January 25, 2011 4:35 PM | Report abuse

The past decade involved politicians seeing who could spend more. Now they are competing to see who can CUT more. I'm not going to argue, and don't care who gets the credit. At least they are going in the 'right' direction....

Posted by: dbw1 | January 25, 2011 4:44 PM | Report abuse

"This is worth about $400 billion to the budget over 10 years."

Given how far off the CBO report on the ACA is, we'll need at least that much to soak up the deficit hit coming from the underestimation of expenses and overestimation of revenues in the ACA.

Posted by: dbw1 | January 25, 2011 4:46 PM | Report abuse

I guess the Obama Deficit Commission's recommendations are being shelved.

Posted by: drjcarlucci | January 25, 2011 4:52 PM | Report abuse

What progressives don't get is that the higher uncertainty from ambiguous regulation and the lack of any plan to rein in out-of-control health care spending is dampening the economy, right now. President Obama is increasingly devolving towards President Clinton; high in activity, low in policy impact. As for the deficit and debt, the manner in which they are closed is important. Raising taxes at the marginal dollar earned is just a plain bad idea and lots of economic studies from the monetarist camp support that. The deficit reduction committee put forward an excellent tax policy approach that would concomitantly reduce the deficit and support the economy by reducing marginal tax rates and eliminating deductions. Some middle class voters who currently pay no taxes would wind up paying some under such a scenario, so politics again kills good policy. Also, we should raise the federal gas tax by as much as $1/gallon (phased in) to capture the externalities of increased defense spending to counter terrorism that our petro-purchases fund. Again, politically unacceptable. Lastly, we need to either inject a price mechanism in consumer health care choices or just nationalize and ration it. Since both are politically unacceptable, we do nothing and watch costs rise and pay a cost to economic growth for all of this uncertainty.

Posted by: tds15 | January 25, 2011 4:57 PM | Report abuse

How does cutting spending create jobs? Taxes have already been cut, thus "incentivizing business to invest", so won't cutting spending cost you jobs, federal jobs?

Posted by: AB68 | January 25, 2011 5:09 PM | Report abuse

There are some things that are too important to compromise.

Especially when Obama's idea of "compromise" is to stick it to the middle class as the repugs bellow that he's not sticking it to us enough.

Posted by: solsticebelle | January 25, 2011 5:12 PM | Report abuse

At this point nearly every post regarding The Obama administration should just be entitled "Obama looks for a compromise".

Unfortunately the compromise between "right" and "wrong" is "WRONG".


re "tax cuts for the wealthy are a much bigger contributor to the deficit than spending on food safety". That is true. And that argument should be made. But spending on wars (and decades of VA expenses) is also WAY more than everything that repubs want to cut - particularly social security.

And a financial transactions tax and eliminating the cap on social security are obvious and politically feasible things to do.

Ahhh, but I could go on and on.

Posted by: randomcurmudgeon | January 25, 2011 5:14 PM | Report abuse

I would guess that the number of people who know that the Republicans say that spending should be frozen at 2006 or 2008 levels is diminishingly small. So Obama will propose something that sounds austere and reasonable tonight which makes the Republican sound like a knee-jerk reaction to what he says tonight. We'll see.

Posted by: willows1 | January 25, 2011 5:21 PM | Report abuse

I've lost respect for liberals who whine immediately when he does something to save some money. He's the frikkin president. Get out of the way & let him do his job.

Posted by: carolerae48 | January 25, 2011 5:27 PM | Report abuse

who cares about 2006, or 2008 levels....? What does that have to do with balancing the budget? Why not 2000? When it was balanced.

Posted by: Roblit1 | January 25, 2011 5:30 PM | Report abuse

Obama does seem to care more about being reasonable and right, than being a good negotiator or scoring political points.

Making this proposal before negotiations even really begin, may hurt his bargaining position, but there is a silver lining. In the 2012 presidential campaign, he is going to eat his competitor alive. Unlike the midterms, where the president's opponents were paying much more attention than his supporters, everyone will be paying attention and everything the Republicans have been unreasonable about will come to light in the general public.

The Republicans are going to have little to attack him on:
-Want to talk about spending cuts? The president proposed a pay freeze for federal employees and a federal spending freeze that saved $400 billion - and either the Republicans rejected it or went along with it, in either case it will not make Obama look bad.
-Want to talk about tax cuts and business uncertainty? Obama supported a permanent middle class tax cut passed by the house and it was rejected by the Republicans.

The Republicans will have a hard time portraying him as a socialist liberal when he has these kinds of proposals on record. Obama will win back independent and moderate votes once the majority of Americans across the political spectrum are paying attention.

Posted by: DeanofProgress | January 25, 2011 5:51 PM | Report abuse

Further proof that leftists are deficit peacocks.

CUT EDUCATION SPENDING!


Year Education -total ($ billion)

1995 400.46
2000 545.68
2005 735.28
2010 921.21

Posted by: krazen1211 | January 25, 2011 5:51 PM | Report abuse

The solution isn't that the President should be staking out a super liberal position and negotiating towards the middle. The solution is that he shouldn't be staking out specifics as his opening position. He should be saying that he's open to considering spending freezes but also thinks we need investment, and that he looks forward to getting the details right with legislators.

Posted by: MosBen | January 25, 2011 5:58 PM | Report abuse

DeanofProgress: that is a possibility-- that Obama is trying to outflank is opponents by disarming any serious proposals they can offer. That works great in a runup to a re-election campaign, but he does that *all the time*, giving away the farm before negotiations have even started, particularly when it comes to bills being negotiated in non-election years.

Posted by: constans | January 25, 2011 5:59 PM | Report abuse

the so-called "investments" on infrastructure, education, etc...isn't that what the "stimulus bill" was for? money that still hasn't even been spent on the areas that we are encouraging "investments" for tonight???

ditch this fad of word play and call the "investments" what they are...SPENDING

Posted by: poofster | January 25, 2011 6:17 PM | Report abuse

The country desperately needs investment, to compete with the rest of the world. The US people are apparently brainwashed (thank you, Pete Peterson, Fox, etc) into believing we're in an imminent government debt crisis.

So Go President Obama...somehow you have to sell crucial investment spending to an unreasonably-skeptical country.

I trust you to find a way.

Posted by: watt | January 25, 2011 6:34 PM | Report abuse

For the sake of the nation, let's hope the Repubs will stick to their guns to cut spending. The national debt is out of control and the budget deficit is shameful!

www.eclecticramblings.wordpress.com

Posted by: my4653 | January 25, 2011 6:51 PM | Report abuse

Conservatives want to cut cut cut spending.

They also want Corporations to govern our country.

But what Corporation ever cut its way to fiscal health?

Just one name will do.

Posted by: grat_is | January 25, 2011 7:01 PM | Report abuse

Anyone who says we need to "cut non-discretionary spending" isn't really serious about anything. It's like McCain going bananas over earmarks which make up a tiny percentage of the budget (true this would be a symbolic cut but worthless to overall deficit reduction).

In my opinion, in any discussion of spending, the defense budget should be fair game - Homeland Security is a bloated bureaucratic nightmare - the kind that these so-called small government conservatives should be taking the hatchet to. It's true other programs can be tweaked to save money but talk about low hanging fruit (budget wise, not political wise).

But discussions like these are beside the point. Job growth is the main factor for how our deficits are controlled. If we create 30 million new jobs and 30 million new taxpayers, boom - deficit reduced. BUT that takes investment (true investment requires spending, but think long term people). Investing in infrastructure creates jobs now and for the long term. Investing in education creates skilled workers to create new companies and jobs when they graduate. Making clean energy a priority for the country will require huge investment but can make us a technological leader in the field, where demand is only going to grow.

The last great depression was solved by the New Deal and World War II, which if you look at it was a massive federal stimulus. It led to the national debt being the largest percentage of GDP in history, but also led to decades of economic prosperity.

The point is that making a huge fuss about deficits now won't do anything except hamper the economic recovery. If we have to spend to create more jobs, so bet it - it will be worth the long term investment.

Posted by: kmani1 | January 25, 2011 7:12 PM | Report abuse

This criticism misses the point of what the President seeks to accomplish. He wants to change the issue from how much should the government spend to what should the government spend it on. While the GOP wants to talk about cutting spending mindlessly, he wants to talk about spending money smartly. The public cares more about job creation and economic growth and is likely to agree that those goals will benefit from increased spending on education and infrastructure. He wants to avoid being sidetracked by attacks that he just wants to spend more money. This is intended to nip that attack in the bud. On the FY2011 CR and the FY2012 budget, the President wants to make the compromises occur over the mix of spending rather than the amount of spending. I think the President also believes that when he submits his budget he will be able to identify enough cuts to pay for his increases in other areas while staying within the total dollar limit set by the 5-year freeze. Furthermore, the president can still use the freeze itself as a compromise in the specific context in which the issue will actually arise. Take the debt ceiling, for instance. The president will say that a clean debt ceiling increase should just be passed. The GOP will want to attach something to force spending to say the 2008 level. The president can then say, well, ok, he'll compromise by agreeing to attach his spending freeze to the debt ceiling. Since the public will have already concluded that the president's freeze with some cuts and some increases is the reasonable way to go, they will view this as a reasonable compromise and expect the GOP to then vote to increase the debt limit, rather than threatening a default.

Posted by: gregspolitics | January 25, 2011 8:37 PM | Report abuse

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