President Obama plans to produce his own deficit reduction recommendations to a new Super Congress committee tasked with achieving $1.5 trillion in solutions by October, he said in a speech at the White House.
Responding to Standard and Poor’s downgrade of US debt, Obama said that the need for a balanced approach to deficit reduction “was true the day I took office” and remains true today. While not fully agreeing with S&P’s decision, he did say that the gridlock in Washington, cited as a cause of the downgrade, “has not been constructive,” and that the threat of using the debt limit as a leverage point “has now roiled the markets and slowed the pace of recovery.” He did add that the bond markets continue to snap up US debt, and “continue to reaffirm our credit as among the world’s safest.”
But the main news in this speech was that Obama intends “to put forward my own recommendations in the coming weeks on how we should proceed.” And he pretty much tipped his hand as to what those recommendations would be. He said that the deal already trimmed much in the domestic and defense discretionary budgets, and that there’s “not much further we can cut in those categories” (a debatable point on defense, to say the least). So Obama implied that the Super Congress should concern itself with “tax reform and modest adjustments to health care programs like Medicare.” He name-checked the Bowles-Simpson recommendations and the Gang of Six as examples of good proposals, as well as his aborted grand bargain with House Speaker John Boehner. And he said that the sense of urgency for the Super Congress to act has been raised with the S&P decision.
I don’t know how much clearer this can be made. Obama wants to implement his grand bargain, or at least key elements of it, through the Catfood Commission II, and he’s going to give specific proposals on paper to that end. These will include cuts to health care programs.
The second half of the speech attempted to pull off a pivot to jobs. He cited the need to extend two key stimulus measures, the payroll tax cut and extended unemployment insurance, by the end of the year. He used statistics floating around in left-leaning think tanks as well as conventional economic analyst shops, in saying that a failure to extend these two measures would result in 1 million fewer jobs and 0.5% less growth in GDP. And this is true, though it’s important to note that simply extending current law is not on-net stimulus, it just makes fiscal policy anti-contractionary rather than expansionary.
But the fact that the President announced he would put forward a deficit plan “in the coming weeks” just shows how impossible this pivot to jobs will be. Media analysts will debate what should be in the President’s deficit plan. After it’s announced, they’ll debate the particulars. By then we’ll be onto the annual appropriations deadline at the end of September and the conclusion of the Catfood Commission II’s tight, 14-week schedule to ink a deal. The jobs talk will melt away, as a Washington culture wired to talk about deficits during a Democratic Presidency will have all the more reason to do so.
The President closed with remarks on the 30 dead Americans in a helicopter shoot-down in Afghanistan, but before that he related this saccharine cheer: “No matter what some agency may say, we always have been and will continue to be a triple A country.” If austerity continues to get headline billing over job creation, that will only be true in the sense of AAA baseball teams.