In an interview yesterday with Bloomberg’s Al Hunt, Sen. Evan Bayh (D-IN) — who met with members of the administration’s economic team this week — said that he believes there’s a “fighting chance” that President Obama will call for a freeze on discretionary spending in his next budget:
We can do something right here, right now, starting next week. The President can say in his State of the Union address, ‘I’m going to include in my budget a freeze on discretionary spending, I’m drawing the line in the sand, and I’m willing to use my veto pen to enforce that’…I think there’s a fighting chance that he will. That’s what I’m looking for.
“On a personal level people say, well, wait a minute. I’ve got to balance the family checkbook. I’m making do with a little less now. Why can’t the government do the same thing?” Bayh added. Now, Bayh is the signature model of a “deficit peacock”: someone who likes to harp on deficits, while at the same time voting for budget-busting expenditures like a $250 billion tax cut for the heirs of wealthy families. So his approval of a spending freeze fits right in.
What’s more troubling is that the administration might take this seriously. This all stems from Office of Management and Budget Director Peter Orszag asking every executive department to submit three budget proposals, including one that freezes spending and one that reduces spending by five percent. The administration has also made other noise about serious deficit reduction in fiscal year 2010 being under consideration.
There’s obviously something to be said for identifying programs that don’t work or that overlap with other programs. But a straight spending freeze is a blunt instrument that has no place in responsible budgeting. When the Republicans proposed various versions of a spending freeze during the debate over Obama’s first budget (and when Sen. John McCain (R-AZ) had the same idea during the presidential campaign), they were correctly regarded as being in right-wing fantasy land.
Not only is a freeze a poor way to budget that doesn’t take into account priorities or the effectiveness of a particular program, but it will also have an anti-stimulative effect while the economy is still struggling through a middling recovery. Bayh analogizes the federal budget to a family’s checkbook, but the truth is that there is a lack of demand in the economy — an output gap between what the country could produce and what is is actually producing — that only the government can fill. “We cannot invite a W-shaped recession, or an M-shaped recession,” said Rep. John Olver (D-MA), when asked about a spending freeze.
“Do you think we could have a 5 percent reduction in [Low-Income Home Energy Assistance]?” asked Rep. Robert Andrews (D-NJ). “Do you think we could have a 5 percent reduction in food stamps?” The real long-term issues in the budget have little to do with discretionary spending and everything to do with health care costs, entitlements, and plummeting tax revenue in the wake of an economic crisis. A blunt spending freeze sounds nice, but only real reform in those other areas tackles the actual problems with the federal budget.