I don’t agree with President Obama’s decision to prioritize securing a long-term budget deficit reduction package in 2011. But I do think some of the criticism of this idea that I’m seeing somewhat misstates the situation. In particular, I hear people baffled as to why the president would pursue growth-reducing spending cuts that would damage his own re-election bid.
It’s generally wise to assume that the White House isn’t blind to that obvious potential political problem. Part of what they’re thinking is that a 2011 agreement to long-term spending cuts is the best way to avoid the need to reduce spending during the election season. How’s that? Well, it’s because the fiscal consolidation plans being discussed are for trillions of dollars worth of cuts over a 10-year horizon. Since you’ve got that horizon, it’s not strictly necessary for any of them to come between September 2011 and November 2012. On the contrary, in principle spending could go up in the short-term consistent with any long-term cuts. By contrast, what happens if the White House winds up getting a “clean” debt ceiling increase is that we then head into the September lapse in appropriations. It’ll be a replay of the “government shutdown” fight in which the GOP goal has to be short-term cuts. And the White House isn’t going to get away without giving something up in that fight. In other words, clean debt ceiling increase = guarantee of fiscal anti-stimulus, whereas a 10-year spending cut plan leaves open room to avoid that.
There are a lot of assumptions going into that analysis, and I’m not sure it’s right. But this is the thinking and it’s not crazy. The administration understands the way short-term fiscal policy relates to their 2012 campaign.