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ThePlumLIneGS whorunsgov plumline
Posted at 04:43 PM ET, 07/11/2011

What if Obama is right about the deficit?

Does Barack Obama really believe in part that “solving” the deficit “problem” will allow liberals to begin getting more of their priorities enacted — starting with more federal spending to create jobs?

I think the key takeaway from today’s presser is that he really does believe this. And he may be right.

As Greg highlighted below, one of the key points Obama made today was that a deficit deal can take the deficit off the table as a political issue — making it easier for liberals to demand more spending on job creation, and making it harder for Republicans to say No to it.

The key answer from Obama came at the very end of the news conference. He was talking about some relatively small steps his administration had achieved, and then suddenly shifted gears into a more ambitious vision:

I mean, the infrastructure bank that we’ve proposed is relatively small. But could we imagine a project where we’re rebuilding roads and bridges and ports and schools and broadband lines and smart grids, and taking all those construction workers and putting them to work right now? I can imagine a very aggressive program like that that I think the American people would rally around and would be good for the economy not just next year or the year after, but for the next 20 or 30 years.

Which he then followed immediately with his understanding of why the American people aren’t rallying around something like that right now:

But we can’t even have that conversation if people feel as if we don’t have our fiscal house in order. So the idea here is let’s act now. Let’s get this problem off the table. And then with some firm footing, with a solid fiscal situation, we will then be in a position to make the kind of investments that I think are going to be necessary to win the future.

That’s a bold claim: if the deficit were no longer perceived as a problem, then it would be much easier to pass liberal programs. I strongly suspect that this view will inform his general strategy.

Is he right?

In favor of Obama’s position: The fizzling out of the Republican drive to tear apart the government after their electoral victory in 1994. Republicans then used the same kind of radical anti-government rhetoric as Republicans now, and it culminated in the showdown that shut the government down twice in 1994-1995. That fight produced substantive wins for Bill Clinton and the Democrats, albeit wins on Republican turf. But more importantly, perhaps, the fight also basically ended Republican efforts to destroy New Deal and Great Society programs (with some exceptions) for a decade. Indeed, one could argue that S-CHIP, passed by a Republican Congress, would not have happened without Clinton’s success in de-fanging the GOP — that that the only way to do that was to remove large government deficits from the equation.

Working against Obama’s idea is the fact that the 1990s Republican revolution wasn’t just defeated by Clinton’s maneuvers on the deficit. Strong economic growth, which Obama doesn’t have, played a major role — it confined anti-government sentiment to core Republican groups.

One key question is how taking the deficit off the table will affect Congressional moderates in both parties who profess to care about it. Would the Ben Nelsons and Kent Conrads of the world be more likely to support expensive liberal priorities if the budget were balanced? My inclination is to say No, but it’s hard to know for sure.

Either way, what Obama gave here is an answer to liberals who believe he’s betraying them. He’s saying: I still want the things that you want, but the only way to get them is to deal with the deficit first.

It’s not an unreasonable bet, given the situation (remember — whatever Obama does, this Congress isn’t going to approve the kind of stimulus that liberal economists would like to see). But it sure is a high-stakes gamble.

By  |  04:43 PM ET, 07/11/2011

 
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