He’s made it before, but in the wake of the new GDP report showing the economy has shrunk, Obama really needs to forcefully make the case in his State of the Union speech that more deep spending cuts risk further damage to the economy. Jobs need to be a key part of the speech, yes, but a strong argument linking government spending to the health of the recovery is also a must.
As I noted earlier today, Republicans are seizing on the news of the economic contraction to renew their push for more spending cuts, even though a sharp drop in defense spending helped drive the shrinkage. The contraction renews pressure on Obama to talk at length about the economy in his SOTU speech. However, this also offers an opportunity to renew the case against deep spending cuts as a threat to the recovery.
Unfortunately, at times, Obama has diluted this message. During his 2010 State of the Union speech, for instance, the President proposed a temporary spending freeze, and said:
“Families across the country are tightening their belts and making tough decisions. The federal government should do the same.”
Obama and his advisers had made a strategic decision to signal long term seriousness about getting the deficit under control, in hopes of blunting GOP attacks on Obama’s spending. But liberals such as Paul Krugman argued that Obama was merely reinforcing the conservative world view, helping his enemies, and failing to level with the country about the need for more deficit spending to boost the economy. At times during the last two years, however, Obama did make a stronger case for Keynesian economics, repeatedly insisting that “we cannot cut our way to prosperity” and arguing that public investment was the way to bring about long term recovery and economic security.
Obama won the election, of course, and in his Inaugural Address, the President laid out an expansive progressive agenda that barely mentioned the deficit, a sign that he is trying to focus the country on other problems. But the Inaugural had little to say about jobs, and given the latest economic news, that won’t be an option for the SOTU. Let’s hope, then, that Obama renews, and expands on, the argument that “we cannot cut our way to prosperity,” and warns that the contraction proves that the austerity championed by Republicans risks imperiling the recovery further. Let’s also hope he makes a forceful case that boosting growth is the best way to bring down the deficit over the long term. As E.J. Dionne put it recently:
If you care about deficits, you should want our economy to grow faster. If you care about lifting up the poor and reducing unemployment, you should want our economy to grow faster. And if you are a committed capitalist and hope to make more money, you should want our economy to grow faster. [...]
You have to hope that President Obama will use his State of the Union message to speak forcefully for growth and the public investments that will foster it.
This isn’t at all to say that more stimulus spending is politically likely in the near future. But a high profile reiteration of the case might at least limit the damage, and I would be surprised if Obama doesn’t attempt just that. After all, the State of the Union may be depending on it.