As Greg noted earlier this morning — and has been pointed our across the political media — President Obama will use the State of the Union to present a plan for re-energizing the economy and strengthening our sluggish recovery.
In terms of public opinion, now is the time to do it. In a new nationwide poll from Reuters, 35 percent of voters said that the economy was their top concern, while 20 percent pointed to the federal deficit. In addition, 53 percent said the economy was still in recession, highlighting the extent to which the recovery hasn’t reached ordinary Americans, despite two years of consistent growth.
Given the constant focus on debt and deficits from both sides of the aisle, odds are best that Obama will make some nod to deficit deduction and a “balanced approach” to spending cuts and tax increases. He alluded to as much in his second inaugural—“We must make the hard choices to reduce the cost of health care and the size of our deficit”—and will likely do the same in tomorrow’s speech. Indeed, given Washington’s preoccupation with the national debt, we should expect pundits and commentators to measure the “seriousness” of the State of the Union by whether it offers a plan for shrinking spending and cutting entitlements.
With that said, if Obama wanted to make a genuinely serious speech — one that addressed the actual economic problems of the United States — he would ignore the fight over debt and deficits. There is far more to economic policy than the size of the budget, and at a time of slow growth and high unemployment, our policy priorities should begin and end with the question of growth. What can we do to generate the growth that will restore full employment, fill the public coffers, and enable us to make the investments that secure long-term prosperity?
In an op-ed for Reuters, Larry Summers suggests a package of changes and reforms that would be familiar to anyone who followed the presidential campaign: Revenue-neutral corporate tax reform, federal re-investment in housing, construction of the Keystone XL pipeline, and new regulatory changes. But these are plans for the long-term, and will do little to deal with our short-term employment crisis.
Unfortunately, a divided Congress — and 60-vote Senate, where the filibuster is routine for most measures — makes new stimulus unlikely, unless it’s paired with spending cuts, which would be counter-productive. But there’s a next best option: Ignoring the sequester. Rather than call for a replacement to the $1.2 trillion in scheduled spending cuts, President Obama should ask Congress to delay or end it.
With growth, the economy can deal with high debt and deficits, at least in the medium-term. Continued commitment to austerity, on the other hand, will threaten our economic trajectory and harm our effort to reinvest in the United States. If Obama wants to do the prudent, serious thing, he’ll ignore the hawks, and stop worrying about the deficit.