Before Toledo, Obama’s main task was to take credit for a slow recovery. After Toledo, his main task is to explain and confront a stalled economy. The adjustment has not been easy.
A slow recovery requires a message of patience. A stalled economy demands an impression of action. So Obama’s main political problem comes down to this: He has exhausted many of the obvious options for action. A major stimulus package will not be repeated — and some previously passed spending will expire at the end of the year. The Federal Reserve is reluctant to pump more money into the economy. The chairman of the Fed, Ben Bernanke, warns that some causes of the economic slowdown — particularly a dismal housing market — are likely to continue into next year. So what is Obama’s economic strategy? To wait and hope? And how long will Democrats find such an approach sufficient?
The president’s problem is further compounded by a consuming debate in Washington that is largely irrelevant to his political needs. A major program of spending cuts and/or tax increases is not the normal response to a flat-lining economy. Whatever the long- and medium-term benefits of serious deficit reduction, its immediate economic influence is likely to be marginal.
This is not to say the deficit debate is inconsequential. On the current spending path, federal debt will exceed the size of the entire American economy by 2021. Democrats generally believe that the deficit should be confronted by increasing the percentage of the economy taken in taxes. Republicans generally believe that the deficit should be confronted by reducing the percentage of the economy devoted to government spending. In the abstract, the Republican approach is more popular. But it requires cuts in entitlements, which aren’t popular.
This disagreement has been bumped up to the presidential level. Obama will have a large influence on its outcome. But the argument itself has little to do with his immediate political interest in job creation. It is not a matter of taking the right or wrong side; for Obama, it is simply the wrong debate.
The president seems to recognize his predicament. “Of course,” he said recently, “there’s been a real debate about where to invest and where to cut, and I’m committed to working with members of both parties to cut deficits and debt. But we can’t simply cut our way to prosperity.”
This argument is also a kind of admission. It indicates how thoroughly Republicans are dominating the political discussion. There is little attention in Washington to anything other than cutting deficits and debt. Obama invited some of this attention by his own spending habits. But this focus has little to do with his urgent need for economic growth. Heading into a presidential election season, Obama is not determining the ground on which the election will be fought.
The next few weeks will bring some must-watch reality television. Can Obama and House Speaker John Boehner work a debt-limit deal involving spending cuts and caps while clearing out some tax preferences and exclusions? Will Boehner be able to sell such an agreement to suspicious House conservatives? Will the speaker need to turn to House Democrats to get the votes he needs? Will Majority Leader Eric Cantor further distance himself from Boehner and take advantage of conservative discontent?
Meanwhile, the Obama administration drifts on a sea of economic events, heading toward a lee shore.