When Will Mr. Obama Make Those Tough Choices'?
THERE WAS much to admire in President-elect Barack Obama's speech on the economy at George Mason University yesterday. He candidly assessed the country's predicament, calling it a "bad situation that could become dramatically worse." He sounded a note of confidence about Americans' capacity nevertheless to "overcome great fears and improbable odds." And he offered a point-by-point description of the American Recovery and Reinvestment Plan, which he is developing with congressional leaders. That plan, currently estimated at $775 billion in deficit spending over the next two years, is nothing if not comprehensive: As Mr. Obama laid it out yesterday, it will encompass everything from weather-stripping to teacher training.
The best of his ideas would use temporary federal borrowing in ways that not only boost economic activity now but also enhance the country's efficiency in the long run. For example, Mr. Obama spoke of upgrading energy-wasting federal buildings, improving the electrical grid and eliminating a backlog of already-vetted infrastructure projects. He also wisely proposed an infusion of cash to help state governments avoid sharp tax increases or program cuts -- as well as a $1,000 middle-class tax cut and increased unemployment benefits to counter the current contraction of consumer spending, which certainly make sense at least as one-time measures.
Mr. Obama acknowledged that "some might be skeptical" of his plan because it would add massively to the already swollen federal deficit. He alluded to "tough choices" but proposed none. Nor was his promise of an "unprecedented effort to eliminate unwise and unnecessary spending" reassuring: As Mr. Obama knows, the deficit would still be immense even if he eliminated all the waste he could find. A truly "unprecedented" effort would be one that attacked the structural threats to the federal government's solvency: Medicare, Medicaid and Social Security. Without some assurance that serious entitlement reform is on the next president's agenda, global financial markets could gradually lose the confidence in America that Mr. Obama said yesterday he is trying to restore.
But on that issue, Mr. Obama has had disappointingly little to say, either during the campaign or since. The closest he has come lately was a promise, at his news conference Wednesday, to address Medicare and Social Security in his budget plan. We're not saying that he has to deliver comprehensive entitlement reform and fiscal stimulus all at once. But he should be using the leverage of this year's spending to win a commitment to future reform. Persuading Congress to spend $800 billion will be, relatively speaking, the easy part; cutting benefits, or, for that matter, the equally vital and unpopular task of imposing a carbon tax, will be much tougher. The present emergency is as good an opportunity to start tackling the structural problems as any president is likely to have before 2019 -- when Medicare's trust fund is projected to run dry. If not now, when?