Spending Freeze And Good News on the Deficit

While it is not surprising that everyone is talking about the proposed spending freeze, I’m not sure that this is the biggest economic news of the day. I still want to see more details on the freeze, but as it comes down to decreasing spending in some areas in order to increase spending in others it largely sounds like a PR attempt to point out the fact that Obama is hardly the big spender the right makes him out to be (and some on the left wish he was). Those who paid attention to what Obama was saying while campaigning before the crash should not be surprised by his desire for fiscal restraint.

The more significant news today might be that the Congressional Budget Office has improved its estimates as to the size of the deficit this year:

The deficit will come in at $1.35 trillion in the fiscal year that ends on Sept. 30, the Congressional Budget Office said, a slight improvement over the $1.38 trillion figure it predicted last August.

That’s also slightly lower than the record $1.4 trillion posted in the last fiscal year.

But at 9.2 percent of gross domestic product, the deficit still hovers at levels not seen since the end of World War Two.

Other reports attribute the lower estimates to a combination of  less money spent on the bank bail outs and the economy improving more than expected. While there is still a long term problem to be dealt with, this news sure contradicts the tea-bagger narrative.

I suspect that the goal of announcing the freeze is to try to change this narrative. We will have to see how this plays out but I’m not very optimistic this will work. There has already been overwhelming evidence that the conservative meme that they are more fiscally responsible than the democrats is outright false. Conservatives prefer to exaggerate the effects of the stimulus on the deficit and ignore the Republican record. Adding talk of a freeze is unlikely to change this. Rather than acknowledging that the Democrats have shown greater fiscal restraint in recent years than the Republicans, conservatives will point to any areas where spending does increase as signs that Obama was lying while ignoring any offsetting cuts.

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4 Comments

  1. 1
    Will C. Justice says:

    AN OPEN LETTER TO PRESIDENT OBAMA ABOUT HIS “BIPARTISAN” AGENDA by Will C. Justice

    Dear Mr. President:
    You appear to have forgotten who brought you to this party.  But we haven’t.
    I once was your enthusiastic supporter, a believer, a defender.
    But I, like millions of others, have begun to give up hope.
    Your decision to surge in Afghanistan made me heartsick.
    Trying to turn that land-locked, tribal, desperately poor society with a 10% literacy rate, no natural resources, no industrial base, and a century’s-old drug culture into a democracy is a fantastic dream, but an impossible one.  Perhaps a few centuries from now it might be feasible, but not in our lifetime.
    Your initial mistake, and a huge one, was your choice of top advisors.  You let Governor Howard Dean go. His Democratic strategy was one of the big reasons you are in the White House.
    You kept the Bush military team in place—Gates, Patraeus, Jones & Co, who actively opposed you.   Why didn’t you use General Wesley Clark?  He knows how to lead a successful military campaign.  (NATO,, the Balkans)
    A prediction.  If you follow the Bush team’s military strategy, you will get what Bush got.  Before long, an approval rating in the high 20s.
    It may not be too late to get better military advice, but time is running out.
    Your decision about Afghanistan has already cost you hundreds of thousands of supporters who remain fervently against the war.
    Presently you are copying Bush’s DOMESTIC policy.   Tax cuts for this, tax credits for that.
    Straight out of the Republican play book.   But has it gotten you a single ounce of Republican support?  If it has, it’s not visible.
    More importantly, has it gotten you any good results?
    Obviously not, because tax cuts and miniscule tax rebates do not work in this environment.   And they add to the deficit.
    You can’t leverage tax cuts the way you can leverage expenditures for rebuilding infrastructure.
    And what good are tax credits to people who are unemployed or about to lose their homes?   As for businesses, few businesses will hire on the basis of tax credits alone.  Certainly not businesses that are about to go under.
    And now your latest horror.  You propose a freeze on domestic spending for everything but THE MILITARY, veterans affairs, etc.  For THREE YEARS!!!!
    What are you thinking about, Mr. President?
    Why would you put handcuffs on yourself?  For the rest of your term in office?
    Are you trying to appease Republicans and Tea Party zealots?  They hate you.  Are you over-reacting to the Massachusetts loss?
    Only hubris could lead you to believe that you can turn these people into supporters.   If you doubt this, listen to Fox News.  Listen to Rush.  They are bullies who regard what you are doing as weakness; these people eat weak leaders for lunch.
    Remember: He who tries to please everybody ends up pleasing nobody.
    Continue down your “bipartisan” path, and you will end up pleasing nobody.
    You will get nothing done–because you will look around, and your friends will be gone.  Soon you will be dealing with just enemies.  Your friends will no longer trust you.
    We won’t hate you.   And we won’t become Republicans.
    We will just leave you alone.  And the ones whom you are courting will destroy you

  2. 2
    Ron Chusid says:

    “And now your latest horror. You propose a freeze on domestic spending for everything but THE MILITARY, veterans affairs, etc. For THREE YEARS!!!!”

    That is not what is being proposed at all. The freeze excludes far more than the military. It actually does not exclude any form of domestic spending other than requiring that other spending be cut to make up for new spending in certain areas, with the bulk of domestic spending not even covered by the freeze.

    He’s not trying to turn the Tea Party zealots into supporters. He’s looking at the independents and swing voters–the people who elected him.

    This may not work, and I can’t even say if it is a good idea without more details, but his proposal is nothing along the lines which you are saying.

  3. 3
    good says:

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  4. 4
    good says:

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