Obama Budget Offers Inertia, Not Hope and Change

One way to judge the merits of the budget Barack Obama unveiled this week is by the comments of his political allies. "It's not enough to focus primarily on the non-security discretionary part of the budget," said Senate Budget Committee Chairman Kent Conrad.

Erskine Bowles, the Democrat whom Obama appointed as co-chairman of his fiscal commission, said the budget goes "nowhere near where they will have to go to resolve our fiscal nightmare." "The president punted," began the editorial of the Washington Post, which endorsed Obama in 2008. The paper noted tartly that he "chose to duck" the fiscal commission's recommendations.

Conventional wisdom is that voters like spending cuts in the abstract but oppose any specific cuts except in foreign aid.

"I don't need to tell you what I think of the budget: it's disastrous," wrote Atlantic economics blogger (and Obama voter) Megan McArdle. "I'm starting to think it's time to panic."

There was a little countervailing opinion, but not much. The New Republic's Jonathan ("I hate George W. Bush") Chait headlined his comment, "Why Obama's budget is OK." He thinks it might be a successful political ploy.

In his Tuesday news conference, Obama was reduced to calling for "patience" and saying he wanted to have an "adult conversation" with Republicans on entitlement spending.

To understand what may be ahead, it's useful to distinguish between budgets for three periods -- fiscal 2011, fiscal 2012 and the out years thereafter.

For fiscal 2011, which began Oct. 1, the government is now being funded by a continuing resolution that expires on March 4. House Republican leaders initially promised to cut that by $57 billion, arguing that that fulfilled their campaign promise to chop $100 billion because the fiscal year is already five months old. But the freshmen objected, and the leadership agreed to cut the full $100 billion.

The conventional wisdom is that the parties won't be able to agree on funding levels for the remainder of fiscal 2011. This could result in a government shutdown, like the one that occurred in 1995-96 when Bill Clinton and Newt Gingrich failed to agree on terms for continuing to fund government operations.

That was supposedly disastrous for the Republicans. Actually it worked out well both for Clinton and for House Republicans, who lost only nine seats in 1996 -- a lot fewer than the 63 that the Democrats lost last November. Moreover, in 1995-96 we had healthy economic growth and the case for cuts was much weaker. Now there's a much stronger argument that we can't afford the increased spending Obama and Nancy Pelosi produced in 2009-10.

For fiscal 2012, House Budget Chairman Paul Ryan said he'll present a budget that "will include real entitlement reforms." There's obviously some political risk here. Social Security is considered the third rail of American politics, and many Republicans cited Medicare cuts as one of the defects of Obamacare.

But there's also some risk in not addressing entitlements. Obama's fiscal 2012 budget does nothing to address the looming problems of Social Security, Medicare or Medicaid. That looks less like "hope and change" and more like "inertia and despair."

So do his budget plans for the out years beyond fiscal 2012, which don't address entitlements and are larded with gimmicks. The charitable deduction for high earners would be cut permanently (in effect transferring money from charities to the government) to pay for a few years of Alternative Minimum Tax fixes. The patent period for biologic drugs, set by the last Congress, would be reduced to pay for a few years of the annual Medicare "doc fix."

In November 2010, the voters rejected the vast increase in the size and scope of government of the Obama Democrats. They had increased domestic discretionary spending by 24 percent, and by more than 80 percent if you count the stimulus package.

Now the president is trying to salvage most of what was intended to be a permanent increase of government's share of the economy by calling for dribs and drabs of cuts and freezing total discretionary spending at a much higher level than ever before.

This may be, as Chait suggests, a successful short-term political ploy, while being obviously long-term bad public policy. Conventional wisdom is that voters like spending cuts in the abstract but oppose any specific cuts except in foreign aid.

But conventional wisdom also said that the stimulus package and Obamacare would be popular. The Republicans, following where the voters led, are betting conventional wisdom is wrong again.

Michael Barone is a Resident Fellow in American Politics at AEI.

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