All State of the Union addresses are political statements: this one was more carefully crafted than most. In wrapping himself in the flag and mouthing platitudes such as “This is our generation’s Sputnik moment” and “This is a country where anything is possible,” President Obama wasn’t merely channelling Ronald Reagan (although at one point I thought he was going to start talking about “a shining city on a hill”). He was setting out the terms for a bitter fiscal debate, which is going to dominate the next two years.
Having spent much of last fall arguing (correctly) that during a recession wasn’t the right time to try and reduce the deficit, the President has shifted ground and agreed to fight on the Republicans’ terms: “Now that the worst of the recession is over,” he said, “we have to confront the fact that the government spends more than it takes in.” In repeating his pledge to freeze discretionary domestic spending for four years, while at the same time calling for more public investments in education, infrastructure, and alternative energy, he was trying to strike a tricky balance between fiscal orthodoxy and techno-optimism.
I thought his best line was comparing Facebook and Google to Thomas Edison and the Wright Brothers. Still, Brit Hume of Fox News had a point when he asked of Obama’s public investment proposals, “How much borrowed money, Sir, are you willing to spend on these items?” We won’t know the answer until next month, when the Administration delivers its budget for the fiscal year of 2012, which begins in October.
It is tempting to think of deficit reduction as an endeavor that naturally favors Republicans, but for several reasons that would be a mistake. We are entering a fascinating period in which Republicans have the political energy and ideological impetus, but President Obama has the tactical advantage. As the fiscal battle gets going in earnest, three things will play in his favor.
The first is structural. In a balkanized political system such as ours, which was expressly designed to prevent strong government, being President is a bit like quarterbacking a January playoff game in Chicago or Green Bay: defense is much easier than offense. Having spent the first half of his Presidency getting roughed up by Rex Ryan-style blitzes, the President is now moving to the sideline, waving his defensive line into position, and inviting John Boehner and his teammates to try and score some points against them.
As Newt Gingrich discovered in the mid-nineties, making policy from the House of Representatives is mightily difficult. Rudyard Kipling said harlots have power without responsibility. Congressional leaders such as Gingrich, and now Boehner, are in the opposite position: they have responsibility without power. If they don’t meet the expectations of their supporters, a backlash is inevitable. If they do play to their base, they risk alienating the country at large.
The Republicans’ dilemma was clearly visible last night. Representative Paul Ryan and Tea Party darling Michele Bachmann both made clear that they are determined to slash federal spending, or, at least, to be seen trying to do so. However, aside from calling for a repeal of Obama’s health-care reform, neither made any specific proposals on which programs to cut. As the President pointed out, discretionary domestic outlays make up just twelve per cent of the budget. Without curbing entitlements and the defense budget, it is virtually impossible to bring down spending.
As the months progress, the White House will force the Republicans to get more specific about what they mean to do with Social Security, Medicare, and other high-cost programs. In Gene Sperling at the National Economic Council and Jack Lew at the Office of Management and Budget, the Obama Administration has two wily veterans of the fiscal wars. Both were members of the Clinton Administration team that negotiated the Balanced Budget Act of 1997. The Republicans, by contrast, look like callow rookies. Ryan, for example, is already on the record as proposing to turn Medicare into a privatized voucher program for anybody under fifty-five. (Good luck selling that one to the A.A.R.P.) And whatever the Republican leaders do, they will have the Tea Party ultras nipping at their heels.
Last but not least, President Obama may finally have the economy on his side. In recent weeks, many independent forecasters have been raising their estimates of G.D.P. growth from two to three per cent to three to four per cent. That might not sound like a big change, but if growth of close to four per cent does materialize it will start to have a significant impact on unemployment and the deficit.
Contrary to Republican claims, a big reason that the deficit exploded was a collapse in tax revenues rather than a spurt of stimulus spending. Between 2007 and 2010, federal revenues went from about eighteen per cent of G.D.P. to less than fifteen per cent—the first time they had fallen to such a low level since the nineteen-sixties. If growth picks up, so will tax revenues, and the deficit will start to come down of its own accord, relieving the political pressure to slash everything in sight. (Yes, the U.S. still has a worrying long-term structural deficit, but that has virtually everything to do with Medicare, Medicaid, and Social Security, and virtually nothing to do with the stimulus program.)
No wonder the President seems so chipper. A couple of months ago, when he gave his speech about the “shellacking” of the midterms, he was gray and dejected. Last night, he looked like a man who has been sentenced to two years in jail, only to find he can serve his time at the Four Seasons Maui.
According to at least one objective source, the President’s sunny demeanor is justified. This morning, Paddy Powers, the Irish bookmaker, made him the 4/5 favorite to win the 2012 election. (At these odds, you have to bet $50 to win $40.) Mitt Romney is second favorite at 8/1. Sarah Palin is 12/1. Mike Bloomberg is 25/1.
Photograph: Pablo Martinez Monsivais-Pool/Getty Images
