Dem Senators: Obama Failing to Lead on Budget

As Growing Evidence Points to Need for Spending Cuts, President Keeps Head in the Sand

Senate Democrats vented their frustration with Obama’s failure to lead on spending cuts Tuesday evening, expressing their anger that the President has left the task of deficit reduction almost entirely to Congress:

“At a closed-door session on the budget, nine Democratic senators spent parts of the 30-minute meeting whacking the White House for not being more engaged, according to people who were present.

“The open irritation with the White House comes just as Reid announced support for the Republican-led bill which passed in the House Tuesday and funds the government for another two weeks, while slashing $4 billion. Senate Democrats’ call for Obama to step it up is a precursor to two looming fights: one over a bill to fund the government for the rest of the fiscal year, and another on whether to raise the national debt limit.” (Manu Raju, “Democrats: Obama Must Lead on Budget,” Politico, 3/1/2011)

Meanwhile, evidence mounts that spending cuts are key to the nation’s long-term economic health. Goldman Sachs issued a report Wednesday morning reiterating the firm’s belief that spending cuts are both necessary and proper:

“Left unchecked, chronic primary deficits will lead to an increasing stock of federal debt as a share of GDP, raising long-term interest rates and thereby crowding out private investment…

“The eventual effect of sustained fiscal imbalance is slower growth and greater risk of a fiscal crisis.  Our estimates suggest that a 10-point increase in the debt/GDP ratio lowers growth four years later by 0.2 percentage point, and increases the probability of a debt crisis by 2.5% in the aftermath of a financial crisis like the recent one.  (See No Rush for the Exit,” Global Economics Paper, No. 200, June 30, 2010 and “When One Crisis Leads to Another,” US Economics Analyst, 11/04, Jan. 28, 2011.)  To avoid this, lawmakers must begin to identify deficit reduction strategies.

“Ultimately, what goes up must come down. In the case of the federal budget, this means that a deficit-financed boost to growth will eventually lead to a drag. While policymakers can try to smooth the transition by phasing in cuts and incorporating multi-year fiscal commitments, achieving a sustainable fiscal policy will inevitably be a painful but necessary process.” (Jan Hatzius and Alec Phillips, “Fiscal Restraint: A Question of When, Not If,” Goldman Sachs Global ECS U.S. Research, 3/2/2011)

Sen. Kent Conrad (D-ND) and former Rep. Harold Ford, Jr. (D-TN) both emphasized the link between spending cuts and job creation Wednesday morning, explaining that spending reductions would be a key part of reducing unemployment:

CONRAD: “The gross debt of the United States as you know is going to reach 100 percent of the gross domestic product of the United States this year. And the best economic analysis that’s been done by two professors who looked at 200 years of economic crisis studied 44 countries found that when you get to a gross debt of more than 90 percent of your gross domestic product you’re in the danger zone and you compromise future economic growth in a substantial way.So that’s what this is all about: future opportunity, future jobs for the American people. Too much debt acts as a lodestone around the American economy. It’s critically important we deal with this.” (Remarks by Sen. Kent Conrad, MSNBC’s Morning Joe, 3/2/2011)

FORD: “I hope that you [CONRAD] continue to draw the link between job creation and job growth and controlling spending particularly long-term spending. Seems to be an argument that might appeal to Democrats and Republicans and business leaders.” (Remarks by former Rep. Harold Ford, Jr., MSNBC’sMorning Joe, 3/2/2011)

Yet, despite this broadening consensus in favor of spending cuts, Obama has offered no leadership on deficit reduction, leaving the issue instead to Congress. This failure of leadership has spurred criticism of Obama’s “‘Where’s Waldo?’ presidency” even from a liberal columnist for The Washington Post:

“For a man who won office talking about change we can believe in, Barack Obama can be a strangely passive president. There are a startling number of occasions in which the president has been missing in action – unwilling, reluctant or late to weigh in on the issue of the moment. He is, too often, more reactive than inspirational, more cautious than forceful…

“Yet the dots connect to form an unsettling portrait of a “Where’s Waldo?” presidency: You frequently have to squint to find the White House amid the larger landscape.

“This tough assessment from someone who generally shares the president’s ideological perspective may be hard to square with the conservative portrait of Obama as the rapacious perpetrator of a big-government agenda. If the president is being simultaneously accused of overreaching ambition and gutless fight-ducking, maybe he’s doing something right. Maybe, or else Obama has at times managed to do both simultaneously…

“Where’s Obama? No matter how hard you look, sometimes he’s impossible to find.” (Ruth Marcus, “Obama’s ‘Where’s Waldo?’ Presidency,” The Washington Post, 3/2/2011)