Here comes the anti-stimulus. President Obama, reports the New York Times, is proposing a three-year freeze on non-security related discretionary funding, aimed at saving some $250 billion on government over the next ten years.
If ever there was a time to pull out the old Karl Marx chestnut, "History repeats itself, first as tragedy, second as farce," that moment is now. Prominent members of Obama's own administration have warned against repeating the errors of 1937, namely, Franklin Roosevelt's decision to cut spending and balance the budget too quickly, thus strangling a nascent recovery from the Great Depression. But with the U.S. economy far from healthy, the president has decided, once again, to bow to the political winds and make the deficit priority number one.
The Times' Jackie Calmes writes that the move "would signal to voters, Wall Street and other nations that Mr. Obama is willing to make some tough decisions at a time when the deficit and the national debt, in the view of some economists, have reached levels that undermine the nation's long-term prosperity."
Strangely, however, bond investors have yet to signal in any meaningful way that they are worried about current levels of debt. The U.S. government is still able to borrow on extraordinarily good terms. So what this really looks like is the exact opposite of a tough decision. As Obama has stressed all year long, substantively reducing the deficit will require addressing booming health care costs. So "a tough decision" would be fighting for health care reform.
Or pushing for a climate change bill with teeth. Or banging the drums for a second stimulus. Those would also be tough! A spending freeze, on the other hand, is nothing but a gimmick aimed at shoring up political support. It will be perceived as exactly that, and the end result will be Obama looking weaker than ever.