{"id":230886,"date":"2010-01-26T09:32:19","date_gmt":"2010-01-26T14:32:19","guid":{"rendered":"tag:business.theatlantic.com,2010:\/\/3.34186"},"modified":"2010-01-26T10:39:17","modified_gmt":"2010-01-26T15:39:17","slug":"how-will-obamas-spending-freeze-play-in-washington","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/230886","title":{"rendered":"How Will Obama’s Spending Freeze Play in Washington?"},"content":{"rendered":"

The announcement that President Obama will freeze non-military discretionary spending for three years has the liberal caucus in a tizzy. The key fact is that non-military discretionary spending today is about 25 percent of the budget. Freezing 25 percent of spending while entitlements grow faster than inflation does not confront our deficit, but it does make the Democratic base really really mad. <\/p>\n

Here are five quick questions about the gambit and some answers.<\/p>\n

Where will the cuts come from?<\/b>
\nThis is being called a budget freeze, but the biggest parts of the
\nbudget won’t feel the frostbite. The exemptions include: security
\ndepartments like the Pentagon, Homeland Security, the Veterans
\nAdministration, and entitlements like Medicare, Medicaid and Social
\nSecurity. The freeze targets close to a quarter of the yearly budget —
\ndepartments like Education and Health and Human Services, agricultural
\nsubsidies and earmarks. The White House will provide a specific list of
\npossible cuts to adhere to the freeze, but ultimately it will be up to
\nCongress to determine how the money sloshes around.<\/p>\n

Will it dent the debt?<\/b>
\nA little. The freeze is not — repeat, not<\/i> — tied to inflation.
\nThat means the cuts will get even deeper each year. $15 billion saved
\nnext year. Maybe $50 billion the next year, and $75 billion the year
\nafter that. The White House is projecting $250 billion saved over ten
\nyears. My understanding is that our projected accumulated debt over
\nthat time is close to $9 trillion.<\/p>\n

Who is the intended audience?<\/b>
\nThere are a couple candidates. (1) Moderates concerned about the
\ndeficit, whom the administration fears are slipping away nationally, as
\nthey did in Massachusetts. (2) Republicans who want to see good-faith
\ncompromises from the president to verify that he is willing to work
\nwith them, not around them, in 2010. (3) Foreign investors looking for
\na signal that the administration is aware of\/concerned about the
\ndeficit. This freeze would represent more of a psychological boost for
\nbondholders than a substantive economic shift.<\/p>\n

What do the Republicans\/Democrats think about it?<\/b>
\nIt sounds like they’re laughing. And not with the president, either. At him. From the Times<\/a>:<\/p>\n

Republicans were quick to mock the freeze proposal. “Given Washington
\nDemocrats’ unprecedented spending binge, this is like announcing you’re
\ngoing on a diet after winning a pie-eating contest,” said Michael
\nSteel, a spokesman for the House Republican leader, Representative John A. Boehner<\/a> of Ohio. \n<\/p><\/blockquote>\n

The year on liberal economists’ minds is 1937. That’s the year that
\nFDR, seeing an economic recovery, pulled back the reigns on fiscal and
\nmonetary stimulus, causing the economy to “double-dip” into a second
\nrecession. The left is worried that, since government spending is very
\nclearly fueling what consumer spending we’ve got going, tightening the
\nfederal budget could drive down the economy. You could also make the
\ncase that if the economy does turn down again after the freeze —
\nwhether or not the freeze has anything to do with the downturn — it
\nwill look horrible for the administration.<\/p>\n

What could be the fallout\/unintended consequences?<\/b>
\nA couple theories are floating around. Could this be a move to slow the
\ngrowth of earmarks? Possibly.  By forcing a broadly Democratic
\nCongress to wrangle amongst themselves for the cuts, it seems to me that
\nhe’s setting the stage for hoards of angry electeds who are in danger
\nof seriously ticking off their constituents in an election year. Take
\nBlanche Lincoln for example. She chairs the Senate Agricultural
\nCommittee, is a conservative Democrat, a swing vote on every major
\nissue including health care, and is locked in a tough reelection
\nbattle. You think the White House is going to force her to sign off on
\nagricultural subsidy cuts?<\/p>\n

Maybe the administration thinks this move gives them political space. You propose a freeze that is unpopular with Congress, hold it over electeds’ heads as a bargaining chip, and then approach senators throughout the year making promises to spare their programs from the Deep Freeze in exchange for votes. <\/p>\n

I’m interested to see how this polls. America’s deficit hawk streak has been on a tear for months. Confronted with this semi-serious effort to demonstrate deficit hawkery, will Americans applaud the move? I’m sure the administration is hoping it can buy some good will among moderate debt watchers — enough to forge ahead with a maybe-sorta-still-alive health care bill and apparently-very-still-alive jobs bill<\/a>.


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The announcement that President Obama will freeze non-military discretionary spending for three years has the liberal caucus in a tizzy. The key fact is that non-military discretionary spending today is about 25 percent of the budget. Freezing 25 percent of spending while entitlements grow faster than inflation does not confront our deficit, but it does […]<\/p>\n","protected":false},"author":1534,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-230886","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/230886","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/1534"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=230886"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/230886\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=230886"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=230886"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=230886"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}