Obama’s Lesser Evil

Jeff Madrick

President Obama’s budget proposal this week shows just how thoroughly austerity economics now dominates the policy debate for both Democrats and Republicans. This emphasis is not new: Obama had already signaled he was giving special priority to cutting the deficit well before the November elections, when he named a bipartisan panel to make recommendations on how to deal with future deficits. It was hardly an objective panel, headed by two deficit hawks, former Clinton White House Chief of Staff Erskine Bowles and retired Wyoming Republican Senator Alan Simpson.

Not so very long ago, some economists feared Obama’s stimulus plan was not doing enough, quickly enough to rescue the economy. With US government spending now surpassing revenues by about 10 percent of GDP, those voices have been muffled. Conditions are now ideal for the growing number of deficit hawks in Congress and well-financed think tanks, mostly long-time small-government proponents like the American Enterprise Institute and the Peterson-Pew Commission on Budget Reform, to control the discussion again. And the financial catastrophes in Ireland and Greece, plus serious doubts about economic stability in other countries, have given conservatives another argument for sounding the alarm. An American general now tells us that the deficit is the nation’s biggest security threat.