How the White House Lost the Public on Spending


Congress will get moving on spending bills now that financial regulation has passed both houses of Congress and moved on to conference committee. Passing a self-described "jobs bill" when 16% of the country is unemployed or forced into part-time work should be a bipartisan cinch. Instead, Republicans and Democrats seem to have reached the opposite conclusion: that another $100 billion on items like public schools and Medicaid payments will make them look like reckless spenders.

Washington has created a strange feedback loop on the deficit. D.C. doesn't explain where the red ink comes from (almost entirely from the revenue nosedive and automatic spending increases). So the public misunderstands and fears the deficit as proof of Big Government. So Washington, reflexively, misunderstands, fears, and kowtows to the public's misinformed reaction. As a result, politicians treat an item like Sen. Harkin's $23 billion public school rescue plan -- which amounts to 0.6% of the budget -- as dead in the water.

Regular readers know that a leading concern of this blog is the way the White House talks about economic policy. Obama could have repeatedly and clearly explained that not all deficits are the same. Instead, he's peppered his speeches with hackneyed false equivalencies -- if families are tightening their belt, then government can, too -- that have obscured the issue.

Spending more than you earn during and immediately after a recession is an appropriate prescription. But the same way an injured patient shouldn't be given a pillbox of Valium with infinite refills, our injured economy needs to wean itself off its deficit medication. Some of that spending-revenue gap comes down naturally when people earn taxable income. Some of that spending-revenue gap comes down naturally when states and families stop leaning on the government for emergency spending -- whether in the form of public school rescue plans for states or jobless benefits for families.

But some of the long-term spending-revenue gap is structural. After the recession clears up, we still won't collect enough money to pay for the promises we've made to Americans. The economic term for those promises is debt. And the only way to solve our debt crisis is to fulfill those promises (which will require more revenue), or to change the promises themselves (which will require less spending).

There is no reason why simple arithmetic should be beyond Washington's power of explanation. But it is. And until the president learns to make the argument for spending, he's trapped by a deficit-hawk vocabulary that's hurting his party and, vastly more importantly, his economy.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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