The Return Of The Deficit Hawks

The Obama administration made a big deal today out of saying that it would adhere to so-called PAYGO rules, basically requiring that any new spending be accounted for. Having just thrown trillions of dollars at the banking crisis, mortgage crisis, auto crisis and this little thing we call the economic calamity, the sudden interest in fiscal rectitude may seem odd, but it's not crazy. Last week, Fed Chairman Ben Bernanke warned that we can't keep all these stimuli going forever and before too long Washington would have to cut spending, raise taxes or both.

Still, the impatience with spending is growing. The Center for a Responsible Federal Budget, one of the leading fiscal scolds out there, took a shot at Obama's plan this afternoon.

"This is like quitting drinking, but making an exception for beer and hard liquor," said Maya MacGuineas, President of the Committee for a Responsible Federal Budget. "Exempting these measures from PAYGO would increase the ten-year deficit by over $2.5 trillion dollars. That's not fiscal responsibility."

CRFB believes the President should strengthen his PAYGO proposal to cover all new non-discretionary legislation, and should accompany this with other reforms. The proposal should also be paired with discretionary spending caps, as it was when it effectively helped to rein in deficit spending in the past.

The he's-spending-too-much line of attack against Obama hasn't worked until now because of the extraordinary situation we find ourselves in. Poor Pete Peterson, the private equity billionaire, who gambled 10 figures of his own money on fiscal discipline just as the economy went off a cliff.

But now that there are green shoots--Dow has stabilized, unemployment doesn't seem to be soaring much more, Citi isn't going to fail--Obama's the victim of his own success and becoming more vulnerable to the spendthrift attack.

Will fiscal hawks continue to gain clout? Will they manage to derail health care? At the moment, I'd say not, but I think today's critique of PAYGO from the scolds suggests what might be coming. Of course, spending now to fix health care is the only way to save the country from fiscal disaster in the years ahead just as spending this winter was the only way to keep the recession from becoming a depression. But, no matter, the fiscal hawks seem resurgent, aided by the administration they seem determined to savage.