Who is the intended audience?
There are a couple candidates. (1) Moderates concerned about the
deficit, whom the administration fears are slipping away nationally, as
they did in Massachusetts. (2) Republicans who want to see good-faith
compromises from the president to verify that he is willing to work
with them, not around them, in 2010. (3) Foreign investors looking for
a signal that the administration is aware of/concerned about the
deficit. This freeze would represent more of a psychological boost for
bondholders than a substantive economic shift.
What do the Republicans/Democrats think about it?
It sounds like they're laughing. And not with the president, either. At him. From the Times:
Republicans were quick to mock the freeze proposal. "Given Washington
Democrats' unprecedented spending binge, this is like announcing you're
going on a diet after winning a pie-eating contest," said Michael
Steel, a spokesman for the House Republican leader, Representative John A. Boehner of Ohio.
The year on liberal economists' minds is 1937. That's the year that
FDR, seeing an economic recovery, pulled back the reigns on fiscal and
monetary stimulus, causing the economy to "double-dip" into a second
recession. The left is worried that, since government spending is very
clearly fueling what consumer spending we've got going, tightening the
federal budget could drive down the economy. You could also make the
case that if the economy does turn down again after the freeze --
whether or not the freeze has anything to do with the downturn -- it
will look horrible for the administration.
What could be the fallout/unintended consequences?
A couple theories are floating around. Could this be a move to slow the
growth of earmarks? Possibly. By forcing a broadly Democratic
Congress to wrangle amongst themselves for the cuts, it seems to me that
he's setting the stage for hoards of angry electeds who are in danger
of seriously ticking off their constituents in an election year. Take
Blanche Lincoln for example. She chairs the Senate Agricultural
Committee, is a conservative Democrat, a swing vote on every major
issue including health care, and is locked in a tough reelection
battle. You think the White House is going to force her to sign off on
agricultural subsidy cuts?
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.
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.