The Fiscal Pivot


The Dish has been arguing for months now that once the worst of the recession is over, Obama should shift his attention to the deficit and the long-term debt. I find the proposed spending freeze to be a symbolic start, a way for the administration to show that it can focus on good government, that it can prune domestic discretionary spending both to hone priorities and to cut waste. It is, of course, a substantively trivial debt-reduction without a serious entitlement and defense review. It's not as trivial as the "pork" fixation. But it is an important - I'd say vital - rhetorical framing for the rest of his term in office.

Obama has his work cut out Wednesday night. He needs to frame health insurance reform as both a moral imperative and as a fiscal downpayment. He has to argue that the cuts involved in health reform will be made and that it's fiscally irresponsible not to make them. He should commit to vetoing future budgets if those Medicare cuts are not made. Then he has to embrace the spending freeze and commit to a deadly-serious entitlement and debt commission that will slash long-term entitlement spending and enact some new revenue system (my preferred option is a VAT, but I'm open to suggestions) to resolve the long term fiscal problem in his first term. This is his populist gesture: a commitment to do what is right against the status quo, regardless of the political consequences.

His theme is clear: he did not come to Washington to play the same old games. He is not interested in the old politics. He wants real reform. He will do everything he can to enact it in his first term, even if it costs him re-election. He should reprise the essential message of his campaign: change.

My view, however, is that this strategy makes no sense without an equally uncompromising effort to pass the Senate health insurance bill.

In my view, the House Dems need to just vote the Senate bill and forget about amending it in reconciliation. If the House Dems cannot do that, they're even more useless than I imagined, and will thoroughly deserve to go down in November. The point is that Obama's fiscal pivot for Independents risks losing Democrats if health reform is left for dead. And it's that coalition that elected Obama and is currently the only coalition capable of addressing this country's profound compounding crises.

The importance of Obama's fiscal pivot is two-fold. The first is that, after the spendthrift Bush years and the fiscally crippling but necessary response to the recession, it's the right thing to do. Given the precarious state of the world economy and the fragility of the dollar, it's actually an urgent thing to do. And again, the real issue is long-term entitlements and defense and the collapse of the revenue stream. If we do not fix this soon, the next generation can say goodbye to any prosperous future.

The second element is political. It is simply astonishing that the GOP is now posing as a party of fiscal responsibility. It's like Bristol Palin campaigning against teen pregnancy. They cannot be allowed to get away with this canard without a thorough accounting of their own profound responsibility for the current state of affairs. Obama was forced to spend in his first year to avoid a second Great Depression. He must be careful not to overdo it and risk a double dip. But he must make solvent government his core objective and he must pound that home day after day, even as he also focuses on jobs. Without that kind of reform, no one should have long term faith in the US economy - because its political system is failing it.

Fiscal responsibility will be for Obama what welfare reform was for Clinton: something he believes in anyway but that can reframe his administration away from the exhausted red-blue, right-left paradigm that the intellectually exhausted Republicans are grabbing onto as the only politics they understand. Obama should be brutally honest about the reasons for spending in his first year and equally blunt about the need to tackle the long-term debt now, while we still can.

Further thoughts on the SOTU later today.

(Photo: Jim Watson/Getty.)