Obama Rejects the Politics of Austerity

For the first time since 2011, the president seemed freed from an emphasis on the deficit and debt reduction to focus on his own agenda for expanding the economy.

Larry Downing/Reuters

Understanding what Tuesday night’s State of the Union address was really about requires first understanding what it wasn’t about: Debt. For the first time since the early days of his presidency, President Obama offered an economic message freed from the crippling politics of austerity.

That becomes clearer when you look at Obama’s past speeches. First year-presidents don’t technically give a “state of the union” address,” but on February 24, 2009, Obama rose before Congress to give the functional equivalent. In it, he began telling the story that he hoped would guide his domestic policy. He said the financial crisis afflicting the nation was the symptom of a deeper malady, which had begun many years before. That malady was America’s failure to foster the kind of widely shared economic growth it had enjoyed in the decades after World War II. “Now is the time to act boldly and wisely,” he declared, “to not only revive this economy, but to build a new foundation for lasting prosperity.

For a time, “new foundation” looked like Obama’s version of “New Deal” or “New Frontier”: the phrase that summed up his economic vision. Under its rubric in that 2009 speech, Obama proposed not only a stimulus to revive the economy, but big energy, education, and healthcare initiatives designed to lay “the foundation for our common prosperity” once the financial crisis subsided. Although he pledged to cut the deficit too, it was a distinctly lesser theme.

In 2010, Obama returned to his signature phrase. Insisting that “We can't afford another so-called economic ‘expansion’ like the one from the last decade … where the income of the average American household declined,” he promised to “lay a new foundation for long-term economic growth, and finally address the problems that America's families have confronted for years.” He talked about a second stimulus, about new spending on energy infrastructure and community colleges and he pushed healthcare reform. But by 2010, Obama’s popularity was down and Republicans were apoplectic about the rising government debt, and so Obama’s “new foundation” found itself competing with a new emphasis on deficit reduction. “Families across the country are tightening their belts and making tough decisions. The federal government should do the same,” he declared, even though Keynesian economics would suggest doing exactly the opposite. Despite acknowledging that the economic “devastation” from the Great Recession “remains,” Obama proposed freezing government spending for three years and proposed a bipartisan commission to suggest longer-term cuts.

By Obama’s 2011 State of the Union address, Republicans had taken the House and the phrase “new foundation” had disappeared. Obama proposed new government money for biomedical research, transportation infrastructure and 100,000 new science and math teachers. But this time, he also promised to freeze federal spending for five years, thus even more thoroughly subordinating his “new foundation” agenda to deficit reduction. “Now that the worst of the recession is over,” he declared, “we have to confront the fact that our government spends more than it takes in,” even though government spending more than it took in was the only thing keeping many Americans from experiencing the “worst of the recession” yet again.

In 2012, Obama shifted from the need for deficit reduction to his favored method of deficit reduction: spending cuts paired with tax hikes for the wealthy. And with his eye firmly on that fall’s reelection campaign, he contrasted his strategy for deficit reduction with the less equitable version favored by the GOP.

Then, in 2013, with reelection safely behind him, and mandatory sequester cuts beginning to bite, Obama offered a deficit compromise: He’d cut “entitlements” like Medicare and Social Security if Republicans accepted “tax reform” that secured more money from the rich. Having beaten Mitt Romney, Obama could now discuss the terms of a deficit reduction package from a position of greater strength. But that didn’t change the fact that, for the fourth year in a row, he was emphasizing fiscal austerity during an economic slowdown that, according to progressive, Keynesian analysis, required the opposite.

Not anymore. Last night, instead of devoting paragraph after paragraph to America’s debt, Obama quickly doffed his cap to the importance of “bringing down our deficit in a balanced way,” and then pivoted hard. Now that congress had “finally produced a budget,” he declared, politicians were “freer to focus on creating new jobs.” And that’s exactly what Obama did. He didn’t just devote more time to subjects he had touched in on years past: making pre-K universal, raising the minimum wage, supporting manufacturing, building an infrastructure for clean energy. More importantly, he didn’t undermine those calls, either rhetorically or substantively, by also promising to freeze or slash government spending. It was as if the politics of austerity had suddenly ceased to exist.

Of course, the politics of austerity still very much exist. Given the anti-government, deficit-focused orientation of congressional Republicans, Obama will have little ability to pass the programs he discussed last night. Still, by no longer agreeing with Republicans that the deficit represents America’s greatest economic problem, Obama returned to his original focus: an economic system that, even as the Great Recession subsides, still isn’t providing widespread opportunity. In so doing, he offered yet more evidence that the Democratic Party is moving left. Instead of merely being the party that does austerity more humanely, Democrats from Bill de Blasio to Elizabeth Warren to now Obama himself are arguing unapologetically for expanding government in order to expand prosperity to those Americans who haven’t experienced it.

It’s been a long detour, but the president is finally back on the road he hoped to travel in 2009. Whether in his remaining years in office he can actually build a “new foundation” for more widely shared economic prosperity remains unclear. But last night, Obama began building a “new foundation” for his party that may change the terms of political debate for years to come.