John Boehner will replace Nancy Pelosi at the next State of the Union address. (White House photo by Pete Souza)

We’re getting our first indication of how the President will use the State of the Union address. With Speaker John Boehner behind him, President Obama will address a solidly Republican House of Representatives and a Senate with a 53-47 Democratic split. In his press conference yesterday he alluded to his persistence and unfinished business on a variety of issues, particularly surrounding the federal budget, the first wave of which will need to be completed by March to avoid a government shutdown. According to spokesman Robert Gibbs, the State of the Union will have a focus on the budget and deficits.

Gibbs made the statement on Twitter, where he was taking reader questions Thursday, in response to a question about whether Obama would push the recommendations from his fiscal commission during the State of the Union speech:

Yes – POTUS will use both SOTU & budget 2 talk about priorities & focus on our deficit/debt – team looking thru deficit comm recs 2 @mwfreel

Gibbs said the speech would come in late January:

Look for SOTU to be after visit by President Hu – late January @The_Future

As tea-leaf reading, this is thin gruel. But it does line up pretty favorably with what Robert Kuttner said would be the focus of the annual message. The question is which deficit commission recommendations will the President decide to embrace. There’s a whole area on tax reform which could have some bipartisan interest; the option of lowering rates and broadening the tax base is attractive to many, although there are much bigger issues about the overall size of government involved. And then there are recommendations that include major budget cuts, including cuts to Social Security, which falls outside the scope of the federal budget, having a dedicated funding source.

The decision will fall along these lines, but there certainly will be a kind of counter-offer made on deficit reduction in the next Congress. The President has talked about “cutting programs that don’t work” for years and offered a fair amount of rescissions in previous budgets. The question remains how big and how immediate the President will go. Near-term deficit reduction will ruin the stimulative effect of the tax cut deal, which he has said is crucial to economic recovery. That’s what Republicans will seek when they call for a 20% reduction in the budget in March. The President called those reductions outrageous in some parts of the budget, particularly education, but that doesn’t mean he won’t just shift priorities around to accommodate the request. Any reduction in the budget in the next two years will reduce aggregate demand and hurt the economy. The economy may be on a slow road back, but with 9.8% unemployment that road is entirely too slow. And major budget cuts can bring that to a standstill.

Austerity budgeting would sink the country, in other words, and unfortunately there seems to be quite an appetite for it in Washington.

David Dayen

David Dayen