According to Treasury Secretary Tim Geithner our Democratic President wants a deficit package containing the most cuts possible. From CBS News:
“What the president wants to do, and he’s bringing the leadership to the White House this evening, to keep at it, he wants to do the largest possible deal that’s going to do the most for the economy,” Geithner told “Face the Nation” host Bob Schieffer.
This is a truly disturbing statement on multiple levels. It was President Obama that first put Medicare and Social Security benefit cuts on the table and it is Obama who is publicly pushing very hard to make sure these cuts to the social safety net are part of the largest possible deal.
Even if as some claim this just political theater to make Obama look more responsible than the Republicans, it still sets a devastating precedent. By making Medicare and Social Security cuts something a Democratic president is now actively pushing for, it damages a core part of Democratic brand. Protecting Social Security is the message that helped Democrats win back power in 2006.
Even more concerning is the economic insanity captured by Geithner saying the largest possible deal would “do the most for the economy.” This takes the idea of confidence fairies to a frightening extreme.
To begin with we don’t need to worry about the bond market right now because Treasury rates are so incredibly low. Even if the bond markets actually did need reassurances there is no reason to believe a $4 trillion package would be so much more reassuring than a $2 trillion that it would cause any big difference in the bond rates.
Yet according to Geithner a small amount magical unnecessary extra confidence fairy dust is so great for our economy, it is worth the large reduction in aggregate demand that will result from large cuts in government spending while there is still 9.2 percent unemployment.
The Obama administration has gone full Hoover.