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Obama Tells Democrats He Still Wants Grand Bargain

John Boehner, Barack Obama and Harry Reid

Despite winning re-election on not cutting Social Security and Medicare and pushing back on plans for austerity President Obama still apparently wants those cuts.

President Barack Obama said he wants to reach a “big deal” on the budget that will cut the nation’s deficit without slashing spending on education and research that is needed to ensure future growth.

Obama said negotiations with congressional Republicans over avoiding the $1.2 trillion in automatic, across-the-board spending reductions set to begin March 1 shouldn’t push aside the effort for a broader plan to cut government debt.

“I am prepared, eager and anxious to do a big deal, a big package that ends this governance by crisis,” Obama said at the annual House Democratic retreat at Lansdowne Resort in Virginia, about 35 miles (56 kilometers) northwest of Washington.

The eagerness for this “big deal” is puzzling given the lack of an actual debt crisis. Many now understand the focus on the debt is essentially a misdirection strategy from other issues, the Republicans are running out the clock on the Obama presidency.

But what actually happens if Congress embraces austerity? Paul Krugman writes.

Start with a basic point: Slashing government spending destroys jobs and causes the economy to shrink.

This really isn’t a debatable proposition at this point. The contractionary effects of fiscal austerity have been demonstrated by study after study and overwhelmingly confirmed by recent experience — for example, by the severe and continuing slump in Ireland, which was for a while touted as a shining example of responsible policy, or by the way the Cameron government’s turn to austerity derailed recovery in Britain…

But aren’t we facing a fiscal crisis? No, not at all. The federal government can borrow more cheaply than at almost any point in history, and medium-term forecasts, like the 10-year projections released Tuesday by the Congressional Budget Office, are distinctly not alarming. Yes, there’s a long-term fiscal problem, but it’s not urgent that we resolve that long-term problem right now. The alleged fiscal crisis exists only in the minds of Beltway insiders.

Despite an electoral mandate and compelling evidence to the contrary, President Obama seems determined to push for austerity. Why remains unclear.

Photo by White House under Public Domain

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Dan Wright

Dan Wright

Daniel Wright is a longtime blogger and currently writes for Shadowproof. He lives in New Jersey, by choice.