There Is No Money
The great problem with President Obama’s State of the Union is that he has created a bizarre reality in which there is no money. This is a narrative that is not only going to continue to hinder our weak recovery, but also make new progressive spending programs impossible.
In his speech Obama said the first thing we must do is find another $1.5 trillion in deficit reduction. This is no easy task. A dozen committees, super committees, commissions, one-on-one negotiations, etc… have all tried and failed to do this over the past three years. There simply isn’t a bipartisan agreement on what revenue to raise and what programs to cut. There is not some $1.5 trillion politically easily cut pork program, because if there were it would have been cut by now.
If a deal is ever reached it will not only consume every single piece of low hanging fruit but also many pieces from the top branches. It will take every tax loophole closing the GOP can stomach and every domestic cut Democrats are willing to accept, and then some.
On the off chance there is a deal that can be struck, it will leave no politically acceptable “pay fors” left for new programs, be it tax increases or spending. That is what doomed Obama talking about spending more on jobs programs, infrastructure improvements, and preschool
Obama said every one of these ideas would not add a dime to the deficit, but Obama still can’t even get Congress to pay for the deficit reduction he wants. If Obama can’t get the $1.5 trillion to pay for deficit reduction, it simply defies belief to think he could get even more to pay for new initiatives.
In the real world, interest rates are so low people are basically paying to loan the federal government money. Given that we still have high unemployment this would be a perfect time to borrow money on the cheap to pay for smart long-term investments, like infrastructure improvements and preschool, that would also put Americans to work. Sadly, our President doesn’t believe in this reality and has instead created his own in which the country shouldn’t borrow even though its borrowing costs have never been lower. A reality in which the only path forward is more austerity.
Photo by Ramberg Media Images under Creative Commons license.