The mar­ket made me do it

On the deficit, Mr. Obama has cho­sen not to lead. Is there a Plan B?

The Washington Post Sunday - - SUNDAY OPINION -

IN HIS STATE of the Union ad­dress Tues­day night, Pres­i­dent Obama failed to present a cred­i­ble plan for long-term debt re­duc­tion. It’s no se­cret that we think he made a big mis­take. If Amer­ica can’t get a han­dle on its fi­nances, ev­ery­thing else is at risk: mil­i­tary strength, the safety net for the poor, the abil­ity to in­vest for fu­ture eco­nomic growth. But now that the pres­i­dent has punted, is there any con­ceiv­able path to­ward fis­cal san­ity?

Last year it seemed the pres­i­dent had set out on such a path. He ap­pointed a bi­par­ti­san com­mis­sion to study the debt, the idea be­ing that it could pro­pose so­lu­tions that ev­ery­one knows are needed but that are so po­lit­i­cally charged nei­ther party dares pro­pose them first. And the com­mis­sion, chaired by Demo­crat Ersk­ine Bowles and Repub­li­can Alan Simp­son, came through: It pro­duced a cred­i­ble plan that won sup­port from key mem­bers of both par­ties. Mr. Obama could have em­braced the re­sults with­out ac­cept­ing ev­ery facet of them and chal­lenged con­gres­sional lead­ers to do the same, with the goal of fash­ion­ing a debt-re­duc­tion plan that would re­as­sure mar­kets and in­ter­na­tional len­ders.

The pres­i­dent took a cagier route. He hailed the com­mis­sion’s “im­por­tant progress” with­out en­dors­ing any of its rec­om­men­da­tions. He ac­knowl­edged that the govern­ment will have to raise taxes, but said it in such a con­vo­luted way — re­fer­ring to the need to cut “spend­ing through tax breaks and loop­holes” — that no one could pos­si­bly un­der­stand. He pledged a will­ing­ness to re­form So­cial Se­cu­rity, but “with­out slash­ing ben­e­fits for fu­ture gen­er­a­tions”— phras­ing that con­ceiv­ably left him room to re­duce ben­e­fits, be­low some slash thresh­old known only to him, while sound­ing as though he op­poses any cuts at all.

What could ex­plain such cyn­i­cism? One the­ory would be that Mr. Obama doesn’t agree about the se­ri­ous­ness of the prob­lem. If this is so, his rhetoric — two years agohe warned, “We can no longer af­ford to leave the hard choices for the next bud­get, the next ad­min­is­tra­tion or the next gen­er­a­tion,” and on Tues­day he re­it­er­ated, “Now, the fi­nal step — a crit­i­cal step— in win­ning the fu­ture is to make sure we aren’t buried un­der a moun­tain of debt”— is just that, rhetoric. But the arith­metic is so clear, and main­stream econ­o­mists are so in agree­ment, that it seems un­likely that Mr. Obama would be a se­cret dis­senter.

A sec­ond pos­si­bil­ity is that he cal­cu­lated the chances of get­ting a deal at close to zero. House Repub­li­cans are con­vinced that the prob­lem can be solved sim­ply by cut­ting spend­ing. The arith­metic again says oth­er­wise, but un­til they come around, Mr. Obama may have con­cluded that there’s no point in try­ing to bar­gain— might as well wait un­til 2013. In that case the key goal would be re­elec­tion, which would ex­plain why the Tues­day speech at times sounded like a cam­paign kick­off: draw­ing dis­tinc­tions be­tween Demo­cratic far­sight­ed­ness and Repub­li­can my­opia, and ap­peal­ing to core in­ter­est groups such as teach­ers, con­struc­tion work­ers and se­nior cit­i­zens.

The third, and scari­est, pos­si­bil­ity is this: The White House may have de­cided that debt re­duc­tion is so tough it has to await what of­fi­cials, speak­ing not for at­tri­bu­tion, have termed a “forc­ing event” — a spike in in­ter­est rates, a re­luc­tance by for­eign­ers to buy U.S. debt or some other mar­ket dis­rup­tion that would frighten Congress into ac­tion. What’s dis­turb­ing about this idea is that such “forc­ing events” tend to take on lives of their own; once a panic starts, it’s not eas­ily con­trolled.

It’s not too late forMr. Obama to ap­ply a dif­fer­ent kind of forc­ing event: pres­i­den­tial lead­er­ship. We un­der­stand it’s tough. Amer­i­cans say they want deficit re­duc­tion, but they op­pose just about ev­ery kind of tax hike or spend­ing cut needed to make deficit re­duc­tion hap­pen. But they also are gen­uinely wor­ried about the debt and the Euro­pean ex­am­ple. Can­dor, in­stead of cagi­ness, might yield re­sults.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.