By Nancy Cook
February 12, 2013
When President Obama delivers his State of the Union address tonight, he’s expected to give scant attention to one of the most pressing issues facing Washington: $85 billion in deep spending cuts set to begin on March 1 for government programs from Head Start to the Food and Drug Administration to the Pentagon's weapons purchases.
Known in D.C. parlance as “sequestration,” the spending cuts will affect a wide swath of life for everyday Americans. It could mean fewer FBI agents and cuts to free pre-school programs; reduced loan guarantees for small businesses; furloughs for food safety inspectors; and less manpower for the Internal Revenue Service to process tax returns. This says nothing of the military budget cuts. Already, that threat has delayed the take-off of an aircraft carrier to the Persian Gulf. Sequestration would cut $1.2 trillion over the next decade from federal spending, with the $85 billion as the first annual installment.
Yet, none of these potential cuts will receive the same attention during the speech as job creation, the economy, innovation, or infrastructure spending: proposals that the president has not been able to pass through the divided Congress since the stimulus bill in 2009.
“We’re so caught up in dealing with these short-term, self-imposed crises that it’s undermining our ability to come up with a long-term comprehensive plan,” says Rep. Chris Van Hollen, one of the Democrats’ primary budget experts with close ties to the White House.
That’s true, but much of the hold-up is because of fiscal fights rather than stalled economic questions. Republicans remain uninterested in any plan that involves new stimulus spending. Instead, they would prefer to spend the next few months paring down the size of the government, revamping the tax code, or overhauling the federal health insurance programs, all in the name of boosting economic growth through lower tax rates and reducing the deficit.
The president’s reluctance to tackle these major philosophical fiscal issues in his prime-time speech seems like a missed opportunity. Why not lay out for Americans the contours of the fight and the way the geeky-sounding budget machinations relate to job creation, the slowly recovering economy, or the social safety net? Instead, he is expected to use his speech to push big-picture economic ideas that have no chance of passing Congress.
“On the face of it, the State of the Union should be about the state of the union,” says Douglas Holtz-Eakin, former director of the Congressional Budget Office and President of the right-leaning think tank, American Action Forum. “He won’t talk about budget issues because they’re a bad news story for him. The large, projected increases in debt are hampering the economy.”
The latest budget and economic outlook from the Congressional Budget Office doesn’t offer a conclusive road map for immediately tackling Washington’s budget fights. Still, it does give some perspective on the next 10 years.
The federal deficit will shrink in the short-run, as the federal government collects roughly 25 percent more revenue through the year 2015 and as the rate of healthcare spending slows down. The ‘spending problem’ Washington so frequently talks about is really a demographic problem, which involves too many baby boomers entering federal healthcare programs at the end of the decade, all at the same time. That becomes a problem around 2020 when deficits start to significant rise again.
By 2023, the federal debt held by the public will hit 77 percent of gross domestic product. That’s a high ratio that Americans should care about because it makes it hard, under those circumstances, to spend additional money to respond to another recession, or pay for another war.
These are facts that President Obama could lay out during this State of the Union address to showcase Democratic ideals and the contours of the upcoming budget debates that will inevitably dominate politics through August: from sequestration to the funding of the government to fights over the increase in the debt ceiling.
The president could use the State of the Union pulpit to talk about the way the budget plays into that vision. Politically, for Democrats, that means funding and preserving the social safety net. It means treating policies like immigration reform or the Affordable Care Act as the newest, most politically expedient way to deliver progressive economic policy.
And, for Republicans, the budget fights offer the chance to highlight the ways they would cut spending over the next decade by changing Medicaid or Medicare, or cutting spending on federal agencies like the Environmental Protection Agency or on programs such as food stamps.
It's not a bad idea to clue Americans into the budget ideals of both parties, since they will dominate the next several months and since they’re essentially a fight over the long-term future make-up of the government.
By Nancy Cook
February 12, 2013