President Obama has been more upbeat in 2011 than he said he was going to be. Last year he promised America a tough conversation about cutting the deficit. "If we are concerned about debt and deficits, then we're going to have to take actions that are difficult and we're going to have to tell the truth to the American people," he said. Shrinking government would be his focus for the remainder of his first term, he pledged. Everything else would be secondary, even investments of the kind he is now proposing. They would have to wait until he presented"a credible plan for dealing with the medium- and long-term budget problems."
Now, instead of tough talk, the president is offering stirring slogans. "Win the future" was the theme of his State of the Union address. "We do Big Things" is now on T-shirts available to Obama donors. "Startup America" was unveiled Monday to encourage entrepreneurs. If the first lady hadn't taken "Let's Move" for her anti-obesity campaign, it could have been used for the president's push for high-speed rail.
The president has decided that he'll let Republicans be the dour ones. A credible deficit-reduction plan is no longer a precondition for weeks of talk about plans for government investment. Let Rep. Paul Ryan, chairman of the House Budget Committee, do all that gloomy talking about the grim fiscal picture. As one GOP aide put it after the president's State of the Union speech and Ryan's official response: "He's the optimistic one, and we're the ones that want to lock up your children."
The two parties are making opposite bets about what the public really thinks about the deficit. The president is betting that people don't see an iron connection between reducing the deficit and increasing the number of jobs. When they judge who is doing more for them—the GOP or the president—they will pick the person optimistic about the future, not the guys preaching pain.
Republicans get this, so they're working hard to reiterate that their deficit agenda is a jobs agenda: Jobs will be lost if the deficit isn't reduced drastically. They've produced 222 economists who make this case. They'll have to do better than that, because the White House can bus in their own fleet of economists.
Short and sharp is what is needed to rebut Captain Win the Future. So far, the message needs some work: "By running up the—spending money we don't have, running up the huge budget deficits, we create more uncertainty in the private sector," says House Speaker John Boehner, who then becomes almost tautological. "This is where cutting spending will create jobs because it is going to bring greater fiscal responsibility in Washington, D.C., end some of the uncertainty, and allow jobs to be created in America."
The problem is that big deficits don't have an immediate job impact. Right now interest rates are low. The danger is that when the level of debt becomes unsustainable, rates will spike quickly. The policy response will be drastic cuts or tax increases or both. The mix will be catastrophic. In anticipation of this, business is skittish. The GOP needs to explain this deficit-and-jobs link at Twitter length: Deficits make businesses worry that interest rates will go up. To hedge, they hold off hiring and investing.
Republicans will point out that the president's pitch is wrongheaded on policy grounds.When he makes his pitch for investment, he argues he's taking the long view. But others taking the long view say the deficit should be the first priority. The deficit, they point out, is the government's biggest problem. Moreover, the president's push for "investment" consists of little more than nudges and incentives. He has real power over the federal budget and thus the federal deficit.
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