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.
When the economy is bad, the issue of the deficit can be a proxy. People express their frustration with the lack of job growth by blaming Washington profligacy. It's also a simple issue lawmakers can talk about. Get the deficit number down, and jobs will return. This is easy to say when you're out of power and don't have to get specific about how you're going to do any of this. The primacy of the deficit is the message the GOP took from the 2010 election. In exit polls, 37 percent said Congress' No. 1 priority should be reducing the budget deficit.
The GOP also knows, however, that the politics of the deficit change when the debate gets specific. That's why Republican leaders didn't get specific before the election and are slow to do so now. People don't want to make the hard choices. They're already sacrificing enough.
Complicating this political moment is that the debate between the two parties isn't really about how to address the deficit. Both the president and Republicans have plans to tackle the problem. It's a matter of emphasis. The president isn't ignoring the deficit. He's just not making the grueling case he promised. Not even close. (He's even punted on the recommendations of his Fiscal Commission, the formation of which was itself a punt from hard choices). He's hoping that people won't judge his efforts on the economy based on what he does about the deficit. There's some support for his position: In those same exit polls, 37 percent also said that Congress' No. 1 priority should be "spending to create jobs." In a recent Pew poll, 84 percent said politicians should make jobs a top priority. Only 64 percent said the budget deficit should be a top priority.
Furthermore, deficit reduction is not an area where the president can play to his political strength. He'll never out-cut Republicans, who are engaged in an intramural game of how-low-can-you-go. Plus, say White House aides, when the president submits his budget, it will be full of painful choices. Months will be spent arguing not about whether there will be pain, but how much of it there will be. Obama knows this is coming, so his message now is kind of a base coat of optimism that can help people understand why they should go through all of this hard choosing.
This isn't just about political positioning, of course. The president genuinely believes that his "Win the Future" policies will lead to more jobs. In November 2012, it will be all that matters. If the unemployment rate is still high, the president isn't going to win re-election by saying he was painfully honest about the necessity for huge budget cuts. Plus, with interest rates so low, why not invest a little now in the hopes that economic growth helps plug the deficit.
Even if the investment agenda doesn't affect the economy immediately, his constant talk about innovation and improving education will show him concerned about the key issue voters care about, allowing them to make a connection between his actions and economic improvement.
This drama will play out over the next few months in a three-act play about how to shrink the government. First will come the March vote to continue funding the government. Next will be a debate over passing the federal budget. Finally, there will be a vote to raise the debt ceiling. What's going on now is an extended prologue.