OK, he’s coming to this later than many of the rest of us, but I was happy to read this from an NYT interview with President Obama:
“I want to make sure that all of us in Washington are investing as much time, as much energy, as much debate on how we grow the economy and grow the middle class as we’ve spent over the last two to three years arguing about how we reduce the deficits,” Mr. Obama said. He called for a shift “away from what I think has been a damaging framework in Washington.”
I can hear groans from both sides. “He’s giving up on fiscal rectitude!” “What took him so long to get there?!”
Re the latter point, one could cut the President a break and argue that he’s following the numbers: as the deficit has receded as an alleged near-term problem, he’s changing his views. I’m a big admirer of the man, but I don’t readily accept that explanation. Of course the deficit went up in the deep recession—the near-term deficit question was never “is it too big?”—it was “is it temporarily big enough to offset the large private sector demand contraction.”
And of course it was going to come down. Here, the near-term question is whether it’s coming down to quickly, austerity-style—I’d argue it is: spending cuts, including sequestration, and tax increases, along with the fading of stimulus and safety net expenditures, have contributed to its fall from 10% of GDP at its 2009 peak to 4% and falling next year.
I hear in that quote above some recognition of these facts. “All of us in Washington” includes the President himself. And to flatly call deficit obsession in a persistently weak economy a “damaging framework” goes further than I’ve heard him go before.
Obviously, the politics are not there—R’s are about to launch an austerity campaign around the end of the fiscal year (Sept 30) and debt ceiling, so we’ll have to see where these insights take the administration and the rest of us in upcoming fiscal fights. It certainly sounds like they’re going to hold fast against more damaging cuts and fight to replace the sequester. Stay tuned.