When President Obama delivers his State of the Union address Tuesday night, 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 March 1 for government programs ranging 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 preschool 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 sailing of an aircraft carrier to the Persian Gulf. Sequestration would cut $1.2 trillion from federal spending over the next decade, 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 get 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 of Maryland, one of the Democrats’ primary budget experts with close ties to the White House.
That’s true, but much of the holdup 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?
Former President Bill Clinton pulled off the rare political feat of delving into the budget weeds and delivering a rousing speech during the Democratic National Convention in August. There, he contrasted the economic policies of his presidency (which led to the country’s most recent budget surplus) with the economic and fiscal plans of Republicans like Mitt Romney, who promised to reduce the deficit alongside massive tax cuts. Clinton pointed out the flaws with the GOP ticket’s fiscal plans and it’s lack of specifics—and in doing so, he laid out for Americans the most cogent view yet from the Democrats on the link between the deficit, economic policy, and prosperity.
Yet, President Obama is expected to shy away from this route on Tuesday night and instead, he is expected to use his speech to push big-picture economic ideas that have no chance of passing Congress. If he does mention the upcoming fiscal fights like sequester, it will only happen in a broad brushstrokes way.
“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 the 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 2015 and as the rate of health care spending slows down. The "spending problem" Washington so frequently talks about is really a demographic problem, which involves too many baby boomers entering federal health care programs at the end of the decade, all at the same time. That becomes a problem around 2020 when deficits start to significantly 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. Ensuring that Americans continue to have access to Medicare and Medicaid benefits over the next decade is an idea that’s integral to the Democratic vision for the middle class. It’s foolhardy to not tackle it in a speech about the state of the economy and inequality.
For Republicans, the budget fights offer the chance to highlight the ways they would deal with the country’s coming fiscal reckoning. Their solutions? Cut spending over the next decade by changing Medicaid or Medicare, or cutting spending on federal agencies such as the Environmental Protection Agency or on programs such as food stamps. The bottom line for their plan is to get rid of the deficit as quickly as possible, with the idea that lower tax rates and little debt will bring about economic growth. That’s much different than the Democratic vision.
It's not a bad idea to clue Americans into the budget ideals of both parties, because they will dominate the next several months and because they’re essentially a fight over the long-term future makeup of the government.