Obama Must Own the Budget Battle

Mar 1, 2011Bo Cutter

Shaping the future with today’s choices.

I support the Obama budget -- or more accurately I understand and (mostly) support the strategy the White House was following in arriving at this budget. At the same time, I think the strategy is incomplete and has, at its core, a major flaw. This blog, therefore, is not about the details of the Obama budget; rather it is about the unfolding of this year as we begin a week leading to the first of several government shut-down dramas.

In the interests of transparency, and because most in the New Deal 2.0 blogosphere do not agree with me, I want to be clear that I believe the debt and deficit course we are on is dangerous and not sustainable. It is beyond irresponsible for the President and the Congress not to change that course. The President ultimately will have to take the political risk of truly leading on this question.

I also believe this debt issue is not the most important one we face (although so long as we do not deal with it, we won't solve the bigger issues) and it is crazy to launch into a deficit slashing spasm now with 9% unemployment. But it is not crazy to put the mechanisms in place now in order to begin to solve it in a couple of years.

There is no particular point in commenting at length on the specific details in President Obama's 2012 budget. He had to write one, so he did. His budget deals with the same tiny percent of the deficit and debt problem as do the efforts of the Republicans. But no one in this Administration believes this budget will have much influence in the current frenzy. It is a deliberate placeholder and, as such, represents a political decision taken in today's political context.

That context has two aspects. First, the 2010 November election results guaranteed that 2011 would be a messy, ugly tactical year. Second, there is no organized center in America anymore. (Progressives apparently think this is a good thing for them; it's not.)

Once November 2010 happened, the Republican House was inevitably going to proceed as it has. Nothing President Obama did with the 2012 budget was going to stop the House from trying to rip apart 2011 programs. And since the Senate Republicans have already stated that the single most important national issue was defeating President Obama in 2012, there is no room for movement there.

More broadly, there is no center in American politics anymore from which to do anything. Both the left and the right compete to eviscerate the President. If you set aside the "birther" stupidity, left and right wing blogs are fairly similar in the level of contempt expressed for President Obama. These politics have broad consequences: for starters, they mean we are doing absolutely nothing to solve the big issues America confronts. Every major long-term problem we face is getting worse. (If you want a really terrifying read, look at the January issue of Physical Transactions of the Royal Society on the consequences of a 4 degree rise in global temperature -- where we are headed.) We lurch from election to election as each party misinterprets the "mandate" it supposedly received.

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And more specifically, they mean that 2011 will be a series of short-run tactical "Perils of Pauline" budget dramas. There will be several Congressional Resolution dramas, and, probably, a few debt limit dramas. I suspect there will be at least one short federal government shutdown, although not this Friday. The prospects of any actual problem being solved are close to zero.

President Obama obviously began with the decision that for at least several months there would be no one on the Republican side willing or able to negotiate. Why lay out the full list of horribles a real solution will entail if no one will actually consider them in good faith? So he decided to take the inevitable criticism for not showing "leadership." His second decision was to lay out enough detail to make it clear why everything has to be included in any real solution -- the entitlements, new taxes, and defense.

The president had to buy time for events to play out, and they will, but not quickly. The odds are high that the House Republican leadership will not be able to manage its coalition and the House Republicans will push too far. The Senate Republicans cannot easily go along as far as the House. There probably will be a short government close down at some point. And this all will go on and on since the Republican leadership has apparently decided that they like the tactic of 2 to 4 week congressional resolutions with a fight each time.

But this tactic is classic political Washington myopia. Ordinary Americans are going to tire rapidly of all of the high drama and see it as just another version of the Washington they hate. They will also decide there are a lot of cuts they don't want to make: closing down Teach for America was not what they had in mind. So the President has to let the game come back to him.

But in the meantime, he has work to do. First, he must reclaim the narrative about the future of the U.S. economy. He has to be seen as the one actor in Washington who actually has a plausible view of a future that might work. The White House is trying much harder here than it has in the past; the President made a good start with the State of the Union speech. But they aren't there yet. The task for President Obama's new NEC head, Gene Sperling, is to come up both with that vision and with the tactics the next year requires. If that doesn't happen, the NEC failed.

Second, the President has to be the embodiment of bipartisanship. He has to take every opportunity, and invent new ones, to bring in the Republicans. If we are going to redo the tax system, bring in the Republicans now. If the CEO of 3M says the president is anti-business, invite him for dinner. Make them decide to be ungracious. It is unlikely that this will lead to much in the short-term except making clear who is and who is not trying to make something happen. Over this next year, the President needs to be a tad more open to his inner Lyndon Johnson and Bill Clinton.

Finally, the president has to begin to outline what a "grand bargain" would be and why it matters. This is where his budget strategy was incomplete. He should have leaned more toward his own budget commission; he could easily have given a broad endorsement and kept away from the details. He should have made his investment program much more of a true program of investment. Why not propose an infrastructure bank? He should have offered a process to arrive at a "grand bargain."

I hope the President has the framework for a two-year strategy. You can't make this up day to day, and a lot rides on doing it well. A Washington Post poll, published today, says that at this moment the public would blame the President and the Republicans about equally if a shutdown happens. The president can shift this perception with a purposeful strategy for this next period. If he does, he will be clearly perceived as the leader standing above this mess; a "grand bargain" that is good for the country will be achieved; and he will a two-term president. If he doesn't, the nihilists on the right win.

Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team.

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