The State Of The Union, And The President's Spending Freeze

by Pejman Yousefzadeh on January 26, 2010


In his State of the Union, the President should acknowledge that the “liberal moment” he and his supporters were supposed to enjoy, has not come to pass because America is fundamentally a small-government country. It appears that the President has recognized this fact at least somewhat, given his proposal of a spending freeze. The freeze could be meaningful, but it is not supposed to start until next year, and it is only going to save us $25 billion a year. Given the size of the deficit, $25 billion a year in savings is chump change, alas, which is why I am with Alan Meltzer in saying that if the Administration is serious about deficit reduction, it needs to start cutting entitlements.

In any event, if we learn anything from the spending freeze proposal, it is that the Administration believes that Keynesian stimulus has failed to revive the nation’s economy, and has left us with massive fiscal problems to boot. For political and policy reasons, President Obama is therefore forced to triangulate. The nation will benefit from this, but we will all be left to wonder why it is that the President embraced Keynesian stimulus in the first place, instead of using the Federal Reserve to boost demand.

As for the Republican reaction, I agree with Bill Kristol, who argues that Republicans ought to welcome the Obama spending freeze, and state their willingness to work with the President in bipartisan fashion in order to craft further deficit-fighting measures. The mistake the Republicans made in 1995, when responding to Bill Clinton’s agreement to eliminate the deficit in seven years, was to refuse to take “yes” for an answer. They must not make that mistake now. The only thing that I would add to Kristol’s analysis is that given his proposal for a spending freeze, Republicans ought to proclaim an ideological triumph over the Obama Administration; after a full year of trying to advance a liberal agenda, President Obama is now forced to govern on Republican turf.

Perhaps the President could even have a Republican write his State of the Union speech, now that he is adopting Republican policies. He/she can have the President proclaim what the last Democratic President was forced to proclaim as well; “the era of Big Government is over.” Incidentally, given that the 2010 elections are coming up, and that 2012 will be upon us faster than we think, Republicans might well want to ask why it is that Democrats ought to be elected to public office, if after a while, they end up acting the way small-government Republicans would when the chips are really down.

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