Barack Obama’s job approval in Iowa fell to 49 percent according to the latest statewide poll by Selzer and Co. for the Des Moines Register. His lowest marks were for his handling of the budget deficit (30 percent approve, 61 percent disapprove), leading Kathie Obradovich to suggest that “Cut spending and balance the budget” should be at the top of Obama’s to-do list.
No matter what today’s polls say about the deficit, it would be poor economic policy and foolish politics to make deficit reduction a priority now.
Many factors contributed to the Great Depression, but Herbert Hoover’s insistence on balancing the budget certainly made a bad economy worse. Most economists also agree that Franklin Delano Roosevelt’s spending cuts in 1937 led to an economic downturn as well.
Iowans are looking at the federal red ink at the same time the state is slashing local school budgets, laying off employees and warning more pain is ahead for next year. Iowa, by law, has to balance its budget. The federal government doesn’t – and that chaps those of us who are doing without luxuries to stretch our paychecks.
But when millions of Americans have lost jobs and millions more are cutting back on their spending, it’s imperative for the federal government to help generate additional economic activity. That’s why George W. Bush and the Republican-controlled Congress cranked up federal spending during the last recession. We didn’t hear any GOP calls for a federal budget freeze in 2002 and 2003.
Many economists agree with Nouriel Roubini, who says job losses are likely to continue for some time. Roubini advocates another round of federal spending for shovel-ready infrastructure projects, help for “fiscally strapped state and local governments,” and “a temporary tax credit to the private sector to hire more workers.”
Obama erred earlier this year by making too many concessions to Republicans while Congress debated the federal stimulus bill. The stimulus helped reduce monthly job losses considerably (recall that a net 600,000 jobs were lost in February alone), and it cushioned the blow for many states, but it wasn’t big enough or targeted enough.
Obama has called for a jobs summit in December, and Congressional Democrats plan to start working on a new jobs bill around then. A Siegel listed quite a few good ideas for creating green jobs here.
But, you may ask, how can Obama justify spending more money on a jobs bill when so many Americans are worried about the deficit? As I mentioned above, making deficit reduction a priority now would probably lead to a double-dip recession and higher unemployment.
I would support drastic spending cuts in the form of bringing our troops home from Iraq and Afghanistan. But that’s not what deficit hawks are advocating. They want to keep increasing our military budget while slashing the domestic spending that our economy desperately needs now.
As for polls showing people aren’t happy with how Obama is handling the budget deficit, that’s nothing compared to the numbers we’ll see for him if unemployment keeps rising throughout 2010 and 2011. Obama’s already getting not-so-great marks for handling the economy. “We cut the deficit” won’t make a good bumper sticker if unemployment is nearing 12 percent by 2012.
In fact, Bill Clinton’s experience indicates that presidents don’t get much of a political lift from cutting the deficit. Clinton pursued an aggressive deficit reduction policy and made tremendous progress during his first term. Yet a 1996 poll showed that a plurality of voters actually thought the deficit had increased since Clinton took office.
The economist Paul Krugman is right:
So if I were a politician, I’d focus on providing real improvements in peoples’ lives, rather than seeking deficit reductions the public won’t even hear about.
Note: I am not saying Clinton was wrong to rein in the deficit. Remember, he pursued this policy while the economy was growing, not after unemployment hit a 26-year high. Also, Clinton’s deficit-reduction strategy wasn’t solely focused on spending cuts; it also raised taxes on the wealthiest Americans.
I hope Obama is smart enough not to stake his political future on spending cuts that could become a drag on a weak economy. We’ll find out soon.