Election 2010: a fight over jobs and recovery vs. deficit and debt

"The [creation of the] deficit commission is [Congress] punting, but sometimes you have to punt," says Robert Bixby, executive director of the Concord Coalition. "Clearly, the regular order has not been able to deal with these problems, so we need to have a new process to shake things up."

Government now one-quarter of the economy

In the past 2-1/2 years, government spending as a share of the overall economy has gone from 20 percent to 24 percent, and is rising. "The question is, how do we bring the government back down, but how do we do it in a way that doesn't stifle this recovery – to the extent we're having a recovery," said Sen. Judd Gregg of New Hampshire, a member of the deficit commission and top-ranking Republican on the Senate Budget Committee, at an Aug. 3 hearing of that panel. "If we act precipitously to try to control the deficit, do we end up stifling the recovery?"

If the US economy grows at a 4 percent annual rate, $8.5 trillion will be added to the federal deficit from 2010 to 2020, the White House projects. If annual growth in the gross domestic product averages only 3 percent during that time, deficits would be $2 trillion higher, according to the White House Office of Management and Budget. (For comparison, the latest GDP report, for the second quarter of 2010, said the economy was growing at an annual rate of 2.4 percent.) The independent Congressional Budget Office calls the current fiscal course unsustainable. By 2054, the national debt will be 400 percent of GDP, the CBO projects.

"Unless policymakers restrain the growth of spending, increase revenues significantly as a share of GDP, or adopt some combination of those two approaches, growing budget deficits will cause debt to rise to unsupportable levels," concludes the CBO in a July 27 briefing paper.

In the face of such warnings, Democrats have felt compelled to defend their general approach of spending now to support the recovery. They have invoked a paper by economists Alan Blinder of Princeton University and Mark Zandi of Moody's Analytics, a former adviser to GOP presidential candidate John McCain, that asserts that absent vigorous government intervention in the economy, including bailouts and stimulus spending, "GDP in 2010 would be about 11.5 percent lower, payroll employment would be less by some 8.5 million jobs, and the nation would now be experiencing deflation."

Disadvantages for Democrats

But that position could be a tough sell to many voters.

"Concern about the deficit [among the public] is as high as it's been in at least a decade," says Jeff Jones, managing editor of the Gallup Poll. "It's also the lowest rating that President Obama has gotten on any issue to date."

Democrats carry the added weight of being the party in power.

"We're mired in a recession, and the party in power inevitably gets blamed for it," says G. Terry Madonna, director of the Center for Politics and Public Affairs at Franklin & Marshall College in Lancaster, Pa., citing the Reagan, Carter, and Bush midterm elections.

"Democrats would love to do a second stimulus, but they can't do it because the swing, independent, moderate voters wouldn't have it," he adds. "They can't get a number of their own members to vote for any more programs that require debt."

Previous

1 | 2