Obama argues a balanced budget isn't necessary. Can he convince the public?
Republicans propose to balance the budget within 10 years, while Democrats argue that such a move could actually hurt the economy. History suggests the politics may be on Republicans' side.
"My goal is not to chase a balanced budget just for the sake of balance," Mr. Obama said. "My goal is, how do we grow the economy, put people back to work."
He added: "We're not going to balance the budget in 10 years, because if you look at what Paul Ryan does to balance the budget, it means that you have to voucherize Medicare, you have to slash deeply into programs like Medicaid, you've essentially got to either tax middle-class families a lot higher than you currently are, or you can't lower rates the way he's promised."
Obama's comments mirror what left-leaning economists like Paul Krugman have been arguing for a while: that while Washington will need to tackle its debt problem at some point down the line, doing so right now is not only unnecessary but could actually damage the economy. With the private sector still weak, the argument goes, reducing government spending could cause a contraction that could potentially send the economy back into recession.
Nevertheless, Democratic politicians have until recently been somewhat wary of dismissing a balanced budget out of hand – because polls show the public strongly approves of the idea, at least in the abstract (when presented with actual choices for cuts to reach a balanced budget, not surprisingly, the picture changes).
But now, Democrats are being forced to try to argue the other side of the argument – since the budget proposal from Representative Ryan (R) of Wisconsin achieves balance in 10 years, while the Democratic version put out Wednesday by Sen. Patty Murray of Washington does not. Obama is expected to release a proposal of his own next month, and given the president's comments, it seems unlikely that he will be offering a path to a balanced budget, either.
Republicans clearly think the politics favor their position. In a news conference Tuesday, Ryan essentially dared Obama to balance the budget, saying: "This is an invitation. Show us how to balance the budget. If you don't like the way we are proposing to balance our budget, how do you propose to balance the budget?" Or as Republican strategist John Feehery put it this week in The Hill: "House Republicans have seen the polling data and they know that balancing the budget in 10 years is by far their best political message."
Indeed, an NBC News/Wall Street Journal poll from December found that 58 percent of Americans agreed that the deficit "needs to be solved now," compared with 37 percent who said it is something the United States needs "to continue to address" and just 4 percent who said it could be "addressed in the future." Likewise, polls in recent years asking about the prospect of a balanced-budget amendment have found support among roughly three-quarters of Americans.
One interesting question is what, exactly, is driving this fervor for balancing the budget, given that there's little evidence the deficit is currently affecting average Americans' lives in any sort of measurable way. Typically, the biggest economic downside to running high deficits is the impact on interest rates. But interest rates in the US are historically low, and while they may rise in the future, data suggest that's not necessarily going to be the case.
Instead, it seems that the public's horror of deficits is mostly a product of political rhetoric – rhetoric that Americans have been listening to for decades, from both Republicans and Democrats. During the Reagan years, it was Democrats who railed against spiraling deficits. During the 1990s, then-House Speaker Newt Gingrich made it a rallying cry for Republicans, pushing President Clinton to make balanced budgets one of his signature achievements. During President George W. Bush's tenure, Democrats – as well as some conservatives – renewed their focus on the debt and deficits.
In short, politicians on both sides of the aisle have spent years convincing voters that balancing the budget is both the moral and fiscally wise thing to do. There have been repeated warnings about borrowing on the backs of our grandchildren and calls to "live within our means," as well as misleading comparisons between the federal budget and household budgets – despite the fact that government borrowing can actually be an essential tool for a healthy economy.
As The New York Times's Annie Lowrey wrote Tuesday: "As sensible as a balanced budget might sound – much like a balanced checkbook for a family – countries are generally able to run modest deficits for years on end while still keeping debt stable as a share of economic output. One year’s deficit is effectively paid off by later economic growth, especially if a government is investing in public goods like roads and schools."
Obama may have plenty of economic data points to back up his argument that a balanced budget, for its own sake, isn't necessarily desirable right now. But whether he can convince the public of this – after years of politicians arguing the reverse – remains to be seen.