Reports have leaked that, during his State of the Union address, Obama will announce a freeze on federal nondefense discretionary spending for the next three years. This plan is ostensibly to help balance the budget, and inflation will lead to a combined $250 billion in savings over the next ten years.
This is, quite literally, the stupidest thing Obama has done so far. Why?
Reason #1: A spending freeze will hurt the economy. Every credible economist whose credibility survived the financial crisis says that governments need to spend enormous sums of money to get their country out of a recession. While the first round of stimulus didn't start a new economic boom, you only need to look at the Great Depression to imagine what would've happened had the government not pumped billions of dollars into the economy. For months now, economists (most notably Paul Krugman) have argued that far more stimulus is needed to offset the millions of job losses that have occurred over the past year and a half. A spending freeze will only hurt the economy, leading to lower tax revenues that will exacerbate the national deficit. More importantly, though, it will make it harder for the millions of unemployed men and women across the country to find new jobs since the private sector is still unable or, in some cases, unwilling to begin substantial increases in hiring.
Reason #2: It won't make a substantial difference in the national debt or deficit. $250 billion is a lot of money, but it's pretty unsubstantial when you consider that the national deficit is around $100 billion per year and the national debt is somewhere in the neighborhood of $12.3 trillion. As the Economist says in an excellent article,
"Non-defence discretionary spending is nothing; those who are serious about long-term budget sustainability talk about defence, they talk about entitlements, and they talk about revenues. In other words, this will do very little about the deficit, and it will do even less to convince markets of the credibility of the American effort to trim the deficit."
In other words, Obama is promoting an economic policy that will forestall economic recovery and job creation without bringing any tangible benefits.
Sure, we weren't happy when Obama decided that he wouldn't use his authority to repeal Don't Ask, Don't Tell or fight the Federal Defense of Marriage Act. There was a good deal of anger over the choice to escalate the war in Afghanistan when plenty of analysts say that it will only make matters worse. We were pretty flabbergasted when he decided not to personally sponsor or fight for any specific healthcare reform, leaving the dirty work to an congress that was undisciplined and obstructive. And, believe me, no one likes the frighteningly large concessions he's made to special interests, especially banks, over the past year. Each time, though, many of us were willing to look the other way, to give the administration a pass because we thought it would follow the concession with an aggressive move towards the change that Obama promised on the campaign trail. But now it's really gone too far. The freeze is political theater, pure and simple, and the consequences are too great for anyone to ignore.
