The Proposed Spending Freeze

The blogosphere is abuzz with comment on President Obama’s statement that he would seek an overall freeze on federal spending other than security-related spending, spending on entitlements, and interest on the debt:

WASHINGTON — President Obama will call for a three-year freeze in spending on many domestic programs, and for increases no greater than inflation after that, an initiative intended to signal his seriousness about cutting the budget deficit, administration officials said Monday.

The officials said the proposal would be a major component both of Mr. Obama’s State of the Union address on Wednesday and of the budget he will send to Congress on Monday for the fiscal year that begins in October.

The freeze would cover the agencies and programs for which Congress allocates specific budgets each year, including air traffic control, farm subsidies, education, nutrition and national parks.

Presumably, this is a trial balloon for the State of the Union message. If so, it is a lead one. Paul Krugman is livid:

A spending freeze? That’s the brilliant response of the Obama team to their first serious political setback?

It’s appalling on every level.

It’s bad economics, depressing demand when the economy is still suffering from mass unemployment. Jonathan Zasloff writes that Obama seems to have decided to fire Tim Geithner and replace him with “the rotting corpse of Andrew Mellon” (Mellon was Herbert Hoover’s Treasury Secretary, who according to Hoover told him to “liquidate the workers, liquidate the farmers, purge the rottenness”.)

It’s bad long-run fiscal policy, shifting attention away from the essential need to reform health care and focusing on small change instead.

My own reaction is more along the lines of that of Brad DeLong:

As one deficit-hawk journalist of my acquaintance says this evening, this is a perfect example of fundamental unseriousness: rather than make proposals that will actually tackle the long-term deficit–either through future tax increases triggered by excessive deficits or through future entitlement spending caps triggered by excessive deficits–come up with a proposal that does short-term harm to the economy without tackling the deficit in any serious and significant way.

I can’t speculate on whether this is intended as a symbolic action, as an example for state and local governments, as just a start, as better than nothing, or, as James Joyner put it:

My standard position on these things is that they’re political cowardice aimed at creating the false illusion of political courage.

However, for the federal government and even more so for state and local government there is really only one practical alternative for bringing budgetary sanity: they must reduce healthcare spending. As I’ve posted before at some length here in Cook County there are practical and acceptable measures that could bring the budget into balance except for healthcare.

I’m beginning to despair that anything will allow us to reduce healthcare spending other than systemic collapse.

2 comments… add one
  • steve Link

    This is cover for the blue dogs so that they have a better chance of re-election. It may let the Senate bill pass, HCR that is. If not, I believe you may be correct about collapse. There are no Republicans interested in HCR and they have shown that they can stop it.


  • PD Shaw Link

    steve, I’ve heard the new Senator from Massachusetts say several times that what we need is cost control, which the health care reform bill isn’t. I’ve also heard Olympia Snowe say that she supported health care reform that increased quality, lowered costs and didn’t raise taxes. Who should, and who will Democrats seek to find common ground with? I think it’s Snowe, cause she’s just a Ben Nelson with a different zip code.

Leave a Comment