When Barack Obama asked Congress to pass a massive economic-stimulus bill last January, he offered Republicans outstretched arms, saying he wanted to seek "solutions that advance not the interests of any party, or the agenda of any one group, but the aspirations of all Americans." Ten months later, he is asking for perhaps $200 billion more, but this time he comes ready to rumble.
In a Dec. 8 speech at the Brookings Institution, he wrapped his new stimulus plans in a partisan critique, charging that Republicans "presided over the decision-making that had led to the crisis" and then handed "it over to others to solve." He accused the GOP of "waxing political about fiscal responsibility" and finished his point with a dash of sarcasm: "It's a sight to see."
Long past dreams of Beltway comity, Obama is now in a political tight spot, wedged between sky-high unemployment and lingering concerns over government spending and debt. That choice pits the President's left flank against his moderate supporters. Meanwhile, Republicans have found some traction on the economy, for which Americans traditionally blame, for good or ill, the guy who calls 1600 Pennsylvania Avenue home. As soon as Obama finished speaking, his foes pulled out their knives too. South Carolina Senator Jim DeMint called Obama "delusional" and "out of control."
In private, Obama's aides have long fretted over the danger of a slow recovery and ballooning deficits, and the President has been slipping in the polls on both fronts. For now, however, the West Wing calculation is that bad polls today matter far less than bad polls three years from now, when Obama hopes to win re-election as the guy who saved the nation from economic catastrophe. "The reality is that you would rather have done something, and worked toward solutions, and be able to show results," explains Obama senior aide Anita Dunn, in what just might be a preview of the 2012 campaign message.
All this explains why Obama is being very careful about how he packages the new spending ideas, which could push the total stimulus price tag past the $1 trillion mark. For starters, he never used the word stimulus in his Dec. 8 speech to describe the new effort, perhaps because according to a Rasmussen survey, that's a concept that only one-third of Americans support. Nor did he say how much the new programs would cost. He gave few details of how they would be paid for, and he never explained when the plan would go into effect. As he has done in the past, the President is leaving most of those details to Democrats in Congress, who are likely to split up his requests into separate measures over the coming months. Obama wants about $50 billion in new spending on roads and bridges, new tax incentives for small-business hiring, a zeroing of the capital gains tax for small businesses and an extension of several other small-business incentives. Congress is sure to add its favorites before it is finished.
Some liberal economists have maintained that the stimulus bill in February was not big enough to fill the economic crater left by the financial crisis. Obama aides refused to endorse that position, even after Obama began planning another stimulus effort in September. Though the Great Recession is officially over, credit remains scarce, unemployment hovers above 10%, commercial real estate is crashing, home foreclosures are rising, and many state and local governments are teetering on the brink of insolvency. The nation, in other words, is out of the operating room but not yet home from the hospital. "If we go back into recession, it's going to blow out the budget, and it's going to cost the taxpayers a lot more," says Mark Zandi, chief economist of Moody's Economy.com, who has advised both parties.
At the same time, international confidence in the government's ability to pay its $12 trillion debt is tenuous, and Obama has yet to take any clear steps, beyond rhetoric, to reassure investors. His 2010 budget, announced last February, projected medium-term deficits that even Obama's aides agree are unsustainable. And by most accounts, his health care reform package, if it passes, is unlikely to yield the clear long-term savings that Obama once suggested.
In recent weeks, Obama has begun to talk more about the debt, admitting in an interview with Fox News that too much spending could yield a loss of confidence in the U.S. and a "double-dip recession." At Brookings, Obama copped to trying to "spend our way out of this recession in the near term" but also announced that "one of the central goals of this Administration is restoring fiscal responsibility."
Get used to the discordance. Once the next stimulus is passed, Obama will make reducing a record-breaking deficit a theme of his State of the Union address in January. His second and third years in office will turn on whether he can fix the economy while still reducing the deficit and bringing two wars to a close. If he succeeds, he will enter the 2012 campaign in a strong position for re-election. If he fails, even he may not want the job of cleaning up the mess.