Tuesday, July 12, 2011

Obama's goals in the debt ceiling talks

I've talked a lot about the Republican goals. Here is Matt Yglesias on Obama's:

Suddenly it became clear that we’re not looking at an administration strategy to get an increase in the debt ceiling, with the negotiations over the long-term fiscal balance being a means to an end. We’re looking at an administration strategy to get a bipartisan deal over long-term fiscal balance. It’s a strategy whose purpose is to try to change the dynamic in which we alternate between Democrats-only balanced deficit reduction bills (like the 1993 Clinton budget) and GOP-led deficit increasing bills (like the 2001 and 2003 tax cuts). It’s the debt ceiling that’s a means to an end. And you can see that the key Democratic bargaining position here is to insist on revenue increases rather than to try to minimize spending cuts.

I hadn't really thought too much about why Obama was so willing to go for a huge deficit reduction bill. And I think this analysis makes sense. I just want to add that I think this also makes sense in relation to the 2012 election. By fighting about deficit reductions now, you avoid it becoming an issue and a distraction in a year from now. You also take away a big criticism of the Obama administration's first term, which is that they spent a ton of money to try and lessen the impact of the recession. Not only was that not very successful, it added a lot to the deficit. Republicans will still make that criticism (and be complete hypocrites by doing so). But Obama would have a response.

If a deal gets passed with huge spending cuts Obama can point to a clear effort to try and get the deficit under control. That's not a bad idea, because for some reason, a lot of people say they care about the deficit. Its probably not crazy to think that a few undecideds make that issue a top priority. Of course, what will really matter is the growth of the economy in a year from now up the the election. And while I don't think this debt ceiling deal with help with that growth its at least one less thing Obama will have to worry about.

Plus, as I've mentioned before, Obama seems to genuinely believe that reducing the deficit is a good thing. I'm not sure if that belief comes more from a certain economic policy or from an electoral policy. But I'm pretty sure this is being done at least in part by looking forward to 2012.

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