One of President Barack Obama's top economic advisers on Tuesday called on Republicans to "hold hands and work together" with the White House on budget matters "in an adult way."
Austan Goolsbee, who chairs Obama's Council of Economic Advisers, decried what he described as the GOP's single-minded campaign against "out-of-control government spending."
Speaking to Washington insiders on an Aspen Institute roundtable, Goolsbee said the Republicans calling for large, immediate but unspecified spending reductions are intentionally confusing the nation's long-term deficit problem with the short-term deficits due mostly to the recession.
And Goolsbee asked the deficit hawks around the table to stop letting them get away with it.
"We have known for 35 years that we have a fiscal imbalance that is associated with rising healthcare costs and the aging population," he said. Meanwhile, he said, Obama's critics "keep saying and implying that it's about discretionary spending" even though "everyone in the know knows that's not correct."
"The frustrating or disturbing aspect is the conflating of the deficits of last year and this year with the long-run fiscal challenges facing this country," Goolsbee said, adding that "there seems to be a somewhat deliberate attempt to conflate those."
Goolsbee also said too much focus on the long-term deficit can lead politicians to lose sight of what's required in the short run. "The most important thing is to get growth," he said, warning that poorly-chosen or excessive spending cuts could instead endanger the recovery.
"We're finally moving to phase two of growth -- it's a recovery, it's fragile," he said. "That's not the moment that you want to be saying, 'OK, let's pull the rug out from under the recovery.'"
Goolsbee cited Obama's tax compromise with Republicans late last year as an example to repeat. Even though everyone knew it would increase the deficit, when it was done, private forecasters increased their growth estimates.
But he despaired about the current state of discourse. "If you take the response to the State of the Union that [Republican Rep.] Paul Ryan gave," Goolsbee said, "Paul Ryan has in the past had some pretty serious budget discussions." But his speech that night "was all in the context of 'spending's out of control'."
There's little chance of a serious discussion about the budget "if in your mind it all has to be based in how much cutting has to be done," he said.
Goolsbee said economic indicators show that what he called "phase one" of the response to the recession has come to an end. That phase was basically: "We're in free fall, we're in rescue mode" and the only way to keep the economy going "was with government as the central actor."
Now, he said, Obama is moving into "phase two" and asking: "If we're going to start growing, well, what do we want to grow into?"
His answer, as expressed in his State of the Union message, is that the country needs to out-innovate the rest of the world.
Damon Silvers, policy director for the AFL-CIO, asked Goolsbee to explain how Obama would solve the central riddle of his State of the Union address, namely that he seemed to be calling for a decrease in spending in more or less the same areas that he was calling for an increase in spending.
Goolsbee said the answers will come next week, when Obama releases his budget proposal.
"Nobody's going to get all of what they want," Goolsbee warned. "It means there are going to be cuts in a bunch of things that are painful," in favor of long-term investments in infrastructure, education and innovations.
"We've got to preserve the seed corn for investing," he said. "In that budget he's going to say here's where we cut; here's where we cannot afford to cut."
Goolsbee also took on the deficit hawks by warning against the "mindset that the bond markets are about to punish us."
"In my view, the market could not be saying more clearly that they don't have a problem with the government borrowing right now," Goolsbee said.
"The problem with deficits," he added, "is that you have to pay back the money, not that they drive up the interest rates."
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