So I'm on my way to do a TV interview last night on a set of middle-class initiatives we announced yesterday, when I learn that what they really want to talk about is our proposed freeze on non-security discretionary spending. Ok,I'm flexible -- and in fact, the two are related in an important way that folks need to understand.
First, an important note on timing. No one is arguing that we should take our foot off the accelerator today, when the economic recovery remains fragile and job growth has yet to return. In fact, you'll hear from the President tomorrow night about measures we should undertake right away jump-start job creation. In his words and deeds, the President has made clear that recovery comes first. But that doesn't mean we should wait to start changing the same bad habits in Washington that left a $1.3 Trillion deficit on our doorstep when we entered office in January 2009, especially when we can do so without cutting back on our jobs agenda.
Second, a little background on freeze-eology: there are two ways to do a freeze like this: (1) an across-the-board freeze on every program outside of national security; and (2) a surgical approach where overall totals are frozen but some individual programs go up and others go down. In short, a hatchet versus a scalpel.
During the campaign, you may recall that John McCain touted option 1: the hatchet approach of an across-the-board freeze.
The President was critical of that approach then, and we would be critical of it now. It's not what we're proposing. To the contrary, the entire theory of the President's proposed freeze is to dial up the stuff that will support job growth and innovation while dialing down the stuff that doesn't. Under our plan, some discretionary spending will go up; some will go down. That's a big difference from a hatchet.
Take, for example, the policies we announced yesterday -- a significant expansion (a 20% increase) in a program that provides services for seniors, like respite care and in-home services; a program to limit student loan repayments to 10 percent of income (after living expenses); an expansion of two tax credits, one for child care and another for retirement savings.
How can we expand these programs in the context of a freeze? By making sure that the freeze either holds steady or increases those parts of the discretionary budget that support jobs and income security for folks who need them, while whacking the wasteful subsidies that support lobbyists and special interests.
President Obama deeply understands the various imperatives of this moment in time, even if they don't always point in the same direction.
We must do all we can to help those who are still reeling from the impact of the great recession; we must create the economic conditions for robust, private-sector job growth, and we must make the investments in clean energy, health care, and education that will ensure that the next economic expansion is characterized by broadly shared prosperity, not narrow gains to financial speculators.
At the same time, we must take steps to move toward a sustainable fiscal position, and that's where the discretionary freeze comes in.
You can't thread that needle with a hatchet. You've got to use a scalpel. That may be a truly lousy metaphor, but it's good public policy.
Jared Bernstein is Chief Economist to Vice President Biden, and Executive Director of the Middle Class Task Force
Mitchell Bard: An Open Letter to the President: It's Time for Change, Not Spending Freezes
It's time to be bold, Mr. President. Where is that audacity of hope? It's time to introduce a bold jobs-creation bill, and to replace your Wall Street-stained economic team members.
David Isenberg: About That Non-Discretionary Spending
President Obama's planned three-year budget freeze won't include security spending. In 2010, we'll spend more on the Pentagon than in any year since 1946 -- in dollars adjusted for inflation.
Robert Reich: Obama's Tiny Jobs Ideas for Main Street, A Big Spending Freeze for Wall Street
Obama's three-year freeze on a most discretionary spending will make it impossible for him to do much of anything for the middle class that's important. Chalk up another win for Wall Street, another loss for Main.
We need jobs more than bombs and foreign military bases.
You could start here:
http://www.cqpolitics.com/wmspage.cfm?docID=cqmidday-000003179170
http://www.huffingtonpost.com/joe-cirincione/gates-grounds-the-airborn_b_238347.html
WE DON'T TRUST YOU to act in the interests of the people. As I have written to the President countless times in the past weeks, for those of us who supported Obama during the election, who are now completely disillusioned by a full year of mis-steps and broken promises, cleaning out the economic team of Geithner, Summers and Bernanke would send us a message that effective change is in the works. But it seems the man we invested so much hope in is lacking backbone, caving in to criticism from corners where no matter what he does, he will be wrong. We need leadership that is strong, decisive, and clear about goals...it's becoming painfully clear that Obama is not that man. What a sad state of affairs...
the Military Industrial Complex is the biggest Congressional Lobbying mafia - and they ain't giving up their Halliburton-like War Profiteering - ever.
Sigh.
There are more systemic and humane alternatives to the mantra which demands budget cuts and tax hikes. We as a nation pay interest on "fiat" money used to fund public budgets. That just does not make sense. The privately owned Federal Reserve System siphons off $500 billion in tax receipts which pay the interest/profits to the Federal Reserve.
The President could easily issue an E.O. declaring a five year moratorium on interest payments to the Federal Reserve. That would save upwards of $2 trillion.
The 2nd alternative is to issue interest free Treasury funds to finance the government for the next five years. That saves an additional $2 trillion.
The 3rd alternative is to issue a new interest free currency which replaces the Federal Reserve Note and Treasuries. The Fed Notes and Treasuries would be liquidated once redeemed to eliminate the threat of inflation.
Importantly, interest free funding of public sector budgets allows government entities to provide all the needed services required to sustain communities without incurring debt.
The Treasury can use the same fractional reserve lending principles commercial banks use. $1 trillion in U.S. assets held by the Treasury becomes $8-$10 trillion in interest free credit for distribution to fund National, State, and local budgets.
Think about it. You may also want to visit www.webofdebt.com to peruse the definitive discussion presented by Dr. Ellen H. Brown.
This would be you, Mr. Bernstein. Yes, you please. When Joe Biden tapped you for his economic advisor, I had high hopes indeed: one, well, Joe Biden is a favorite humanist of mine and has chosen an impressive team (of greater worth than any VP I know of in recent history, and I don't say that lightly), and second, I read your bio besides being keenly aware of your time in COMMUNICATING economic information to us common folk before becoming part of this administration.
This post is what we need to read. Most populist do not have degrees is economics, and thus really do not understand nuances. Thus, it is my request that you please, please post more frequently on HP and elsewhere. Obama-Biden needs someone like you to communicate clearly to this country and others.
Great post, by the way Mr. Bernstein, you've never let me down. Thank you so much. Tell your boss Hi!
Biden called Bernstein a "proven, passionate advocate for raising the incomes of middle class families,” which, I believe was a big reason Biden tapped Bernstein. I don’t believe a vice president ever had the mental wherewithal to make such a choice. Biden was keenly aware of the need for such an expert and he pulled out a plumb.
Your choice of the term “humanist” is unique, and is what sets Bernstein apart from other economists. I trust him.
Thank you for this Jared; I just hope readers appreciate your prose.
Are we not supposed to look at our budget and cut out wasteful spending? Who are we going to get the money from, China? In my opinion, this was a smart move by the President. We already allocated $700+Billion to the stimulus which only a portion of it has been spent.
Thankfully, President Obama is into short-term and long-term solutions. I see responses on this blog that people are not going to vote in 2010 because he is putting a freeze on wasteful programs starting in 2011. WOW. What a childish response before you even hear his rationale or which programs are not going to receive additional funding for the next 3 years.
Families are tightening their budgets and therefore, we need to make some adjustments to our government's budget. It is the responsible thing to do and frankly I'm appalled that progressives are against using our money more wisely. What if we froze money given to build oil refineries and instead reallocated those funds to build wind turbines? Would the left be opposed to that?
Maybe you should listen and find out all the information before jumping the ship. Geez. No wonder Obama has so much gray hair!
I clearly remember what the plan was to cut the deficit. Scalpel it and provide funding for important programs to boost education, jobs, etc. Cut waste but it had to be done carefully.
Sometimes, I wonder if people even voted based on information!
This 'freeze' talk hit the airwaves and everybody got their knickers in a bind! Krugman spoke out against it so of course it can't be right because he's never wrong, correct? My question...did Krugman have all the facts? Or anyone who started running their mouths?
I prefer to wait til the information is all out there before I start running without my head.
Thank you, Mr. Bernstein for offering some insight where there is mostly misinformation!
I am so pleased to see that you wrote an article to post on Huffingtonpost. I watched your interview on Rachel Maddow and I felt for you. I like Rachel, but this time she was wrong. You and President Obama are proposing a spending freeze on areas that do not focus on job growth (except for defense and medicare/social security). You will be reallocating money that was saved from this freeze to areas that will stimulate growth.
I get it.
The problem with the left , especially the liberal media is that it is all or nothing. Same thing happened with the health care debate. It's the public option or nothing! Now that there might not be any health care bill, they are screaming "pass the bill and do it now!" What about the public option they so fiercely fought for?
I'm glad that you are not catering to the liberal base because this is not a liberal America. In my opinion, a successful President governs from the middle, giving each side what they want. It is not only smart politically but the right thing to do. Bush was ideological and therefore had the worst approval rating in history. What strikes me is that the liberals believe that President Obama should do the same as Bush. "It's our turn", they say. What about having a President that listens to both sides and does what is best for our Country.
Now, that is Change!
Everyone has the tendency to see the country through the prism of their particular ideology, but it still astonishes me to see anyone claim that Obama gives "each side what they want." The health care debate is a perfect example. Nobody got what they wanted, policy-wise, and only the minority party got what it wanted politically. After gaining concession after concession, with national support evaporating with each one, Republicans oppose it as vehemently as ever, even though there is virtually nothing progressive left in it.
The result is a bill with significantly diluted support, and Obama damaged from moving to the center. The electorate voted for progressive policies in 2008; what it has soured on is the idea that this administration will deliver them.
Vote for the Progressive Caucus, Kucinich, Dean Grayson, etc.
Never vote for conservatives, never for the GOP.
How can you change Washington "pragmatically"?
I hope you will post here more regularly and, perhaps, even throw in a good word or two about Secretary Geithner.
Of course, President Obama, VP Biden and Secretary Geithner and the rest of the economic team could explain until they are blue in the face and most of the people around here will still refuse to understand. But, that's all the more reason why you should be posting here more often - and at length - and you should urge Biden and Geithner to do the same.
Regular blogs by Berstein/Biden/Geithner would go a long way toward countering the dysfunctional and toxic media culture so prevalent around here.