The Americans wrapped up their meetings at the Toronto summit in an oddly contradictory posture. With much of the world afflicted with austerity fever, President Obama's team found itself in the awkward position of pushing the Europeans not to abandon economic stimulus -- while Obama himself is unable to get the U.S. Senate to approve even modest sums to extend expiring unemployment insurance for upwards of a million workers, or his $23 billion request for emergency aid to the states to spare 300,000 schoolteacher layoffs.
The British, Germans, and Canadians, meanwhile were giving priority to deep budget cuts in their own countries -- while smaller European nations were being made to extract even more severe cuts in exchange for guarantees of their government debt. Obviously, if every nation is cutting back, then economic recovery falters. But this seems far from obvious to the world's leaders.
In part, this general outbreak of austerity is the price that Obama is paying for giving too much attention to deficit-reduction at home, and not enough to jobs. The administration's own embrace of austerity, in the form of a freeze on domestic spending after this fiscal year, as well as Obama's fiscal commission, not only undercuts his credibility with the G-8. It gives ammunition to Senate Republicans and Democratic deficit hawks who refuse to appropriate another dime for jobs measures that are not "paid for" by tax increases or other spending cuts (which of course undercuts any stimulus effect.)
One good piece of news is the departure of OMB director Peter Orszag, the leading deficit hawk inside the administration. Orszag was the architect of the fiscal commission and the domestic spending freeze, and the foe of even modest increased outlays on jobs.
It's not clear that his successor will be a great deal better, though some of the names leaked to the press -- notably Laura Tyson or Gene Sperling -- are less hawkish.
If the Republicans make massive gains this November, the main reason will be the lingering economic slump, which now belongs to the incumbent Democratic administration.
You could spin recent events to suggest that President Obama finally had a pretty good week. He showed presidential resolve in getting BP to part with $20 billion. He fired the insubordinate General Stanley McCrystal. And he persuaded Congressional Democrats to put aside House and Senate differences and agree to a conference bill on financial reform.
But in all of these cases, the back story doesn't reflect so well on Obama. McCrystal's policy, which will continue, is a fantasy. He should have been fired for insubordination several months ago when he was trying to back the president into a corner with his public pronouncements.
Had the new administration cleaned house at Dick Cheney's Interior Department early on, and not given BP safety waivers, the spill probably would not have occurred.
And Obama hardly participated in the final deliberations on financial reform. For lack of progressive presidential leadership, the banking lobby gained back some of what it had lost on the Senate floor, in weaker provisions on derivatives, big loopholes in banks' ability to continue risky trading activities, and looser limits on banks' ability to invest in risky hedge funds and private equity.
Polls show a continuing erosion in the public's confidence in Obama and the Democrats. And none of the recent cases of presidential leadership touches on the real issue that is killing the Democrats, namely high unemployment.
Speaking of polls, one of the oddities of the Administration's reticence on the jobs issue is the reported counsel of the White House political staff that the public cares more about deficit-reduction than about jobs. In this account, the public sees deficit reduction as a sign that government is out of control and doesn't believe that more government spending will help solve the jobs crisis.
Political advisers who take such results at face value are fools. Yes, you can get poll respondents to say that the deficit is a serious concern, but it's a far less salient one than worries about losing your job, your health insurance, your pension, or the value of your home. If Obama can persuade the American people that he is their champion on these immediate pocketbook issues, the abstract worry of the deficit evaporates.
The political team also reportedly argues that Obama can't get serious jobs measures through the Senate in any case, and therefore a major effort would only make him look ineffectual. But this is also the wrong reading.
As I argued in a recent piece for The American Prospect, adapted from A Presidency in Peril, Obama needs to learn from the example of Harry Truman. In the summer and fall of 1948, when Republicans controlled both houses of Congress, and Truman was widely given up as a goner, Truman responded by deliberately sending "the do-nothing 80th Congress" legislation on housing and jobs that he knew they would defeat -- to dramatize the difference between his own program and the Republican one.
Truman not only won re-election in November 1948 in American history's greatest
electoral upset; his coattails were so attractive that 75 House seats went from Republican to Democrat, and the Democrats took back both houses of Congress.
If today's Republicans are blocking aid to spare 300,000 school teacher pink slips, and over a million unemployed workers who are losing their unemployment insurance and Cobra health coverage, Obama should be hanging that callous behavior around their necks, Truman style.
And in that respect, there is one surprising piece of news on the polling front from a most unlikely quarter -- the Peter G. Peterson Foundation.
The Peterson Foundation, bankrolled at a billion dollars, is spending a small fortune to persuade the American people that the deficit is a more serious menace than economic collapse, and that Social Security and Medicare need to go on the chopping block. I have rebutted this view in a paper for the Scholar's Strategy Network.
One of the Foundation's grantees is a closely linked organization called "America Speaks," which is supposedly a representative sounding of public opinion on the Peterson Foundation's favorite causes.
The "national town meeting" just completed June 26th, involving thousands of Americans by satellite link. You have to read the press release very carefully to find these results, but after extensive deliberations, the America Speaks poll included these findings:
- 85 percent wanted to raise the cap on earnings subject to Social Security taxes--far more than the percent that wanted to reduce benefits or raise the retirement age.
- 85 percent wanted to cut military spending.
- 64 percent wanted a carbon tax.
- 61 percent wanted a financial transactions tax.
- 58 percent favored a new higher tax bracket for millionaires.
The people are often ahead of the leaders and the pundits. If the administration paid attention to where public opinion really is, we'd be hearing a lot more about jobs and a lot less about deficits.
Robert Kuttner's new book is A Presidency in Peril. He is co-editor of The American Prospect and a senior Fellow at Demos.