Obama to Propose Spending Freeze in SOTU Address

Hear is another reason I do not consider President Barack Obama a policy wonk. The Guardian reports Obama is going to propose a partial spending freeze in his State of the Union address.

Barack Obama is expected to call for a five year partial freeze on spending in his State of the Union address today as he gears up for a battle with Republicans over budget cuts and maps out a path to re-election.

But Republicans rejected the call, even before it was made, as "not enough".

Obama attempts to pander to Republicans. The result is Republicans still diss his partial spending freeze proposal.

The last economic genius that put a spending freeze on the federal government was President Herbert Hoover. The result was less money going into an already weak economy. Matt Yglesias was part of a conference call with an Obama administration official and confirms that a spending freeze will be in the State of the Union.

The Defense Department, the State Department and Homeland Security will not be cut. Obama and Republican Paul Ryan both like giving ballpark numbers about how much they will cut. When asked specifically what domestic programs they would cut they retreat.

Economist Brad Delong breaks down how Obama's proposal will have Hoover-like effects on unemployment.

But in a country as big as this one even this is large stakes. What we are talking about is $25 billion of fiscal drag in 2011, $50 billion in 2012, and $75 billion in 2013. By 2013 things will hopefully be better enough that the Federal Reserve will be raising interest rates and will be able to offset the damage to employment and output. But in 2011 GDP will be lower by $35 billion--employment lower by 350,000 or so--and in 2012 GDP will be lower by $70 billion--employment lower by 700,000 or so--than it would have been had non-defense discretionary grown at its normal rate. (And if you think, as I do, that the federal government really ought to be filling state budget deficit gaps over the next two years to the tune of $200 billion per year...)

And what do we get for these larger output gaps and higher unemployment rates in 2011 and 2012? Obama "signal[s] his seriousness about cutting the budget deficit," Jackie Calmes reports.

Obama extension of the tax cuts was about politics and a lack of seriousness about the federal deficit. The deficit needs a scalpel to cut wasteful spending. Getting more people back to work would increase tax revenue. Instead Obama decides to make Republican rhetoric of spending freezes into fiscal policy because it is easier than taking risky positions.