The Worst Idea Ever (That Only Kind of Came from John McCain)

Matt Yglesias does the admirable work of explaining President Obama’s bizarre plan for a three-year freeze on non-defense discretionary spending (via Dara):

The freeze would not apply to the Department of Defense, the Department of Veterans Affairs, the Department of Homeland Security, or to the foreign operations budget of the State Department. The official emphasized that the freeze is not the only element of the administration’s plans for deficit reduction, just the only element he was prepared to discuss on this particular call. “This is only one component of an overall budget,” he said, “you’ll see other components on Monday.”

So is this an across-the-board freeze like we’ve heard Republicans call for? No, it’s “not a blunt across the board freeze.” Rather, some agencies will see their budgets go up and others will go down, producing an overall freeze effect. The senior official sought to portray this as not just a question of spending less money, but of getting our money’s worth—cutting (unspecified) ineffective programs and spending more on programs that work.

I don’t understand this at all. If there’s any portion of the federal budget that’s amenable to freezing, it’s defense spending, which eats up the vast majority of discretionary spending. Non-defense discretionary spending amounts to a scant 1/6th of the federal budget, and the majority of it goes towards programs that benefit millions of poor and middle-class Americans. And because those programs — unlike agricultural subsidies — don’t have powerful lobbies or influential advocates, they are the ones most likely to be cut by the Republicans and “centrist” Democrats that will end up controlling the process (since President Obama will probably take a hands-off approach to this too).

What’s more, I don’t see how this will do anything to close the deficit. The vast majority of the long-term deficit is a product of under-taxation and growing health care costs. And assuming a major tax increase/revamping of the tax code isn’t going to happen anytime soon, the single best thing the Obama administration could do to reduce the deficit is to pass the Senate health care bill, which is projected to substantially lower the deficit over the long-term.

Policy aside, this is bound to be a political disaster. The American people don’t give a shit about deficits, and insofar that they do, it’s because large deficits are associated with economic hardship. Health care aside, the most important thing the administration can do, politically, is reduce unemployment. What they’ve chosen instead is to pursue a policy that will take money out of the economy, and push unemployment upwards. The nearest parallel is FDR’s attempt to balance the budget in 1937; the immediate impact of which was to plunge the economy into a second Great Depression. Which is another way of saying that if Obama goes through with this, he’s not only is he looking at an even worse economic picture, he’s essentially forfeiting the party’s majority and ensuring a one-term presidency.