Originally posted on Capital Gains and Games
Last night' State of the Union Address almost certainly made deficit hawks very unhappy, extremely angry and, from a policy perspective, close to suicidal. After pushing hard for so long to make the deficit the issue, it was barely a footnote in the president's hour-plus address and wasn't missed that much.
It took less than an hour for the Committee for a Responsible Budget to send out a statement excoriating the White House for missing "...an opportunity to throw down the gauntlet to Congress on the debt and demand a large, bipartisan debt reduction plan this year."
If the speech is an indication, the administration has no interest in throwing gauntlets or anything else on the budget this year.
I was surprised. With Congress unwilling or unable to do much of anything on the budget, I had expected the White House to call for the House and Senate to deal with the budget and to offer to meet anytime, any place, etc. At the very least this would have put it in a good position to be critical when that didn't happen.
But the SOTU turned out to be even more of a campaign speech than I had expected (If you have any doubt about that just listen with your eyes closed to the over-the-top soaring rhetoric at the end and ask yourself if it doesn't sound like the president was accepting his party's nomination.) and campaign speeches don't promise to impose pain (Ask Walter Mondale). That meant that the budget, deficit, and national debt were out and proposals that make you feel good about the future were in.
The subtext was clear: The president was saying to congressional Republicans that this year he'll be happy to let them propose the spending cuts that will cause the political pain. They can appeal to the tea party wing of the GOP; he'll take everyone else.
The speech confirmed what anyone but the most wishful thinkers who follow the budget already knew: barring a crisis, there is next-to-no chance there will be any legislated change in the fiscal policy outlook before the election. The deficit will fall by several hundred billion dollars from fiscal 2011 to 2012 because of what's already on the books and because the economy is likely to continue on its current path.
Anything beyond that will have to wait until a lame duck session of Congress at the earliest. The next session of Congress in 2013 is probably more likely.
