Congressional Republicans are running economic policy these days, but President Obama owns the results.
That puts the president in a bind, as the GOP proposals he signed into law are arguably slowing economic growth.
To put this a bit more precisely, the debate over the long-term shape of the government remains wide open, but Republicans have seized control of short-term fiscal policy. They have been arguing for two years that, contrary to the beliefs of most of the economics profession and the entirety of the macroeconomic forecasting field, fiscal stimulus has harmed rather than helped the economy. Their prognosis is immediate fiscal retrenchment. Conservatives have argued that halting the momentum of Obama's domestic agenda and withdrawing stimulus will boost growth and create jobs.
The Republican message is that they are implementing this agenda. Paul Ryan wrote the other day, "Republicans won the policy debate by securing the first of many spending restraints we need to avoid a debt-driven economic calamity." In today's Wall Street Journal, three more Republicans echo the we're-in-control-now message. Karl Rove:
House Republicans adroitly shifted the debate's focus from how much to raise the debt ceiling to how much should spending be cut. They achieved this even while the other two centers of power in any legislative struggle—the Senate and the White House—remained in Democratic hands.
In doing so, Republicans achieved roughly two-thirds of the spending cuts sought in the budget the House passed in April, cuts which would have gone nowhere in the Senate without the debt-ceiling battle.
Congress has traditionally been dominated by the impulse to spend more and more of the public's money. In 2011, and especially in the Republican-controlled House, that has been replaced by a culture of spending cuts. ...
"We're on the offensive right now," says Rep. Steve Womack of Arkansas, one of the 87 Republican freshmen. "We're winning. We've got a great message."
But will the new culture of spending cuts endure? "We've got this moment right now," says Rep. Paul Ryan, chairman of the House Budget Committee.
Now the progressives are saying their president blinked this week. What broke Barack Obama's will to win "revenue increases" out of the debt negotiations were last week's nightmare-on-Main Street GDP numbers—1.3% growth in the second quarter and the first quarter revised downward to 0.4%. Even Keynes would have blinked.
Obviously, we have not implemented the right-wing prescription for growth in full. But, as all these conservatives acknowledge, we are now playing on their side of the field. The Bush tax cuts remain fully in place. The stimulus is almost completely exhausted, and the government is beginning to withdraw its fiscal support.
How is the policy working out? Should conservatives expect growth to begin accelerating? I see no sign that they actually believe their newfound control over short-term policy has paid any dividends or will pay any dividends. Where are the conservatives declaring that the Keynesian economic models are all wrong, that the new contractionary policy will boost economic growth? To the extent that they evince any interest in short-term growth, the right's focus seems entirely concentrated on blaming Obama for the current results.
It seems pretty clear to me that Obama needs to escape this dilemma, and positioning of himself as the sole reasonable man, while necessary, is not sufficient. If Republicans want to boast about taking control of short-term fiscal policy, he needs to convince the public to hold them accountable for the results.