President Obama visits New Hampshire today, to speak about jobs. That is precisely the right thing to do. The super-committee deliberations diverted attention away from the state of the economy, which is our most urgent problem.
Today’s remarks in New Hampshire are the beginning of an intense White House push to renew a payroll tax break and an extension of unemployment insurance past December 31, when both are set to expire. Among other things, the administration will unveil a calculator that allows people to figure out how much their taxes will go up if the payroll tax break lapses. It’s clever – and it makes the essential point. If the payroll tax break expires, people will have less money to spend and the economy will be weaker as a result.
Of course, it would have been great if the super-committee could have dealt with the payroll tax and unemployment insurance as part of a much grander compromise – in other words, a package that included short-term stimulus and long-term deficit reduction. But that possibility was always very slim, because of the positions the two parties hold. Simply put, Democrats are willing to compromise by embracing spending cuts as well as new taxes. Republicans refuse to consider new taxes, at least beyond very token gestures.
It’s the same situation that bedeviled deficit negotiations over the summer. The reason those deliberations turned out differently was that, during the summer, Republicans had all the leverage: They were willing to let the government reach its debt ceiling, potentially precipitating an economic crisis. Facing that prospect, Obama and the Democrats signed off on a horribly lopsided deal, one that many of us criticized for giving up too much.
But the deal also included the sequester, or "trigger," which calls for automatic cuts that will take effect in 2013. The cuts to the Pentagon would be particularly severe and Republicans are already agitating to undo them. But they won’t get their way unless they come up with some other plan for reducing the deficit – a plan that Democrats, too, find acceptable. That was part of the message Obama delivered yesterday, during an unusually stern speech from the White House.
Of course, it’s not like Obama or the Democrats are wild about those automatic cuts either. As Brad Plumer explained at the Washington Post on Monday, the automatic cuts include fairly drastic reductions in domestic discretionary spending:
Recall that the Budget Control Act — the deal Congress reached in August to hike the debt ceiling — put a cap on all discretionary spending to cut $917 billion between now and 2021. Most of those cuts will likely hit non-defense items. The “trigger” that takes effect once the supercommittee fails, meanwhile, will cut an additional $294 billion from domestic discretionary over that time. ...
Now, it’s hard to know what specific programs will get cut. Future congressional appropriators will have to thrash that out. But just to illustrate the scale here, Third Way has provided examples of what would happen if the the trigger’s 7.8 percent cuts were spread evenly, across the board, in 2013. We’d have 608 fewer food-safety inspectors, which would likely lead to some 49,000 more cases of Salmonella, E. coli, and other food-related diseases. We’d have 1,200 fewer FAA air-traffic controllers, which could lead to an estimated 205,527 more flight delays. There’d be 2,326 fewer IRS agents, which would likely lead to $4.5 billion less in tax revenue collected.
And it’s not clear who has the leverage in the debate over the payroll tax and unemployment insurance. Republicans don’t want to oppose these things openly; Obama and the Democrats will hammer them if they do. But they could insist on offsetting the cost by cutting spending on Democratic priorities or, perhaps, reducing those Pentagon cuts they dislike so much. My gut tells me that Obama and the Democrats would win that fight, because, by and large, the public agrees with them. But I’ve been wrong before.