President Obama's new short-term budget fix: Why kicking the can down the road is smart

Without federal intervention, a slate of massive across-the-board spending cuts promises to imperil the economic recovery

President Obama
(Image credit: Alex Wong/Getty Images)

On Tuesday, President Obama proposed a modest package of spending cuts and tax reforms that would replace $1.2 trillion worth of across-the-board spending cuts that are scheduled to take effect beginning March 1. Obama said the slate of larger cuts — known as the sequester — would have a debilitating effect on the economic recovery if Congress didn't head them off at the pass. "Cuts to things like education and training, energy and national security, will cost us jobs, and slow down our recovery," he said.

Obama maintained that he was committed to reducing the deficit in the long term, through a mixture of cuts and tax revenue. "If we're serious about paying down the deficit, the savings we achieve from tax reform should be used to pay down the deficit," he said. He urged lawmakers to give themselves more time to work out a long-term deal, "instead of making indiscriminate cuts now," and said his previous offers to the GOP on entitlement cuts were "very much" still on the table.

This is, of course, a naked appeal to kick the can a little further down the road, which is sure to frustrate budget hawks. However, Obama is almost certainly right that the sequester would harm the economic recovery. Furthermore, the chances of the president reaching a long-term budget deal with congressional Republicans in the next four weeks are vanishingly narrow.

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For his part, House Speaker John Boehner (R-Ohio) demanded that Democrats replace the sequester, half of which targets military spending, with "spending cuts and reforms that will start us on the path to balancing the budget in 10 years." The GOP-controlled House in 2012 had passed two bills that would have substituted the sequester entirely with cuts to domestic programs, slashing funding for Medicaid, food stamps, and social services. The Democratic-controlled Senate never considered those measures.

The latest round of budget battles coincided with the release of the nonpartisan Congressional Budget Office's yearly report on the country's fiscal outlook. The report had ammunition for both sides: The deficit is expected come down to $430 billion in 2015 (from a high of $1.4 trillion in 2009, in the abysmal depths of the recession), thanks to recent tax hikes on the wealthiest Americans, an improving economy, and falling health care costs attributed to ObamaCare. However, the deficit is projected to bounce back to nearly $1 trillion by 2023, largely due to an influx of retiring baby boomers who will need health care and other government support. "The truly horrendous budget problems come in the 2020s, 2030s, and beyond," says Alan Binder at The Atlantic.

In other words, the country's fiscal situation is not so dire that it needs to be fixed in a mere four weeks. With that mind, it would seem to make sense for both parties to kick the can down the road. The Democrats would avoid crippling spending cuts to social programs, Republicans would prevent Congress from undercutting the military, and the economic recovery would be spared as both sides figured out how to slow spending in the long term.

So will the GOP go along with Obama's plan? Congress agreed to the sequester because it had disincentives for both parties, but some analysts say members of the GOP are willing to let the sequester take effect, military spending cuts and all. According to Darren Samuelsohn at Politico, "A new breed of conservatives in the House cares so much about cutting spending they're willing to extend that to the budget for bullets and bombs, too." And so once again, it appears the ball is in John Boehner's court.

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Ryu Spaeth

Ryu Spaeth is deputy editor at Follow him on Twitter.