A strong federal budget still needs stimulus, not just cuts

An ancient bromide has it that government budgets are political documents.

Right. But where does it say that they should be only political documents?

The release last week of President Obama’s budget proposal for fiscal 2012 has touched off a full-dress political battle that has very little to do with how we’ll be spending money over the next year or so and everything to do with seizing ideological ground.

Obama’s approach was to stake out a broad swath of the ideological spectrum. He tried to steal a march on the GOP’s fiscal hawks by stating that we have to “start taking responsibility for our deficits.” He proposed a federal spending freeze, which is a very Republican idea.

Some of the things he proposed cutting are cherished Democratic budget items, including block grants and community programs in low-income neighborhoods. The Senate is sure to save them, which is good for Obama because that way he gets to look stern without actually turning off the lights at the youth center.

On the other hand, Obama demonstrated that he understands the difference between government “spending” and “investing,” and endorsed the latter — very refreshing in a national politician. And he made the right distinction between Medicare, which is contributing to the federal deficit, and Social Security, which does not. (He didn’t quite go far enough, stating at a news conference that Social Security “is not the huge contributor to the deficit” that Medicare and Medicaid are. The truth is that it doesn’t contribute to the deficit even one tiny bit.)

What about the other side? It was sadly predictable that no matter what kind of budget Obama proposed, the Republicans in Congress would find nothing to like about it. Sure enough, House Budget Committee Chairman Paul Ryan promptly issued a statement grousing that Obama had failed “this critical test of leadership,” though acknowledging that his own caucus had no alternative ideas to offer, just at the moment.

This reminds me of an exchange at a news conference by President Kennedy in July 1963, when a reporter informed him the Republican National Committee had just adopted a resolution “saying you were pretty much of a failure.”

“I’m sure it was passed unanimously,” he replied.

Setting the joke aside, he added: “I must say that I found a scarcity of useful resolutions coming out of the source which you name dealing with this problem of unemployment, tax revision, tax reform, minimum wage, Social Security, trade expansion.” Some things never change.

The dismal conclusion to be drawn from last week’s budget circus is that deficit panic still infects our national fiscal debate, and with the 2012 election looming, it’s bound to get worse.

Yet hacking away at the federal deficit merely to fulfill a talking point is dangerously premature now, when the economy still needs stimulus, the restoration and expansion of our national infrastructure are unfinished tasks, and federal funds are still keeping many states out of the red.

The best joke to come out of the recent convention of conservative activists known as CPAC was the glorification of Indiana Gov. Mitch Daniels, a former budget director for President George W. Bush, as a crusader for fiscal rectitude. Daniels is one of those Republican governors, like Rick Perry of Texas, who pats himself on the back for balancing his budget and attacks Obama’s stimulus program, but forgets to mention that his ability to do the former has depended a lot on the latter — in Indiana’s case, $2.044 billion in federal stimulus payments to the state government.

Daniels is also a garden-variety Social Security hypocrite, offering “an affectionate thank you to the major social welfare programs of the last century” but pressing for their abolition. He never seems to get around to explaining exactly why programs that still very effectively keep millions of Americans out of poverty should be ended.

This is a man who clearly will never have to worry about living on Social Security because he’ll surely be entitled to a government pension; too bad about the rest of you.

Another canard is to project today’s trends out to the limitless future, without acknowledging that some expenditures may take care of themselves. The war in Afghanistan, for example, costs $80 billion or more per year. Are we expecting to stay there forever, like characters out of Kipling?

Today’s deficit hawks tend to claim that we’re facing an unprecedented crisis because the current federal deficit and debt load are at historic peaks. This claim is untrue. Measured as a percentage of gross domestic product, the federal deficit is expected to peak at 10.9% this year, fall to 7% in 2012 and decline to 3.3% in 2016; its peak was 30%, in 1943. Federal debt outstanding will be 102.6% of GDP this year and is expected to rise to 105.2% at year-end 2016; its peak was at 121.7%, in 1946.

The hawks claim to be concerned about providing posterity with a functioning and growing economy, but they fail to acknowledge that creating the economy of tomorrow requires investment today.

Their policy prescriptions are aimed at short-term political gain. Florida Gov. Rick Scott recently rejected a high-speed rail connection between Orlando and Tampa on the claim that Florida can’t afford it today. (He’s the fourth GOP governor recently to cancel a federal rail project.)

This is a project that wouldn’t cost state taxpayers a dime (it would be 90% federally funded, with the rest coming from private companies that have also pledged to cover cost overruns); would create 23,000 construction jobs in a state with 12% unemployment; and could turn the Orlando-Tampa corridor into a world-class industrial zone. That may be why some of the most anguished reactions to Scott’s blunder are coming from the Republican congressional delegation from his own state.

Scott’s action defines what’s lacking in the budget debate in Washington: an understanding of the difference between what we can’t afford to do today and what we can’t afford not to do.

Michael Hiltzik’s column appears Sundays and Wednesdays. Reach him at [email protected], read past columns at latimes.com/hiltzik, check out facebook.com/hiltzik and follow @latimeshiltzik on Twitter.