Obama: Republicans Can Take the First Shot

Barack Obama wants to be re-elected in 2012, and his chances are good.

The American president has therefore chosen, for now, not to propose serious reductions in government spending. He prefers to let the Republicans take the first step and propose unpopular budget cuts that will be immediately denounced as “anti-social” by CNN, MSNBC and The New York Times.

The president is popular even if his economic policy is not. He has inspired both calm and a certain elegance during the storm. He is smartly going to play the centrist. He is counting on the conservatives’ ideological zeal to discredit the anti-deficit crusade that the tea party and the House Republicans have promised to those who have elected them.

In his 62-minute State of the Union address given last night before Congress, he waited more than 40 minutes before speaking about the urgent need to reduce the national deficit, which has reached nine percent of the United States’ GDP.

The federal government spends $3.8 billion a year. The Republicans, who have the House majority, are looking toward $100 billion in cuts this year. Is this inhumane? Going by the numerous defenders of Barack Obama’s social-democrat ideology, that would appear to be the case.

Yet the president is conscious of the gravity of the problem that is the United States’ over-indebtedness. He knows that a return to a deficit of three percent of the GDP by the midterm elections cannot happen without reforms made to the popular social programs Medicare, Medicaid and Social Security. He also knows that the Pentagon must reduce its spending, which approaches $900 billion a year. Despite all of this, he has yet to address this fundamental question. His five-year spending freeze seems daring, but it accounts for nothing more than 12 percent of Uncle Sam’s expenditures!

Barack Obama spent the majority of his televised hour extolling the merits of “public investment” in infrastructure projects such as high-speed trains. With what money? That thing that the Treasury borrows on the markets to the alarming rhythm of $4 billion a day, Sundays and holidays included.

The question, then, is determining whether the state can assure sounder growth for the midterm through its public investments. This debate started about 30 years ago. Today, the American deficit is too high to simply go to the Keynesianism of the good old days. It is perhaps necessary to build high-speed lines in America, but not with Chinese money. The weight of the public debt mortgages the country’s future. It prevents long-term interest rates from falling. It’s weakening the dollar.

To illustrate this alarming situation, I suggest you visit the following website.

There you will see that the weight of the public debt for every American, including newborns, is already past $45,000. Is it reasonable to continue to push for increases in public spending, all the while admitting in an inspired air that hard choices must be made but without actually saying how to make them?

The Republicans, in the upcoming days, are going to be massacred at the hands of the press, which is always pro-Democrat (with the exception of the Wall Street Journal and the Washington Post in their better days). They are going to be accused of wanting to murder artistic creation in proposing to cut cultural subsidies. They are also going to be accused of preventing the poor from going to school by cutting the budgets of university scholarships. The entire American union machine is going to mobilize itself to denounce the Republican projects to reduce salaries and pensions of civil servants. The Republican attacks on health reform are going to be presented as cruel maneuvers that will cause thousands of people with cancer to die early. I am not exaggerating.

Obama will stay above the melee and seem like the wise centrist who is trying to block the path of the anti-government hysterics. The Republicans are tactless enough to fall for this trap. While this strategy can help him politically, it isn’t going to help resolve the American over-indebtedness crisis and it isn’t going to help the dollar.

The chances of success for Barack Obama are stronger than they are for the American economy to go well. An acceleration of hiring in the private sector is likely in the upcoming months. Growth seems much more solid and sustainable now than it did a year ago.

Another trump for the president: his opening a vast fiscal reform project. The marginal tax rates for corporations, even for small businesses, could be lowered on the condition that he will agree with the Republicans in eliminating many of the tax cuts that benefit only certain taxpayers. The approach appears to be winning over the Republicans. It all depends on the impact of his potential reforms on the fiscal and tax system.