A Gentle “Sparefroh”*

Doing exactly nothing can sometimes be the smartest strategy, as President Obama just demonstrated.

It’s conventional wisdom that politicians have to always be doing something: reforming, rehabilitating, reducing, reinvesting. Those who keep an eye on politics can’t stand inaction. But sometimes, inaction is the smartest strategy, as President Obama just demonstrated.

Obama laid out his new budget on Monday. In it, he leaves most of the big chunks (pensions and healthcare) untouched. The Pentagon has to economize a bit while some social programs will be axed completely. In the face of a new 2012 deficit in excess of a trillion dollars, that can’t be considered a tough austerity package. But Obama’s reticence makes sense.

It makes sense, first of all, because there’s no reason for panic. While the new deficit is astronomically high, there’s no sense of crisis as there is in Europe. America pays very low interest on its loans, something U.S. economist Paul Krugman doesn’t see changing in the near future, and choking off the fragile recovery would be highly dangerous. Besides, the chance of raising taxes since the Republicans captured the House of Representatives is virtually nil.

The real American debt crisis threatens not on the national level, but in the individual states and municipalities that are prohibited from running deficits.

*Translator’s Note: “Sparefroh” is a cartoon figure mascot adopted by Austrian banks in the 1960s that preached thrift and taught children the wisdom of saving their money.