The Corner

The Downgrade: A Rebuke Obama Richly Deserved

Let’s start by partially agreeing with Paul Krugman’s weekend column in the New York Times, in which he correctly calls out Standard and Poor’s for displaying an unusual degree of chutzpah in downgrading the creditworthiness of the United States government. After all, this is the same firm that was — at best — asleep at its lookout post during the worst wealth-destroying financial calamity in 75 years. Now, just days after Congress and the president agreed on a ten-year $2.1-trillion spending-reduction plan, we are supposed to listen to S&P’s political prognostications . . . because why?

Still, it’s hard to escape the conclusion that there is an element of justice in what has transpired, because the S&P downgrade is such a clear and richly deserved public rebuke to President Obama. He and his allies have filled the airwaves since last Friday’s decision with their blame-game spin, trying to pin the downgrade on anybody but themselves. It won’t work. This happened on the president’s watch and was entirely preventable. It happened because, at every crucial juncture over the past two and a half years, the president has cynically put his own political fortunes above what would be best for the country.

Recall that in February 2009, the White House convened a “Fiscal Responsibility Summit” at which the president pledged a new era of discipline and promised to tackle the problem of rising entitlement costs. He could have done so in 2009 or 2010 without the need for any Republican cooperation, given the huge Democratic majorities in both the House and the Senate. But, instead of making fiscal consolidation a priority, the president chose instead to use his once-in-a-generation Democratic majorities to secure an activist agenda that liberals had been dreaming of for years. First, there was an $800 billion “stimulus” bill that was loaded with inefficient public spending projects. Then came the $1 trillion health-care plan that included the largest expansion in entitlement spending since the 1960s. These efforts, both highly controversial, exhausted all of the energy in the Congress. Deficit reduction never happened, and never really came up.

Meanwhile, to fend off questions about how exactly he planned to head off the fiscal crisis that most experts could see was rapidly approaching, the president appointed a debt commission, led by Erskine Bowles and former senator Alan Simpson. Conveniently, the commission was given a reporting deadline after the November 2010 election, allowing the president and Democratic candidates to deflect questions about the deteriorating budget outlook during the election season until after the commission issued its report. In the end, this ploy did them no good, as Democrats were routed in an election dominated by mounting fiscal concerns around the country. The landslide put Republicans back in control of the House of Representatives.

In response to the election, the White House had a rare opportunity to create a political environment conducive to bipartisan compromise, especially on entitlements. But again the president chose otherwise. He completely ignored the Bowles-Simpson recommendations in his 2012 budget submission to Congress, and indeed avoided proposing anything controversial at all in what he submitted. The result was a budget request that called for an astonishing $11 trillion in deficit spending over the period 2011 to 2021, with federal debt rising to nearly 90 percent of GDP — well past the danger zone.

At the time, some speculated that the president submitted such an irresponsible plan because he wanted to preserve his ability to attack the inevitable Republican counter and thus boost his reelection prospects. Others said, No, that couldn’t possibly be. Obama isn’t that cynical. Oh, yes he is!

Led by Budget Committee chairman Paul Ryan, the House passed a budget plan that cut spending by $6 trillion over a decade, stabilized federal deficits and debt on a permanent basis, and kept federal taxation at its historic average. If this plan had been adopted, there would have been no downgrade by S&P or anyone else. It was a serious plan, with fundamental and structural changes in the health entitlement programs — Medicare and Medicaid — to move away from the failed command-and-control model toward one in which the programs’ participants would call the shots.

Once again, the president could have used passage of the Republican budget in the House to move toward bipartisan compromise. But again he chose otherwise. In a stunningly partisan speech, the president launched a barrage of demagogic attacks on the Ryan budget. He essentially called it un-American and unworthy of any consideration whatsoever. And he pledged to fight to maintain the entitlement status quo, no matter the consequences.

It was plain from the president’s words that April day that he had no intention of ever working with Republicans on serious entitlement reform. What he planned to do was to relentlessly attack their plan — the one and only plan on the table that would actually fix the problem and reduce the risks of a debt-induced calamity — in the hope that such attacks would boost his chances of reelection. If his partisan political maneuvering meant that it would be near impossible to work with Republicans on the budget, and thus more likely that he was putting the nation at greater economic risk, so be it.

Democratic political operatives everywhere were ecstatic with the president’s choice. They sensed they were on their way to 2012 success.

But a funny thing happened on the way to a second term. It turns out that the presidency can’t always be just about cynical political games. At some point, the leader of the country must actually lead and solve problems, even if that means cooperating with his political opponents.

Since taking office, President Obama had had multiple opportunities to steer the country away from the fiscal abyss. But at every point, he has had other priorities — passing a massive health-care entitlement, satisfying his liberal base, and most especially protecting his chances for re-election. In normal times, he might have gotten away with such self-centered governance. But these aren’t normal times. In 2012, the president could very well find that what seemed like clever maneuvering on the budget has hurt his reelection effort as much as it has hurt the country.

— James C. Capretta was an associate director at the Office of Management and Budget from 2001 to 2004.

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