President Barack Obama will deliver his first State of the Union address tonight. Obama will propose a three-year freeze on “non-security” discretionary spending to rein in the federal deficit.
Never mind that candidate Obama said “the problem with a spending freeze is you’re using a hatchet where you need a scalpel.”
Bottom line: Obama was against a spending freeze before he was for it.
A proposed spending freeze leaves former Labor Secretary Robert Reich cold:
During a recent economic recovery workshop Ryan Sweet, a senior economist with Moody’s Economy.com made a similar warning about the risk of cutting back on government spending:
The bigger news is Obama is planning a three-year budget freeze on a big chunk of discretionary spending. Wall Street is delighted. But it means Main Street is in worse trouble than ever.
A pending freeze will make it even harder to get jobs back because government is the last spender around. Consumers have pulled back, investors won't do much until they know consumers are out there, and exports are miniscule.
His three-year freeze on a large portion of discretionary spending will make it impossible for him to do much of anything for the middle class that’s important. Chalk up another win for Wall Street, another loss for Main.
A self-sustaining expansion will only happen if stimulus spending is not withdrawn too quickly.