On the one hand, as 2010 begins the moon, stars, and planets are perfectly aligned for a major deficit reduction effort.
For example…Not only does the economy appear to be recovering and concern is starting to shift from the need for more stimulus to the need to think about future inflation, but (appropriately or not) last year created some pent-up political demand for deficit reduction. Blue Dog Democrats think a deficit reduction effort is owed to them for all they supported in 2009. The White House has been saying for months that reducing the deficit will be its budget mantra in 2010. Republicans have been insisting that deficit reduction is what’s needed. Some major overseas buyers of Treasuries have been saying they need to see some progress on the deficit this year. And the U.S. bond market seems to expect deficit reduction and, if it doesn’t happen, it may express its disappointment with higher interest rates at the precise time they could damage the recovery.
But it’s not at all clear that having the budget moon, stars, and planets in alignment means the same thing it has before.
For example…It’s increasingly evident that not all the talk about reducing the deficit that has occurred in Washington has actually been about the deficit. To the contrary, the federal budget has become more of the public reason for representatives and senators to oppose something they actually oppose for other reasons. In addition, over the past year congressional Republicans have demonstrated an extraordinary ability to demand deficit reductions while refusing to support the things — like the Medicare spending reductions used to offset the cost of health care reform — that would actually keep the deficit lower than it would otherwise be. And it’s anything but obvious that a revenue increase will be acceptable this year even if it would reduce the deficit significantly. Indeed, it some ways it seems more likely that a tax cut that increases the deficit will be preferred.
Most important, however, is that 2010 is not just an election year when cutting spending and increasing revenues would be unpopular no matter how big an issue the deficit might be. It’s also an election year when gaining a political advantage by preventing the other side from claiming any type of legislative achievement on the budget, including one labeled bipartisan, will be considered by many to be preferable to governing. That makes a successful deficit reduction effort far less likely.
In other words, as far as the deficit is concerned, in spite of the moon being in the seventh house and Jupiter being in perfect harmony with Mars, the only thing that may happen this year is that we’ll actually know when it’s over whose federal budget street cred is real.