Obama’s tried. He’s negotiated with the opposition, attempted to assess all the factors and bring in the stakeholders. But if he agrees to the budget cuts that the Republicans are proposing, he will lose the 2012 election.
Obama should recognize that the fantasy of “cut and grow” simply doesn’t hold. Even capitalists don’t believe it. In fact, in the Goldman study cited, the budget cuts would further contract the economy. What Republicans are betting on is a win-win strategy for them: keep talking about deficits; if Obama blinks, he strangles the economy. Then the Republicans and blame him for his economic mismanagement. They know that balancing the budget and stimulating the economy can’t be done together. Guess which policy actually wins elections.
Obama should refuse to play the deficit cutting game. What is on the horizon, alas, is steep price increases. Republicans will argue that this has to do with the deficit, when it has everything to do with supply and demand. Yet, if he doesn’t create jobs, there will be rising food and oil prices, and a more dissatisfied populace, who will be more likely to give bad economic policies a try in a different president (although, personally, I think Huckabee is more likely to have the populist capital to actually raise taxes).
So by 2012 Obama may do what the Republicans want him to do: cut the budget, thereby diminishing the economy – ensuring he becomes a one term president. He has an alternative: focus on jobs; and do what Harold Washington did when the aldermen talked smack about his leadership. Visit them in their home state and tell the people directly what he can do for them. In this way he challenges Republicans on their home turf; instructs the population how supply and demand really work; and begins his campaign for reelection.