Obama: Like Clinton '92 or Clinton '93?

When Bill Clinton became president in 1993, he famously dumped his "Putting People First" investment agenda in favor of deficit reduction in hopes of lowering interest rates. Might a President Barack Obama do the same? (This is the secret fear of many left-of-center folks on my speed dial.)

Although Obama has ambitious—and pricey—clean energy and infrastructure spending plans, he will also probably be facing a $500 billion-plus budget deficit, more than double what government economists were predicting when Obama announced his candidacy in early 2007. I asked my pal Jared Bernstein—a Friend of the Blog, informal Obama economic adviser, and author of the must-read Crunch: Why Do I Feel So Squeezed?—what he thought Obama would do. Bernstein made a few points to me, speaking purely for himself:

1) Obama will most likely be facing an economy that's far weaker than the one Clinton faced. So pro-growth government investment will be an important policy.

2) Even though infrastructure spending gets criticized for being too slow to help the economy in the short term, Bernstein believes there are plenty of underfunded, ongoing state projects in play so that dollars from Uncle Sam would get spent quickly.

3) The Clinton economic boom may have started even earlier had he focused more on his campaign agenda and less on deficit cutting. Bernstein notes that while Clinton inherited a growing economy, unemployment stayed relatively higher until early 1994.

Me: I don't completely agree with Bernstein's economic analysis, but I think his political analysis is dead on. Obama is going to pursue the PPF agenda that Candidate Clinton advocated but that President Clinton pushed aside. (Sorry, deficit hawks.)

Now let me add that there are some smart folks I talk with regularly who think that with a half-trillion-dollar budget deficit looking him in the face, plus maybe another half a trillion in borrowings to finance a massive banking bailout, nervous bond investors will force Obama to employ his own version of Clinton's bond market strategy. But note that one guy pushing Obama to jack up government spending to boost the economy is superstar bond manager Bill Gross.