What if they shrank the government and nobody noticed?
That's basically what's happening now that the dreaded "sequester" spending cuts have gone into effect, and nobody outside of Washington seems to care. In fact, the Dow Jones Industrial Average hit a new all-time high four days after the sequester kicked in, as if the private sector is sneering at Washington and the tantrums that typify national politics these days.
That's not what President Barack Obama said would happen. In the weeks leading up to the sequester, he warned that the spending cuts, which will total about $85 billion this year, would snarl airport traffic, harm the national defense and kill hundreds of thousands of jobs. Obama has since eased up on the doomsaying, pointing out that it will take time for all this mayhem to unfold.
But Obama is now in an uncomfortable spot, because he looks as if he was exaggerating the impact of cuts that only amount to about 2.8 percent of the federal budget. Many families and businesses have had to adjust to far more severe cutbacks. So Obama, who has staked his second term on the success of an activist government, now has to keep reminding us when all this pain will materialize.
He's right that the impact of the cuts will build over time. The spending cutbacks are scheduled to happen throughout the year, so it's not surprising that little has happened so far. Once they're in effect for a month or more, it could start to impact corporate profitability, which would deflate the stock market. And key economic indicators like GDP growth and unemployment could come in worse than expected.
But until that happens, Obama needs to validate his prior warnings without sounding like a killjoy who actually wants the economy to tank, just to prove he was right and buttress his case for more government spending. That's not what Americans are really looking for right now. Instead, they want an optimistic, Reaganesque leader who can show the way out of a underperfoming economy without complaining that the government isn't getting its fair share.
Obama, in fact, has been something of a riddle because he was reelected on a center-left platform, even though Americans increasingly distrust the government that he hopes to send to their rescue. Polls continually show that a majority of Americans think the government is too big or is doing too much. In a recent Pew poll, a startling 53 percent of respondents said the government represents a threat to their personal freedom—the highest margin ever.
Obama, nonetheless, has laid out a second term agenda filled with government-backed plans to aid homeowners, jump-start manufacturing, rebuild the nation's infrastructure, continue clean-energy development and boost pay for low-income workers. They're not bad ideas, they just seem out of step with what voters say they want, which is streamlined government and a more professional atmosphere in Washington. Meanwhile, manufacturing, the housing market, the energy sector and other parts of the economy are strong or recovering, with little or none of the federal help Obama keeps pushing for.
Obama may think he can persuade voters he knows best, but so far it isn't working. Polls by Gallup and Reuters show that Obama's approval rating has fallen below 50 percent for the first time this year, with voters unimpressed with his handling of the sequester. Meanwhile, a new ABC/Washington Post poll finds that 61 percent of Americans favor government spending cuts on the scale of those already taking place. So the case for leaving the cuts in place is getting stronger.
Americans, of course, are conflicted about government spending, since they generally oppose lower spending on things like Medicare, Medicaid, the military, and Social Security, which are the real budget-busters. In general, people favor cuts in the abstract but oppose them in programs they find virtuous.
Still, Obama seems to be pandering to Americans' sense of entitlement rather than outlining tough choices that might hurt a little bit now but will improve the nation's finances and the soundness of the economy. Sure, the sequester is a clumsy way to fix Washington's finances. But maybe it's time to stop reminding of us that and accentuate the positive.
Rick Newman's latest book is Rebounders: How Winners Pivot From Setback to Success. Follow him on Twitter: @rickjnewman.