To get a sense for how backwards the economic conversation in Washington is at the moment, one only needs to look at Friday's headlines. Right beside stories about the Obama administration's fiscal 2014 budget – which will reportedly include cuts to Social Security and Medicare, as well as overall spending cuts that go deeper than the so-called "sequester" – is the sobering news that the U.S. economy created only 88,000 jobs in March.
88,000 jobs is a pathetic total for this point in the recovery. It's nowhere close to enough job creation to keep up with population growth, never mind to gain back the millions of jobs necessary to bring down America's still unacceptably high unemployment rate, which currently stands at 7.6 percent. (The jobs number could always be revised upwards later, but 88,000 is a very low initial estimate.)
An unemployment rate that high – and such sluggish job creation so long after the Great Recession officially ended – should be considered a national emergency. Instead, lawmakers are set to debate what they can do to make the economy even worse by obsessing over a deficit that is not too large given the current economic situation, but too small.
The Obama administration will be officially releasing its budget next week, and according to early reports, it will be an attempt to put into writing the "compromise" that Obama thinks the GOP should be willing to accept. In addition to endorsing a change to the way in which increases in Social Security benefits are calculated, the budget will call for another $400 billion in Medicare savings, along with a plan to replace the sequester's $1.2 trillion in cuts with a basket of deficit reduction worth $1.8 trillion.
There are certainly some good aspects to the budget. It will reportedly call for increasing tobacco taxes in order to finance Obama's plan for universal preschool, as well as capping tax deductions for the rich and eliminating subsidies for the oil and gas industries.
But it embraces a message of austerity when the clear takeaway from the latest economic data is that the government needs to be doing all it can to put people back to work. Changes to Social Security won't create jobs; in fact, it's really unclear what such a change would accomplish, short of giving the administration the veneer of being reasonable and centrist (by cutting benefits for seniors).
As the Washington Post's Greg Sargent reported, the White House's thinking is that the budget "will drive home that Obama is the one who occupies the compromise middle ground, and if Republicans refuse to deal, it will be crystal clear in the public mind who is to blame for continued austerity." But there is a danger that, by preemptively negotiating, the administration opens the door for Republicans to say "yes" to the parts of the budget with which it agrees, while slamming the door on the rest. Speaker of the House John Boehner has already started down that road, saying, "if the president believes these modest entitlement savings are needed to help shore up these programs, there's no reason they should be held hostage for more tax hikes."
The heart of the problem is that Obama is still playing on the Republicans' home turf, discussing how much to cut rather than how best to pull the country out of the economic doldrums. Talking deficit reduction may be good politics at the moment, but it's terrible economics.
And there's a chance that things get worse in the following months, as the sequester really begins to bite. Over the last three years, the public sector has shed 648,000 jobs, for no real reason, and it's hard to tell how much worse that number will get under the sequester's indiscriminate slicing.
And doesn't have to be this way. The Progressive Caucus's budget, which is all but universally ignored every year, included up-front stimulus spending paired with deficit reduction later, recognizing that without robust job creation, deficit reduction is just a pipe dream. Federal Reserve Chairman Ben Bernanke has been beating the drum for Congress to eschew short-term cuts. Even the Senate Democrats included a (far too small) job creation effort in their latest budget.
But so long as the administration is talking about entitlement cuts and how to pare back domestic spending, the actual policies necessary to turn the economy around will remain relegated to the political wilderness.