ARI SHAPIRO, host:
This is MORNING EDITION from NPR News. Im Ari Shapiro.
STEVE INSKEEP, host:
And Im Steve Inskeep. Good morning.
President Obama prepares for his State of the Union address this week after receiving a reminder of the limits of his power.
SHAPIRO: The speech comes one week after a special election in Massachusetts where Democrats lost what had been thought of as a safe seat. They also lost an important vote for their side in the Senate.
INSKEEP: Now the president hopes to recover and one major issue hes expected to bring up is the gigantic federal budget deficit. That is a delicate matter, which well report on this morning. Many Americans want federal borrowing to go down, but its hard to do that before the economy fully recovers.
NPRs Scott Horsley reports.
SCOTT HORSLEY: The federal deficit hit a record $1.4 trillion last year, and as the debts keep piling up, voters have been piling on. Never mind that deficits grow automatically during a recession, when tax revenues drop and unemployment payments soar. Democratic pollster Geoff Garin says for many voters the deficit has become a kind of shorthand for what they see is government spending run amok.
Mr. GEOFF GARIN (Democratic Pollster): They see the tote board spinning and wonder where is all the money coming from and particularly worry about whether its going to be coming from them.
HORSLEY: A survey by the anti-deficit Peter G. Peterson Foundation found four out of five voters now believe controlling the deficit and the federal debt should be a high priority for the president and Congress. That popular concern has amplified the warnings regularly sounded by fiscal watchdogs like former Texas Congressman Charles Stenholm.
Mr. CHARLES STENHOLM (Republican Congressman, Texas, Former): As you build your credit card deficit, ultimately you have to pay for it. I like Yogi Berras version of the Herb Stein quote, That which cannot go on forever, usually wont.
HORSLEY: Stenholm co-chairs a budget reform task force that recommended a combination of spending cuts and tax hikes to keep the federal debt from ballooning as a share of the U.S. economy. The task force is careful to say spending cuts or tax hikes should be phased in slowly, after 2011, so as not to make the recession worse. But some liberals worry that even talking about deficit-fighting measures at this point is premature.
Mr. JOSH BIVENS (Economist, Economic Policy Institute): The time to start reining the deficit back in, is when the economy starts to recover and not one moment sooner.
HORSLEY: Josh Bivens is an economist at the labor-backed Economic Policy Institute. He says, in the current environment, fear of big deficits is misplaced. After all, interest rates are low, inflations no threat, and theres little danger that government borrowing will crowd out private investment which is still anemic. If anything, Bivens says, the government should be going deeper into debt in an effort to create more jobs.
Mr. BIVENS: Deficits are not always and everywhere, bad - its a tool. And sometimes the Federal Budget should go into bigger deficit to aid prosperity. Sometimes it should go into smaller deficits or even surpass. Were absolutely at a time, right now, where we need bigger deficits to aid that prosperity.
HORSLEY: Heres the rub. The same polls that find voters concerned about the deficit show they are downright alarmed about unemployment. And tackling either one of those problems is likely to make the other one worse. Spending money on job creation adds to the deficit, while fighting the deficit with spending cuts or higher taxes could choke off the recovery. Its a political minefield for the president. But pollster Garin says there is a path of escape.
Mr. GARIN: The voters accept the premise that you have to deal with the deficit in a way that is consistent with growing the economy.
HORSLEY: That means bigger deficits now, along with a promise of more budget discipline later. Thats the path President Obama is likely to take in his State of the Union address. Heres White House economic adviser Christina Romer in an interview with CNN.
Ms. CHRISTINA ROMER (White House Economic Adviser): To the degree that we, of course, care deeply about the deficit - and you are right, in 2010 that is going to be something very much that the president is focusing on and talking about. It is important to understand were also talking about actions taken right now, targeted actions, to jumpstart job creation, and there is no conflict between those.
HORSLEY: Over the weekend, Mr. Obama endorsed legislation that would set up a bipartisan budget commission to make recommendations on tax hikes and spending cuts later this year. One appeal of this approach is that it offers the promise of deficit reduction, while postponing any hard decisions, until the economy is on more solid ground or, at least, until after the November election.
Scott Horsley, NPR News, Washington.
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