We survived the TARP debate. Then the stimulus fight. Bring on the budget!
The political wrangling over the president's $3.6 trillion budget is set to explode this week on the Hill. The president is pitching the budget as an investment initiative, not a bunch of typical big government spending. He says investments in energy, healthcare, and education will seed a recovery and grow a more efficient economy. All the while, he promises, with an eye firmly on fiscal responsibility. He pledges to cut the budget deficit in half by 2013.
It'll be tough. His growth assumptions are slightly more optimistic than some economists. I asked noted economist (and AM regular) Jeff Sachs this morning about the president's statement in his press conference, that his budget's assumptions are "consistent with what blue-chip forecasters are saying."
"That's just wrong," Sachs said. Sachs and many others worry that a recovery when it comes will be weak. A UCLA Anderson School of Management survey released this morning is more pessimistic than the White House assumptions on unemployment (UCLA forecasts unemployment will hit 10.5% in the middle of 2010 and will still be above 9% in 2011, even as a recovery takes hold.)
The president's team says others are not counting the full effects of the boom from the stimulus and other efforts under way.
Bottom line - get ready for another big spending fight. This time, against the backdrop of all that has already been done to shore up the economy, and in an environment where the public is furious at many of the measures that the Washington policymakers have said are critical to restoring the economy to health.
Of course, the stimulus, the budget, the "Road to Rescue" as we call it at CNN, do little unless the banking sector is healed. It's a message the administration has struggled to communicate through the noise of the AIG bonus debacle. Let me be clear, healing the banks whether we like it or not, is the first step for healing the rest of the economy.
Which brings me to something Treasury Secretary Timothy Geithner said before the Council of Foreign Relations this morning. He was asked by CFR's Roger Altman, how difficult will it be to get more support from Congress for additional funding for the bank bailout, if needed.
"It's going to be extraordinarily difficult," Geithner said. "Politics of this here, everywhere are very, very hard. That's why crises are so hard to manage in some sense because it is so hard to make people understand that recovery requires a financial system that is working and that will require government taking risks, providing the support in some sense. But we're just going to have to work on it to make that case."