Obama Needs Navy SEALs to Target Budget Next

May 10 (Bloomberg) -- Obama pulls another Osama. He signs the orders. The operation succeeds. This time the target is another great enemy: the federal debt.

Or so, at least, runs the national daydream.

That Americans indulge themselves in such quirky fantasies reflects a desperation about reality. The reality is that in domestic affairs, President Barack Obama moves not like a leader who nailed Osama bin Laden, but like a passive-aggressive drill sergeant. He is tactical rather than strategic, partisan rather than statesmanlike. He exploits outreach efforts by Republicans to attack their vulnerabilities.

When he announced his new budget plan in April the president wasted time attacking Republicans for helping "billionaires and millionaires." The Obama plan promised to address the ratio of the national debt to the economy. But it cynically postponed the start of that project to an election year, 2014. Such details lent credence to House Speaker John Boehner's allegation that the plan amounts to "a political broadside from our commander-in-chief."

The problem, however, is greater than a specific executive. George W. Bush too worked tactically, sacrificing a long-term national commitment to reducing entitlements to a short-term plan for election victory that included expanding Medicare to cover prescription drugs.

The fault in the system is structural and dates back to 1974. Before then, a president really could play the hero. He could veto bills and also impound money already budgeted so that it wasn't spent. President Lyndon Johnson vetoed or impounded billions, including planned spending by fellow Democrats on housing, agriculture and highways.

Nixon's Vetoes

Richard Nixon vetoed, too, even plans that sounded compelling, like one to help underfunded emergency rooms stay open. Nixon also impounded money, taking glee in withholding funds for laws Congress passed by overriding his veto, such as the Federal Water Pollution Control Act.

Congress so resented Nixon's aggressive budgeting that they welcomed the opportunity to undermine him, and found a good one in the Watergate scandal.

Exploiting Watergate-related hostility for the chief executive, Congress in 1974 passed legislation that had little to do with campaign finance, break-ins or Nixon's character: the Congressional Budget and Impoundment Control Act.

The bill confined presidential budget authority to a "yes" or a veto of a budget. It severely curtailed impoundment by the executive, gave more power to Congress, established new committees, moved the fiscal calendar to October from July, and created for legislators their own budget war department, the Congressional Budget Office.

'Nixon Was Right'

The legislation reached the Oval Office the summer when Nixon was already on his way out. He signed the bill less than a month before his resignation. Through staff, Nixon made his skepticism clear. One official told the press that the law would generate "congressional government -- and chaos."

As historian John Steele Gordon has written, the outcome suggests that gloomy aide had a point. Budgeting proved so difficult in the 1980s that lawmakers began creating complex automatic devices like the Gramm-Rudman-Hollings law of which Obama's "debt failsafe" mechanism is a descendant.

"Nixon was right," a Wall Street Journal editorial said. The very reliance upon such gizmos is a cop out; it's like ordering a drone to take out bin Laden and pretending a Navy SEAL team isn't needed.

Line-Item Veto

Lawmakers and the White House did manage to balance the budget in the 1990s. But both branches understood that more was necessary, which is why President Bill Clinton signed legislation that gave the executive new impounding authority, the line-item veto. Unfortunately, the Supreme Court struck down that law in 1998.

President George W. Bush offered up another version of the measure in 2006, but it didn't make it through the Senate. Meanwhile, the debt and the deficit mounted. In Congress's view, recessions nowadays may be addressed by only one of two policies: spending or more spending.

In short, the chaos that the Nixon aide prophesied is here, and postpones reform. Each day of postponement in turn makes reform more expensive. Voters become more disillusioned, and find themselves falling into those daydreams about SEALs who slash budgets with their knives. Democrats fear trimming entitlements. Republicans fear higher taxes. What both parties overlook is that the disillusionment itself represents a bigger threat than either entitlement cuts or tax increases.

Restoring Balance

Now is the time for legislation that can both restore the executive's budget power and withstand Supreme Court scrutiny. Such a law needn't make the president into a dictator. It need merely restore the balance that existed before 1974.

There is a precedent for such a rebalancing: the 1921 Budget and Accounting Act passed after the spending excess of World War I. Its impounding authority gave Presidents Warren Harding and Calvin Coolidge a tool to keep the budget in surplus.

As for Obama and Republican fears, those fears may be overrated. It's possible that more authority will make any president, right or left, less political, less nasty, more thoughtful, and more forceful. That can also hold for Obama. Give him the power to manage this crisis, and his response may surprise us. It did in Abbottabad.

(Amity Shlaes, a senior fellow in economic history at the Council on Foreign Relations and author of "The Forgotten Man: A New History of the Great Depression," is a Bloomberg News columnist. The opinions expressed are her own.)

© Copyright 2011 Bloomberg

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