The Deficit Primary

April 13th, 2011

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This piece was originally published in Politico.

With today’s address on deficit reduction, President Barack Obama is making a shrewd opening move for his 2012 campaign — laying claim to the political center, challenging Beltway orthodoxies and setting the stage for a possible historic agreement on the budget.

Obama reportedly is set to propose serious entitlement reforms — only three months after 200 progressive groups lobbied the White House to keep Social Security, Medicare and Medicaid off the agenda. Instead, he’s expected to reach out tonight with both hands and grab onto the “third rail” of American politics.

But rather than getting burned, Obama may emerge well positioned for his reelection.

For months, Obama has been criticized for not taking the lead on the deficit. After appointing the fiscal commission that many Republicans had voted against creating, however, he needed to wait to see what Republicans put on the table, get the 2011 budget behind him and monitor the progress of the Gang of Six — the bipartisan group of senators whose work is likely to determine whether deficit reduction is just talked about or acted on.

In his speech, the president aims to shift the debate from “who wants to solve the problem?” to “how do we solve the problem?” And looking ahead to 2012, that shift is likely to benefit him enormously.

If there is a major, bipartisan budget agreement, Republicans cannot run on fiscal responsibility. If there is not, they get the blame. He wins either way.

Why do we predict that this can be a winner for Obama, despite the conventional wisdom to leave entitlements alone and preserve what the left views as a potent political weapon against Republicans? There are three reasons why the traditional advice is misguided.

First, in 2012, moderate voters are likely to reward the party with the best plan to tackle the debt. The 2012 economy is expected to be better than today, and the unemployment rate could be significantly lower. But the economy may still be in a gray zone — improved but not so good as to guarantee a slam-dunk “stay the course” election.

That leaves the deficit as the top economic concern for moderate voters, who show historically high levels of deficit sensitivity.

In our post-election poll of “switchers” — Obama voters from 2008 who voted Republican in 2010 — 66 percent cited “too much government spending” as a major factor in their defection. In a separate poll, voters preferred by 10 points a Senate candidate who went “too far [on deficit reduction] by cutting Social Security and Medicare” over a candidate who did not go far enough.

The vast middle of the electorate — who will be the kingmakers or the heartbreakers for Obama in 2012 — see deficit reduction as a mandatory part of a long-term strategy for economic growth and continued U.S. world leadership. The party that is viewed as having the best plan to deal with the debt will have a strong advantage with this key voting bloc.

Second, entitlement cuts are unlikely to become the Republicans’ Waterloo with seniors. Some Democrats have visions of doing nothing on entitlements and simply pummeling GOP candidates with the particulars of Chairman Paul Ryan’s budget plan, driving a wedge between senior citizens and Republicans.

But consider: In 2005, President George W. Bush sought to privatize Social Security in what many considered to be the worst domestic political idea of the decade. Yet in 2006, 2008 and 2010, Republicans fared better among seniors than any other age demographic.

It’s because voters hold nuanced views on entitlements. True, three-quarters of voters believe the budget can be balanced without touching Social Security and Medicare. Yet 80 percent say Social Security is in crisis, and two-thirds believe the program needs major changes to survive. Doing nothing could be as dangerous to entitlements as doing something.

Third, if done correctly, Obama can unite the liberal base and ideological moderates behind his proposals. The arguments to both groups are roughly the same: We need to make modest adjustments today to make sure that Social Security, Medicare and Medicaid are there for today’s grandparents and their grandkids.

To progressives, the president can say that over the past 85 years, the left championed a safety net that protected the poor, the aged and the ill. Now we must ensure that it is around for the next 85 years — in a way that is affordable. That could also resonate strongly with a core Obama 2008 constituency: younger voters.

To moderates, he must talk about making room in the budget to allow the U.S. to make the essential growth investments we need in education, infrastructure and innovation and restoring global markets’ confidence in our fiscal situation.

By rejecting conventional Democratic wisdom and embracing entitlement reform as part of a bipartisan deficit reduction plan, Obama gets a double play — strengthening our economy and boosting his reelection prospects.

The best policies for America in 2011 may just be the smartest politics for Obama and Democrats in 2012.

Jon Cowan, president of Third Way, served as chief of staff of the Department of Housing and Urban Development under Secretary Andrew Cuomo. Jim Kessler, vice president of policy at Third Way, served as policy director for Sen. Chuck Schumer (D-N.Y.).