Bush is Leaving Debt of 70% of GDP. How Much Wiggle Room Will That Leave Obama?

At the end of George W. Bush’s presidency, the nation’s debt is estimated to be seventy percent of GDP. How much leeway will that leave Barack Obama to propose new programs, such as national health care? If the debt rises to 110 percent of GDP in his first term — 110 percent of GDP is the largest the debt has ever been (after World War II), I suspect he’ll be politically vulnerable to a challenge in 2012 from fiscal conservatives. Steve Coll in The New Yorker:

“The Obama Administration is proceeding initially, it seems, from a sound and firm belief that it cannot afford to be imprisoned by the debts it has inherited, or to allow fiscal constraints alone to prevent transformational projects in health care and energy. Ted Kennedyweighed in on Sunday to argue that health care, in particular, can’t wait. He’s right, of course, but his work will be harder than it should be.”

Meanwhile, Robert Kuttner, editor of The American Prospect and author of a short book titled “Obama’s Challenge: America’s Economic Crisis and the Power of a Transformative Presidency,” says Obama, in the words of The New Yorker‘s George Packer,

“must be willing to spend at least six hundred billion dollars—a Keynesian outpouring—on public works, health care, energy independence, unemployment benefits, mortgage refinancing, aid to state and local governments, and other programs. Otherwise, the country will slide into a depression that will rival the one Roosevelt inherited. (When I ran the six-hundred-billion figure by Paul Krugman, he agreed.)”

Obama will be restrained from such massive deficit spending by conservative Blue Dog Democrats, who tend to be deficit hawks. If Obama leads the nation to a huge, unprecedented first-term deficit, it  would give Republicans a focus and a target to challenge him. And yet, Democrats will be disappointed if he’s overly cautious. They believe his landslide victory gives him a mandate to be bold.



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