Election 2010: a fight over jobs and recovery vs. deficit and debt

What's a member of Congress seeking reelection to do? Above all, Americans want more jobs, but lawmakers' usual fixes – more government spending or tax cuts – are causing many voters deep distress over supersized federal deficits and ballooning public debt.

No previous Congress has faced this political riptide to the same extent. Trillion-dollar annual deficits are unprecedented in American politics, and, even in a tough economy, deficits now matter.

"Suddenly, worries about the deficit are overtaking the economy to the extent that it's a choice between putting people back to work or cutting the deficit. You cannot do both," says Stan Collender, a congressional budget analyst and partner with Qorvis Communications.

The deficit concern is such that it is changing the game for some incumbents in Congress. It no longer suffices to "bring home the bacon" to the district: In fact, a record of spending may hurt a lawmaker.

Of the six incumbents to lose their primaries so far in the 2010 cycle, four – Sen. Robert Bennett (R) of Utah, Sen. Arlen Specter (D) of Pennsylvania, Rep. Alan Mollohan (D) of West Virginia, and Rep. Carolyn Cheeks Kilpatrick (D) of Michigan – had seats on powerful appropriations committees and were big players in targeting "earmarks" to their constituents.

"These losses put lie to the common Washington notion that earmarks equal votes, because if anyone should be electorally bulletproof under that formula it would be appropriators," says Steve Ellis of Taxpayers for Common Sense, which tracks congressional earmarks.

The parties stake out their turf

Both parties expect their midterm election gains to hang on the credibility of their plans to create and sustain jobs. But, increasingly, they also perceive a need for a credible plan to rein in deficits.

For Democrats, that has meant committing to a pro-jobs, stimulus agenda, even while backing pay-as-you-go rules that require offsets for new spending. House Democrats owe their majority to fiscal conservatives elected from former Republican districts. As the election approaches, these conservative Democrats are balking at proposals that are not fully paid for.

For Republicans, it means extending the Bush tax cuts of 2001 and 2003, set to expire Dec. 31, and reducing the size of government in the overall economy. (Democrats are proposing extending the Bush tax cuts for all but families earning more than $250,000 a year.)

"We're going to have a raging debate in September over whether it's right to raise taxes in a recession," said Senate Republican leader Mitch McConnell at a Monitor-sponsored breakfast for reporters on Aug. 5. Republicans argue that extensions of the tax cuts need not be offset because they don't represent new policy.

But in a rare show of comity, Democrats and Republicans agreed to punt key fiscal decisions to the president's bipartisan deficit commission, slated to report after the midterm elections, on Dec. 1. The commission is tasked with proposing ways to deal with unsustainable growth in spending and entitlement programs, as well as tax policy.

"The [creation of the] deficit commission is [Congress] punting, but sometimes you have to punt," says Robert Bixby, executive director of the Concord Coalition. "Clearly, the regular order has not been able to deal with these problems, so we need to have a new process to shake things up."

Government now one-quarter of the economy

In the past 2-1/2 years, government spending as a share of the overall economy has gone from 20 percent to 24 percent, and is rising. "The question is, how do we bring the government back down, but how do we do it in a way that doesn't stifle this recovery – to the extent we're having a recovery," said Sen. Judd Gregg of New Hampshire, a member of the deficit commission and top-ranking Republican on the Senate Budget Committee, at an Aug. 3 hearing of that panel. "If we act precipitously to try to control the deficit, do we end up stifling the recovery?"

If the US economy grows at a 4 percent annual rate, $8.5 trillion will be added to the federal deficit from 2010 to 2020, the White House projects. If annual growth in the gross domestic product averages only 3 percent during that time, deficits would be $2 trillion higher, according to the White House Office of Management and Budget. (For comparison, the latest GDP report, for the second quarter of 2010, said the economy was growing at an annual rate of 2.4 percent.) The independent Congressional Budget Office calls the current fiscal course unsustainable. By 2054, the national debt will be 400 percent of GDP, the CBO projects.

"Unless policymakers restrain the growth of spending, increase revenues significantly as a share of GDP, or adopt some combination of those two approaches, growing budget deficits will cause debt to rise to unsupportable levels," concludes the CBO in a July 27 briefing paper.

In the face of such warnings, Democrats have felt compelled to defend their general approach of spending now to support the recovery. They have invoked a paper by economists Alan Blinder of Princeton University and Mark Zandi of Moody's Analytics, a former adviser to GOP presidential candidate John McCain, that asserts that absent vigorous government intervention in the economy, including bailouts and stimulus spending, "GDP in 2010 would be about 11.5 percent lower, payroll employment would be less by some 8.5 million jobs, and the nation would now be experiencing deflation."

Disadvantages for Democrats

But that position could be a tough sell to many voters.

"Concern about the deficit [among the public] is as high as it's been in at least a decade," says Jeff Jones, managing editor of the Gallup Poll. "It's also the lowest rating that President Obama has gotten on any issue to date."

Democrats carry the added weight of being the party in power.

"We're mired in a recession, and the party in power inevitably gets blamed for it," says G. Terry Madonna, director of the Center for Politics and Public Affairs at Franklin & Marshall College in Lancaster, Pa., citing the Reagan, Carter, and Bush midterm elections.

"Democrats would love to do a second stimulus, but they can't do it because the swing, independent, moderate voters wouldn't have it," he adds. "They can't get a number of their own members to vote for any more programs that require debt."