On The Marc: Obama's Economic Argument

This analysis was written by CBS News' Chief Political Consultant Marc Ambinder. This is the first installment of a new column called "On The Marc."

4707724 With a trillion dollar deficit looming in front of him and signs that the economy is in the benthic realm and in need of more oxygen than the government can provide, Barack Obama played the reluctant salesman today.

He made "the case for urgent action," an advisory says, on an "American Recovery and Reinvestment Plan" that will create millions of jobs. The values encoded in the plan, according to Obama's team, are "responsibility, accountability and transparency."

So far, Obama and Congressional Democrats have agreed to significant new spending on roads, bridges, infrastructure repair and mass transit. How quickly those jobs will be created is unclear. Second, Obama wants to funnel money to states and local governments to cushion the blow of cyclical budget squeezes - California is in hoc to the score of $46 billion. (Republicans are balking; they feel that states will waste the money on pet projects.)

Thirdly, Obama announced a passel of tax cuts this week, all aimed at the people least likely to save and most likely to spend money. They'd cost about $300 million over two years. Obama and Democrats want to refund part of the payroll tax for middle class Americans, propose to allow businesses to deduct from this year's tax bill losses incurred over the past five years, and will spend up to $7 billion to persuade states to alter their unemployment insurance rules to allow people to keep their health care and benefits longer. A provision to provide a tax credit to employers who create or keep jobs is apparently going to be very expensive.

At the end of the day, Obama's name will be associated with an epically large stimulus package that may, in the end, do be too little, too late. Late last year, Obama hoped that the Democratic House and Senate would come to quick agreement on spending, and, by January 20, a bill would be on his desk. But aides say that the scale of the work exceeded their original expectations.

It's just not that easy to figure out how to stimulate an economy in this condition. In a normal recession, small tax cuts might boost savings, which, if the economy were growing, would be fine. But Obama needs Americans to spend, spend, spend, and not to save. And Americans, worried about mortgages, debts and the falling stock market, are keeping their cash in their mattresses. When people save a tax cut, aggregate demand is unaffected. But people, in this deep, deep recession, are demand-starved; they need money to pay for basics like their mortgage payments. The thinking, then, is that no one will save the money.

Deficits matter, indirectly. Economists of all stripes on the need for hundreds of billions of dollars worth of spending. But most want the spending to come - and go - quickly. In this environment, the fear of prolonged deficits could drive interest rates even higher. Obama's presidential run was predicated on his bringing a new spirit of cooperation to government, and to that end, he has been deferential to Republicans and to conservative "blue dog" Democrats.

Famously skeptical of government spending, these Democrats will support new spending only if they're coupled with equivalent offsets, or if Congress reinstitutes rules requiring that future spending be accompanied by future budget cuts. Obama is being smart here: he's rolling a lot of his campaign spending proposals into the stimulus package, where these so-called "PayGo" probably rules won't be debated.

Never wasting a good crisis, as Obama's chief of staff Rahm Emanuel says, includes a big downpayment on all the expensive things Obama was going to do anyway. Obama's team has no problem with statutory PayGo rules; they'll be included in the first budget he presents to Congress.

Blue Dog Democrats are happy with the attention they're getting from Obama's aides, and they were heartened when Obama promised that the stimulus package would not include earmarks, although his definition of earmarks left some waffle room. They're mostly resigned to the fait accompli of new spending. An aide to a top Southern blue dogger told me that a lot of Democrats want Obama to explicitly detail the mechanism he'll use to deal with long-term funding shortfalls for Social Security, Medicare and Medicaid - The deficit exceeds $1 trillion. Those ticking-time bombs will cost the government $56 trillion.