Pre-delivery release of President Obama’s State of the Union address tomorrow night have suggested he will try and adopt a new “Populist” approach after the stinging defeat in Massachusetts.  Central to this effort is a proposal to freeze some areas of discretionary spending for three years, demonstrating that he understands the public outcry over ballooning deficits.  A good start?  Well maybe, or maybe just lipstick on a pig.

The idea of a spending freeze makes great sense for a nation drowning in red ink.  However, this proposal addresses only certain areas and most importantly caps spending at current levels, only AFTER accepting as a new baseline the 26% increase in these budgets that took place in 2009. To put a dollar figure on this, an $11 Billion cut while nice, is a token after approving the $140 billion dollar increase in 2009.  Beyond that, his proposal protects entirely many areas of discretionary spending; those related to the military, veterans affairs, homeland security and international affairs.  Further all non-discretionary spending (entitlements- Medicare, Medicaid, Social Security) will continue to grow unabated.  The remaining ~$500 Billion of our $787 Billion stimulus is still unspent, and uncounted, as is the anticipated $100 stimulus II, the repaid TARP money, it’s all off book.  In a $2.6 Trillion budget, $11 Billion in cuts is hardly a “stop the presses” moment.

This proposal would apply to only $447 Billion in spending, or 17% of the Federal Budget, and lead to forecasted savings of $11 Billion for fiscal 2010, up to $240 Billion over the decade.  That is of course if the promises are kept once we see economic recovery and a shift in national attention.  In a Federal Budget of  $2.6Trillion, and one that is anticipated to run a $1.35 Trillion deficit for 2010, these proposals are modest in the extreme.  In fact it’s really amateurish; does he think people won’t figure this out?

What this initiative attempts to provide, or at least David Plouffe hopes it will provide, is the veneer of fiscal responsibility entering the 2010 election season.  Attempting to re-create the “triangulation” of Clinton’s first term, the President hopes that such a freeze, even if narrowly conceived, will capture the moderate Democrat and Independent voters who abandoned the party in Massachusetts.  But he has a problem; President Clinton had a Republican Congress and Liberal Democratic wing to play off one another.  President Obama: his party controls the Government.  And unlike Clinton, whose ideologic roots were  those of the Democratic Leadership Counsel, President Obama IS a Progressive.  His support comes from the folks at the Daily KOZ.  Without their backing he’s toast.

So expect these initiatives to be modest and limited.  There will be an aura of Populism, but the effect will be inconsequential to the overall fiscal picture.  The TARP funds will be repaid and “recycled”, $500 Billion more in “stimulus” will walk out the door and $100 Billion more may be approved.  And the voters will figure it all out.  It’s going to be a rough 2010 for these folks.