Paul Krugman speculates as to why Obama is talking like a stupid Republican. Obama:
Government has to start living within its means, just like families do. We have to cut the spending we can’t afford so we can put the economy on sounder footing, and give our businesses the confidence they need to grow and create jobs.
That’s a wow statement. It’s profoundly uneconomic. Government doesn’t face the same borrowing constraints as a household. It seems clear that the government can afford current levels of spending. It wasn’t that long ago that government revenues were far higher than they currently are. Neither the invisible bond vigilantes nor the confidence fairy have made an appearance. It seems quite clear that cutting government will be a net negative for the current economy.