Obama says he’ll have to delay some of his spending initiatives in light of the mega-bailout in the works. But not the tax cuts!

He didn’t say what proposals might be delayed first … [but!] he said a bailout would not bar him from pushing for middle-class tax cuts, a central proposal in his campaign.

In a speech Monday, Obama urged Democrats to be as fiscally tough as conservative Republicans and said that the bailout was forcing a new perspective on the federal budget.

Ugh. Maybe this kind of talk is necessary given the circumstances — it’s important in a time of crisis to appear Sober and Serious and Fiscally Responsible, so as to please the Washington Post editorial board. I’m certainly not a good judge of political expediency.

But substantively: ugh.

First of all, why this bizarre tone of mild regret? If I cared about the programs I’d proposed, felt them vital to the country’s welfare and vitality, I’d be pissed that the money was instead bailing out a bunch of irresponsible fat cats. Pissed! Where’s the outrage?

Second, Obama’s proposals, which the AP calls "ambitious and expensive," are largely designed to reverse some crippling trends and forestall some rapidly metastasizing problems. In the case of clean energy, the goal is to detach our national welfare from the vagaries of fossil fuel markets and avoid catastrophic climate change. It is expensive to continue down the road we’re on. There’s not a damn thing wrong with deficit spending if the investments put us on the right path.

James Galbraith says it better than I can:

Today, many Democrats are converts to balanced budgets and pay-as-you-go budget procedures, and many accept that when Democrats return to power, deficits must be cut before anything else is done. But the world has changed, and while this formula appeared to work for Bill Clinton, it probably won’t work for Hillary if she gets that far. Clinton was able to preside over a largely private-sector boom–the information-technology bubble–that can’t be repeated, in a time when we weren’t yet aware of the wolves at our door. But, just as Alexander Hamilton proposed to build America with public works, today we require major public investment for the vast challenges we face. Of these, as Al Gore warns, the largest is to transform our patterns of energy use and defend against climate change.

If we fail here, then in a century or so some of our coastal cities and many others elsewhere will flood–as New Orleans did–suffering irreparable damage. Around the world, food supplies will fail and populations will move–massively, uncontrollably, miserably. If future generations mean anything, the benefits from preventing this are clear. The necessary scale is huge. The work must start soon. It makes sense to borrow to do this job, especially given the prevailing low long-term interest rates. If we insist on paying from current revenue, it won’t happen. And that is what is at stake, just to begin with, in the argument over balancing the budget. There are other important issues, but this one is quite sufficient to make the point.

Thus, even if running budget deficits has important economic costs, we ought to pay them in order to meet our most pressing objectives, on climate change and other priorities. But in fact running moderate fiscal deficits has no discernible costs. In particular, the claim that current deficits are raising interest rates can’t be backed up even by the best efforts of those who believe it. In a paper last year, I examined the detailed work on this topic of two leading Hamiltonian economists, Bill Gale and Peter Orszag, and showed that their own econometrics found no such effect. When I pointed this out, Gale and Orszag reacted with silence. [my emphasis]

I guess Obama can’t say it publicly, but our current economic circumstances make it more urgent to make long-term investments in energy, infrastructure, healthcare, and education — not less.