For all the stiffness and the flip-flopping, what has really gotten Mitt Romney into trouble with the Republican primary electorate is when he says something that shades too close to the truth. We saw another example of that yesterday, when Romney committed the sin of explaining that austerity can worsen the economy in a recession.

Negotiators say they have a deal on a $150 billion bill to extend the payroll tax cut, some unemployment insurance benefits and the “doc fix” to the end of the year, a bill that will sacrifice some health care prevention money, several weeks of unemployment eligibility, and at the very end, pension contributions for new federal employees.

In an impressive bit of caving, the House Republican leadership has given up on finding offsets for the payroll tax cut, proposing a bill that would extend the current cut to the end of the year without any funding. However, the other two pieces that were tied to the overall legislation at the end of last year, extended unemployment benefits and the “doc fix” to avoid a reset of Medicare reimbursement rates, would not be included.

The FY 2013 budget that the Administration will release today is, in the long run, a meaningless document in substantive terms, so I don’t want to spend that much time on it. But I was a little surprised with the pushback I received about my assessment that it reflects a shift in tone rather than policy. It’s a simple fact that the Administration has wanted a deficit deal for some time, and that this budget will build in a deficit deal. They’re going about it in a smarter way with a higher bid in the negotiations.

Austerity is a major issue abroad, particularly Europe, but it has more to do with the sclerotic economic pace in the US than most people realize. Republicans successfully got spending caps that will ratchet down the budget in years to come, and they’ve already effectively frozen it. But as Jared Bernstein and Krugman show, the bigger contribution to austerity comes from state and local budgets.

I’ve seen a spate of stories recently suggesting that a economic recovery is fated to happen by 2013, and whoever wins the Presidential election will be able to claim the mantle of the “recovery President.” This is far too deterministic a take for me. There is such a thing as a business cycle, but to suggest that national policy cannot dislodge it ignores recent history and the candidates’ budget plans.

The President has a speech at this hour where he will call for the consolidation of several federal agencies to shrink the federal bureaucracy and save money, a return to the “age of austerity” Obama that has faded of late as the election nears and populism returns to the fore.

There is a depression going on in the public sector. When cops and firefighters and teachers and nurses lose their jobs, they lose purchasing power, the ability to hire private contractors or visit private businesses for the purchase of goods and services. Public employees don’t use a different currency; you cannot divorce them from the private sector.

California’s ambitious high speed rail program hit a snag yesterday when a peer review group recommended a halt to continued bond funding of the project until a long-term funding source can be secured.

Lawmakers agreed last night to a $1 trillion omnibus spending package, which will fund the government for the rest of the fiscal year, until September 30, 2012. The agreement eliminates some but not all of the policy riders that Republicans coveted in the deal.