The Republicans Are Deficit Hypocrites. The Democrats Should Be, Too by Alex Shepherd

The Republicans Are Deficit Hypocrites. The Democrats Should Be, Too.

The New Republic / by Alex Shephard / 1d

Barack Obama is dumbfounded. The Republicans harangued him for eight straight years over the federal budget deficit. Now, under President Trump, the deficit is skyrocketing—with nary a peep from the GOP. “This is supposed to be the party, supposedly, of fiscal conservatism,” he said in a speech in September. “Suddenly deficits do not matter, even though just two years ago, when the deficit was lower, they said I couldn’t afford to help working families or seniors on Medicare because the deficit was an existential crisis. What changed?”

The former president is not naive; he knows the answer. What changed was that Republicans, having swept the 2016 election, now fully control the government’s purse strings. By the end of Trump’s first year, the Republicans jacked the military’s budget by $80 billion and approved a $1.5 trillion tax cut. So it was no surprise when the Treasury Department reported last week that the deficit rose 77 percent in the first quarter of the fiscal year over the same period the previous year. This week, in its latest budget proposal, the White House had the gall to warn that we “must protect future generations from Washington’s habitual deficit spending,” but nonetheless projected the deficit would rise substantially over the next three years.

The question many are asking is whether the GOP’s about-face matters, politically speaking. As recent headline in The Week put it, “Will Republicans’ deficit hypocrisy haunt them this year?” The White House is confident that it won’t. Trump’s acting chief of staff, former Congressman Mick Mulvaney, spent years ripping Obama about the deficit. Asked recently why Trump’s 2019 State of the Union didn’t mention the deficit, he replied, “Nobody cares.”

The better question is whether the Democrats will continue to be haunted by Republicans’ deficit-shaming. The Democrats have long pushed deficit reduction in the hopes of convincing America that they are the true party of fiscal responsibility. America, like Mulvaney, has responded with a shrug. So instead of complaining about Republicans’ deficit hypocrisy, Democrats ought to mimic it.

The notion that the GOP is the party of fiscal responsibility is one of the most persistent myths in American politics. Republican presidential administrations have consistently driven up the deficit—the amount that government spending exceeds revenue—over the past four decades. The 1981 tax cut signed into law by Ronald Reagan, which slashed the rate for the highest earners from 70 to 50 percent, “led to an explosion in the budget deficit, hitting close to 6 percent of gross domestic product in 1983” The Washington Post’s Daniel Drezner observed last year. When that tax cut failed to pay for itself and the deficit ballooned, the Reagan administration responded with a series of largely forgotten tax increases—while also passing the landmark Tax Reform Act of 1986, which further cut the top rate to 28 percent.

Reagan’s deficit shenanigans became the playbook for generations of conservative policymakers. “By creating a fiscal straitjacket through lower taxes, conservatives leave Washington with less money and raise the specter of deficits damaging the economy as a rationale to take away the benefits that millions of Americans depend on,” wrote Julian Zelizer in The Atlantic shortly before Trump signed his cuts into law. George W. Bush, meanwhile, squandered a budget surplus by gifting enormous tax cuts to the rich, then blew up the deficit to pay for two failed wars.

Democrats, meanwhile, have dutifully focused on reducing the deficit. Bill Clinton began his administration by signing a bill that increased taxes and cut spending; it squeaked through Congress with zero Republican votes. He would go on to embrace the language of fiscal discipline and benefit cuts, signing a welfare reform bill into law that has had devastating reverberations to this day. In a 1993 speech outlining an economic program that would lead to budget surpluses by the end of the decade, Clinton presented deficit reduction as a precursor to social spending. “We’re not cutting the deficit just because experts say it’s the thing to do, or because it has some intrinsic merit,” he said. “We have to cut the deficit because the more we spend paying off the debt, the less tax dollars we have to invest in jobs and education and the future of this country.” (During the 2016 campaign, his wife, Hillary Clinton echoedthis line.) By the time Clinton left office, the $290 billion budget deficit he had inherited had been transformed into a $124 billion surplus.

Like Clinton, Obama dealt with a Republican Congress for much of his time in office and made similar concessions and overtures, tailoring budgets and programs like the Affordable Care Act to conservative demands for deficit reduction. Even though Democrats controlled both houses of Congress at the time, the hunt for Republican votes—and perhaps intoxicated by his belief that he could transcend partisan politics—guided much of the bill’s framing. (Obama did also have to contend with the then-powerful conservative Blue Dog Democrat coalition.) The Affordable Care Act was convoluted and made less ambitious in part due to concerns about the deficit—concerns that also guided the administration’s decision to push for smaller stimuluses during the Great Recession than economists recommended, as well as its approach to budget negotiations. If the goal was to control the deficit, it worked. The deficit spiked early in Obama’s presidency due to a combination of Bush leftovers, economic stimulus, and automatic increases in social spending caused by the recession, but he left it roughly where he inherited it.

Where has this gotten Democrats, politically? Nowhere. Republicans have consistently rejected Democratic proposals that would reduce the deficit, and there’s no evidence that voters have rewarded Democrats for their fiscal responsibility. But Democrats continue to live in fear of being seen as the party of reckless spending and “free stuff.” At the start of the current Congress, Nancy Pelosi pushed the Democratic House to adopt archaic and unnecessary pay-as-you-go rules that would require any new spending to be offset by tax increases or spending cuts—a plan that would make bold new policies like Medicare for All and the Green New Deal impossible to pass. As The American Prospect’s Robert Kuttner wrote last month, “Democrats’ restoring a PAYGO rule ignores a three decades history of getting fleeced, and is worse than nothing. It is like wearing a sign that says to Republicans, ‘Kick me.’ To the broad voting public it signals nothing at all.”

Instead of cowering in fear of Republican attacks, and trying to dig the country out of the holes caused by GOP tax cuts, Democrats should accept what their opponents already have: The deficit is a useful political weapon, and there is little no penalty for being a deficit scold one minute and a deficit denier the next. Even many former deficits hawks, like former Treasury Secretary Larry Summers and former IMF chief economist Olivier Blanchard, have come around to the idea that deficit spending and a growing national debt are not such a bad thing—certainly not to the extent that Republicans have claimed that they do.

What really matters is when to grow the deficit, and why. There are times when it’s unavoidable, like when automatic spending kicks in during a downturn. There are times when it’s sound economic policy, as when large fiscal stimuluses are necessary to pull the economy out of recession. And there are times when it’s a moral good, as it is now in the fight for universal health care and slowing climate change. So Democrats, by all means, should complain ad nauseam about the deficit explosion caused by Trump and the Republicans. But when Democrats regain power in Washington, whenever that may be, they should do exactly as Republicans are doing today: Increase the deficit to achieve their policy goals, and ignore the wails about their egregious hypocrisy.

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