Under Trump the party has abandoned any shred of fiscal credibilityby James Kwak / February 23, 2018 / Leave a comment
US President Donald Trump. Photo: Ting Shen/Xinhua News Agency/PA Images People have short memories. At least, that’s what Republicans in the United States are betting on. And they will be proven right… again. First a $1.5 trillion tax cut. Then a bipartisan deal to increase federal government spending by hundreds of billions of dollars beyond existing caps. And now a Trump administration budget proposal that projects deficits of $7.2 trillion over the next decade—$4 trillion more than last year’s plan. Republicans are absolutely loving deficits and the national debt necessary to pay for them. Of course, this has made Democrats and much of the reality-based media apoplectic. After all, the Republican Party spent the entire administration of President Barack Obama railing against record peacetime budget deficits (even though they were largely caused by the financial crisis that began under Republican President George W Bush) and blocking Democratic attempts to stimulate the economy out of the deepest, longest economic slowdown since the Great Depression. “Republicans Have Forgotten They Hate Deficits,” reads one headline in The New York Times. But the surprise isn’t Republicans’ sudden embrace of deficits now that they are in position to take credit for tax cuts and spend money on their bright shiny objects—primarily the military. It’s that anyone ever believed that modern Republican conservatives care about deficits and the debt. Since 1981, Republican administrations have enacted massive tax cuts with the regularity of a Swiss watch—under Presidents Ronald Reagan in 1981, George W Bush in 2001 and 2003, and now Donald Trump in 2017—while running up military spending, first to compete with the Soviet Union, then to fight wars in Afghanistan and Iraq, and now to compensate for President Trump’s insecurities. The one exception, President George H W Bush’s agreement to raise taxes in 1990, led to a conservative revolt that helped toss him out of office two years later. But, in all seriousness… kudos to them. Republicans figured out a magical political formula: cut taxes to pay off their core constituency (the wealthy); spend money on whatever they want; use the resulting deficits to demand cuts to programmes that help the less fortunate (food stamps, Medicaid, etc.) in the name of our “grandchildren”; and, once out of power, stoke indignation against the national debt to sabotage Democratic administrations. It works because no one ever remembers the outrageous claims of the previous electoral cycle. And it’s genius. We Democrats, by contrast, look like chumps. Each time Republicans wreck the national balance sheet, we dutifully roll up our sleeves and patch it back together again. President Bill Clinton, for example, abandoned his campaign promises and raised taxes in 1993 to cut deficits; Republicans promptly attacked him as a tax-and-spend liberal, leading to the conservative victories in the 1994 midterms. In 2011, the recovery was sputtering and economists were calling for more government spending, not less. Yet President Obama offered Republicans a “grand bargain” to cut deficits, even agreeing to a change that would significantly reduce future Social Security benefits—only for negotiations to collapse at the last minute. Republicans have manoeuvred Democrats into being the party of fiscal responsibility and sound macroeconomic management. Each time the Republicans reverse themselves—like right now—we clap our hands gleefully, expecting voters will suddenly recognise them as hypocrites and will finally reward us for being mature, responsible adults. It never happens. At the end of the day, long-term fiscal policy—what will happen to interest rates decades from now—is just not something that voters care about in their hearts or their pocketbooks. You can win points by pretending to care about our grandchildren, as Republicans have proven again and again. But not by actually caring.