Deficit Politics

[homersapien 12,684]

https://www.washingtonpost.com/opinions/2023/01/05/fearmongering-deficit-losing-its-sting/

Why fearmongering about deficits might be losing its sting

By Paul Waldman, January 5, 2023

 

When Republicans won control of the House in 2010, what ensued was a miserable period of constant crisis, as Congress and President Barack Obama careened from one fiscal emergency to the next, hampering the country’s recovery from the Great Recession.

It’s natural to think that, with Republicans having once again seized control of the House of Representatives in a midterm election, we’re headed for a repeat of that awful history. But believe it or not, there are reasons for optimism.

Policy and political considerations have changed over the last 12 years, for both Republicans and Democrats. If we’re lucky, deficit politics might have changed in profound ways.

Remember that, during Obama’s presidency, Republicans cited the yearly budget deficit and the accumulating national debt as the justification to force massive cuts in domestic spending. If the recovery sputtered in the wake of those cuts (which is just what happened) they knew the president was more likely to get the blame. So in 2011, Republicans created a debt ceiling showdown, threatening to force the U.S. government to default on its debt, which could have touched off a global financial crisis.

That was ultimately resolved with the creation of the “sequester” — mandatory budget cuts taken equally from domestic programs and the military. That didn’t prevent a government shutdown in 2013, or another debt ceiling crisis the same year.

It is hard to overstate how much deficit worries hung over the entire process of governing in those years. As Mark Schmitt, director of the Political Reform program at New America, told me, “as a real thing, a projection and a metaphor, dominated the previous decade almost like a well-funded fourth branch of government.”

But, Schmitt explained, something fundamentally changed over the last few years: A series of events caused both parties to stop worrying quite so much about deficits, at least for now. First, Republicans had a president in Donald Trump who didn’t bother pretending to care about debt. He signed a big tax cut (as Republican presidents often do), but also promised not to cut large entitlement programs; unconstrained by conservative orthodoxy, he just did what he thought was popular.

Then, the coronavirus pandemic inevitably ballooned the deficit, by causing an economic collapse (which deprived the government of tax revenue) and creating the need for new spending to address the public health and economic consequences. That was followed by a series of significant spending bills passed under President Biden, some of them (including the infrastructure bill and the Chips Act) with significant Republican support.

This was possible, says Schmitt, precisely because both parties, but especially Democrats, stopped obsessing over the deficit: “It’s as if a big damper was lifted from the workings of American democracy.”

Republicans do still demand cuts in government spending, and those in the House have already said they intend to force debt-ceiling crises in an effort to extort domestic spending cuts. But they have changed in ways that could keep deficit worries on the back burner.

The Republicans of the 2010 tea party movement claimed that too much government spending was not a problem but an emergency, something that could destroy our way of life. Seeing Greece’s economy in crisis, they said ours would collapse the same way. Almost any means to confront the threat were justified, including the most radical and destructive.

For today’s Republicans, debt has been replaced as the primary emergency by hotter issues, particularly immigration and the varied kinds of social change they put under the umbrella of “wokeness.” Those are what they see as the greatest threats to society, and if they’re going to shut down the government over something, that’s what it will be.

Democrats, too, have changed their view of deficits. While only a few have embraced the theory that the government can spend and borrow almost without limit, the idea that they have to restrain their policy goals just to appease the deficit scolds has disappeared from their discussions. Tired of Republican hypocrisy on the issue, they are more convinced than ever that a growing economy in which prosperity is more widely shared will bring the deficit down. And they know they have enacted all they can in the way of big spending bills, at least for the next two years.

Say House Republicans try to force another debt-ceiling crisis; if Democrats hold their ground and hang together, there’s a good chance they’ll win over half a dozen Republicans who aren’t willing to send the American economy into a ditch. Given the slim GOP minority, that’s all they would need.

As a bonus, a decline in deficit fearmongering might bring a new honesty to our debates about spending. Instead of just saying they want to cut spending, Republicans might have to explain why they would cut specific programs. It would no longer be enough to just say, “We have to make cuts to reduce the deficit.”

In 2002, Vice President Dick Cheney privately told told then-Treasury Secretary Paul O’Neill that President Ronald Reagan "proved deficits don’t matter.” In political terms, Cheney was right: The deficit increased dramatically under Reagan, and no one really cared. So the George W. Bush administration planned a big tax cut. “We won the midterms,” Cheney said. “This is our due.”

Today, there seems to be a greater appreciation of this truth: The deficit is only something to panic about when everyone acts like it is. We just have to decide not to.

Edited January 5, 2023 by homersapien

[homersapien 12,684]

I liked this from the comments:

AnniePannie -

“In political terms, Cheney was right: The deficit increased dramatically under Reagan, and no one really cared. So the George W. Bush administration planned a big tax cut. ‘We won the midterms,’ Cheney said. ‘This is our due.’”

There you have it: The real difference between Republicans and Democrats. When Republicans realize that the deficit is not politically important, they give the rich a tax cut and consider it their “due.” When Democrats believe that it is possible to add to the deficit responsibly, they enact spending programs that benefit citizens in general, especially working people, the elderly, and the neediest, and invest in the infrastructure that supports us all.

Yes, a bit oversimplified. But close enough.

[homersapien 12,684]

And this:

 

wvblonde:

 

I would say first that "spending" should be split into more than one category. For instance, spending on infrastructure is clearly an investment, and likely to generate substantial returns. Spending on so-called entitlement programs isn't an investment, but it's a contractual obligation to the public. Spending on the military is a hodgepodge of things - some is an investment, some is a contractual commitment, some is corporate job creation and maintenance.

 

Our problem is NOT primarily on the expenditures side of the ledger; the American people support things like the ACA and rebuilding bridges and reining in corporate greed on pharmaceuticals. It's that our income (i.e., tax) side is totally out of whack.

[icanthearyou 4,468]

Privatizing government functions is largely welfare for the wealthy. 

The guise of "smaller government" has led to nothing more than overpriced, ineffective, corrupt government.

The government is not in debt because of the poor.  The government is in debt because we intentionally created a system of patronage. 

Not everything needs to be or, should be monetized.

As long as we are grotesquely in debt, we will be controlled by capital, by finance, by Wall St.

It is past time to re-balance and de-concentrate power in this country.

[autigeremt 7,460]

2 hours ago, icanthearyou said:

Privatizing government functions is largely welfare for the wealthy. 

The guise of "smaller government" has led to nothing more than overpriced, ineffective, corrupt government.

The government is not in debt because of the poor.  The government is in debt because we intentionally created a system of patronage. 

Not everything needs to be or, should be monetized.

As long as we are grotesquely in debt, we will be controlled by capital, by finance, by Wall St.

It is past time to re-balance and de-concentrate power in this country.

[creed 1,936]

5 hours ago, homersapien said:

https://www.washingtonpost.com/opinions/2023/01/05/fearmongering-deficit-losing-its-sting/

Why fearmongering about deficits might be losing its sting

By Paul Waldman, January 5, 2023

 

When Republicans won control of the House in 2010, what ensued was a miserable period of constant crisis, as Congress and President Barack Obama careened from one fiscal emergency to the next, hampering the country’s recovery from the Great Recession.

It’s natural to think that, with Republicans having once again seized control of the House of Representatives in a midterm election, we’re headed for a repeat of that awful history. But believe it or not, there are reasons for optimism.

Policy and political considerations have changed over the last 12 years, for both Republicans and Democrats. If we’re lucky, deficit politics might have changed in profound ways.

Remember that, during Obama’s presidency, Republicans cited the yearly budget deficit and the accumulating national debt as the justification to force massive cuts in domestic spending. If the recovery sputtered in the wake of those cuts (which is just what happened) they knew the president was more likely to get the blame. So in 2011, Republicans created a debt ceiling showdown, threatening to force the U.S. government to default on its debt, which could have touched off a global financial crisis.

That was ultimately resolved with the creation of the “sequester” — mandatory budget cuts taken equally from domestic programs and the military. That didn’t prevent a government shutdown in 2013, or another debt ceiling crisis the same year.

It is hard to overstate how much deficit worries hung over the entire process of governing in those years. As Mark Schmitt, director of the Political Reform program at New America, told me, “as a real thing, a projection and a metaphor, dominated the previous decade almost like a well-funded fourth branch of government.”

But, Schmitt explained, something fundamentally changed over the last few years: A series of events caused both parties to stop worrying quite so much about deficits, at least for now. First, Republicans had a president in Donald Trump who didn’t bother pretending to care about debt. He signed a big tax cut (as Republican presidents often do), but also promised not to cut large entitlement programs; unconstrained by conservative orthodoxy, he just did what he thought was popular.

Then, the coronavirus pandemic inevitably ballooned the deficit, by causing an economic collapse (which deprived the government of tax revenue) and creating the need for new spending to address the public health and economic consequences. That was followed by a series of significant spending bills passed under President Biden, some of them (including the infrastructure bill and the Chips Act) with significant Republican support.

This was possible, says Schmitt, precisely because both parties, but especially Democrats, stopped obsessing over the deficit: “It’s as if a big damper was lifted from the workings of American democracy.”

Republicans do still demand cuts in government spending, and those in the House have already said they intend to force debt-ceiling crises in an effort to extort domestic spending cuts. But they have changed in ways that could keep deficit worries on the back burner.

The Republicans of the 2010 tea party movement claimed that too much government spending was not a problem but an emergency, something that could destroy our way of life. Seeing Greece’s economy in crisis, they said ours would collapse the same way. Almost any means to confront the threat were justified, including the most radical and destructive.

For today’s Republicans, debt has been replaced as the primary emergency by hotter issues, particularly immigration and the varied kinds of social change they put under the umbrella of “wokeness.” Those are what they see as the greatest threats to society, and if they’re going to shut down the government over something, that’s what it will be.

Democrats, too, have changed their view of deficits. While only a few have embraced the theory that the government can spend and borrow almost without limit, the idea that they have to restrain their policy goals just to appease the deficit scolds has disappeared from their discussions. Tired of Republican hypocrisy on the issue, they are more convinced than ever that a growing economy in which prosperity is more widely shared will bring the deficit down. And they know they have enacted all they can in the way of big spending bills, at least for the next two years.

Say House Republicans try to force another debt-ceiling crisis; if Democrats hold their ground and hang together, there’s a good chance they’ll win over half a dozen Republicans who aren’t willing to send the American economy into a ditch. Given the slim GOP minority, that’s all they would need.

As a bonus, a decline in deficit fearmongering might bring a new honesty to our debates about spending. Instead of just saying they want to cut spending, Republicans might have to explain why they would cut specific programs. It would no longer be enough to just say, “We have to make cuts to reduce the deficit.”

In 2002, Vice President Dick Cheney privately told told then-Treasury Secretary Paul O’Neill that President Ronald Reagan "proved deficits don’t matter.” In political terms, Cheney was right: The deficit increased dramatically under Reagan, and no one really cared. So the George W. Bush administration planned a big tax cut. “We won the midterms,” Cheney said. “This is our due.”

Today, there seems to be a greater appreciation of this truth: The deficit is only something to panic about when everyone acts like it is. We just have to decide not to.

An article witten to higlight how political parties look at deficits. Which is one perspective, but I look at deficits more on a personal level. For instance, using simple math each citizen's deficit responsibility is @ $93K. That means me, you and every living citizen has $93K of oustanding federal debt. So the question for me is, when will the bill come due? How will I pay the bill? A smart person who is solvent and runs a good household will probably ask the same questions. Or should I just blindly accept any spending that our two political parties present for running our nation. 

[homersapien 12,684]

17 hours ago, creed said:

An article witten to higlight how political parties look at deficits. Which is one perspective, but I look at deficits more on a personal level. For instance, using simple math each citizen's deficit responsibility is @ $93K. That means me, you and every living citizen has $93K of oustanding federal debt. So the question for me is, when will the bill come due? How will I pay the bill? A smart person who is solvent and runs a good household will probably ask the same questions. Or should I just blindly accept any spending that our two political parties present for running our nation. 

It won't come due until our country collapses and the dollar is no longer considered to be a reserve currency by the rest of the world.  At this point, every debtor will simply have to write it off. 

Meanwhile, our best hope for reducing the debt is to grow out of it. We can do that by continuing to invest in our economy, increasing revenue (taxes) on corporations and the wealthy, and eliminating or reducing spending that doesn't have a return. 

Generalized spending reductions or generalized tax reductions for the sole purpose of reducing the debt are counterproductive, IMO.  Trickle down economics doesn't work.

[creed 1,936]

1 hour ago, homersapien said:

It won't come due until our country collapses and the dollar is no longer considered to be a reserve currency by the rest of the world.  At this point, every debtor will simply have to write it off. 

Meanwhile, our best hope for reducing the debt is to grow out of it. We can do that by continuing to invest in our economy, increasing revenue (taxes) on corporations and the wealthy, and eliminating or reducing spending that doesn't have a return. 

Generalized spending reductions or generalized tax reductions for the sole purpose of reducing the debt are counterproductive, IMO.  Trickle down economics doesn't work.

I have pondered in the past on how I would attack the deficit if I was the president. The only method I came to was to reduce overall federal spending by 1% yearly and increase federal income tax revenues by 0.5% yearly. Do this until the point where federal spending < 90% of tax revenue. Then freeze the reduction in federal spending and increase in tax income rates for a period of 10 years. During that time period the federal funds will have accumulated  one operating years worth of funds for reinvestment into the enconomy (infrastructure, etc.). My guess this approach would take more than 25 years to achieve and I don't think our nation has that kind of patience and discipline to execute. 

Obviously, I'm not an encomomist and not sure this would even be a sound method. But somehow, someway we need our government (federal, state and local) to be financially sound for our current and future citizens . 

[homersapien 12,684]

6 minutes ago, creed said:

I have pondered in the past on how I would attack the deficit if I was the president. The only method I came to was to reduce overall federal spending by 1% yearly and increase federal income tax revenues by 0.5% yearly. Do this until the point where federal spending < 90% of tax revenue. Then freeze the reduction in federal spending and increase in tax income rates for a period of 10 years. During that time period the federal funds will have accumulated  one operating years worth of funds for reinvestment into the enconomy (infrastructure, etc.). My guess this approach would take more than 25 years to achieve and I don't think our nation has that kind of patience and discipline to execute. 

Obviously, I'm not an encomomist and not sure this would even be a sound method. But somehow, someway we need our government (federal, state and local) to be financially sound for our current and Ifuture citizens . 

I admire your specificity, that sort of a recommendation is beyond me.  I don't really understand the impact of inflation and growth on the deficit. Both would seem to attenuate it's significance. 

One think I am pretty sure would help is to avoid long pointless wars.