After enacting a massive tax cut for the wealthy that will create record federal deficits, House Republicans last week once again attempted and failed to pass a balanced budget amendment. This latest example of hypocritical Republican grandstanding was exactly as principled and purposeful as their thoughts and prayers after mass shootings. A balanced budget amendment would be terrible policy, but Republicans don't care about policy or the public good, anyway. Republicans do, however, love to posture—particularly in an election year. And they hope that the media will play along, which in the case of budgets often has been the case, with Democrats too often playing defense on an issue they should own. Particularly in an election year.
But some in the media won't play the Republicans' game, and Democrats should seize the advantage:
By now, nobody should be surprised when the Republican Party violates its claims of fiscal rectitude. Increasing the deficit — through big tax cuts, mostly for the rich — has been the defining feature of the party’s economic policy for decades. When Paul Ryan and other Republicans call themselves fiscal conservatives, they’re basically doing a version of the old Marx Brothers bit: “Who ya gonna believe, me or your own eyes?”
Ever so slowly, conventional wisdom has started to recognize this reality. After Ryan’s retirement announcement last week, only a few headlines called him a deficit hawk. People are catching on to the con.
Almost seven years ago, I wrote a piece with the title:
The Republicans have no credibility on deficits
It's not more true now than then. It's exactly as true. Republicans haven't ever been credible on deficits. But they have loved to pretend. As I wrote nearly seven years ago:
When Republicans talk about deficits they are hypocrites and liars. The president and the Democratic leaders in Congress can't speak it that bluntly, but we can. And if we do, perhaps in time the president and the Democratic leaders in Congress will begin to speak it with the less emotionally charged words that the Republicans have no credibility on deficits. Any time a Democrat is on television and is asked about the politics of deficits, the response should begin with the simple message that the Republicans have no credibility on deficits. Any time a Democrat is debating a Republican on television, and the Republican mentions deficits, the response should begin with the simple message that the Republicans have no credibility on deficits. It's easy. It's factual. And with but a bit of message discipline, it could remake the nature of our political system.
Ronald Reagan used the deficit as an issue when he ran against President Carter. As president, Reagan ran up the largest deficit in U.S. history. The Republicans of his era talked a lot about a Balanced Budget Amendment, while consistently voting to run up the largest deficit in U.S. history. Reagan's successor, the heir to the Bush dynasty, outdid his mentor by running up an even larger deficit. President Clinton raised taxes, eliminated the deficit and created a surplus, and just coincidentally oversaw an enormous economic expansion and near full employment. The next heir to the Bush dynasty cut taxes, eviscerated the Clinton surplus, and outdid both his father and Reagan by breaking their records for creating the largest deficits in U.S. history. He also all but broke the economy. This isn't complicated. This isn't difficult to explain. What is difficult to explain is why the Democrats don't do a better and more consistent job of explaining it.
But Democrats have gotten better at it. In fact, House Minority Leader Nancy Pelosi's floor speech in opposition to the latest Republican posturing was concise, factual, and scathing in its simplicity.
Here is the bulk of it:
This legislation is a brazen assault on seniors, children and working families – the American people we were elected to protect. Make no mistake, this GOP con job has nothing to do with fiscal responsibility. It is not balanced in terms of money because of their GOP Tax Scam that’s placed us in a bad spot fiscally and it’s not balanced in terms of values.
To the Republicans, fiscal responsibility just means ransacking Medicare, Medicaid and Social Security and breaking our nation’s sacred promise of dignity and security for seniors and families.
Republicans like to pat themselves on the back and play lip service to the idea of fiscal responsibility. In fact, the deficit hawks have either become an endangered species or extinct. They don’t seem to exist in this Republican House of Representatives.
It may be counterintuitive to the public, but Democrats have always been the ones who have fought to put our fiscal house in order. In the 1990s, President Clinton put us on a trajectory of job growth and smaller deficits, despite inheriting the massive Reagan-Bush deficit.
The last four, some would even say five, conservatively speaking, the last four Clinton budgets were either in balance or in surplus. President Clinton handed President George W. Bush a projected $5.6 trillion 10-year budget surplus, but Republicans squandered that surplus with massive tax cuts for the wealthy and two unpaid-for wars. Their spending sprees exploded a vast new $5 trillion-plus debt – that was an $11 trillion turnaround from the Democrats’ path to surplus.
Under President Obama, then, Democrats restored responsibility to spending rules. We had Pay-As-You-Go. Do you want to invest in something? You must cover it. You must offset it or pay for it. That held true for investments, as well as for tax cuts.
Republicans didn’t mind paying for food stamps, but they did mind paying for tax cuts for the rich. That they wanted to have exempted from Pay-As-You-Go.
This Republican Congress, despite President Obama’s restoring responsible spending rules and slashing the Bush deficit by hundreds of billions of dollars, this Republican Congress has raced back toward fiscal ruin, recklessly erasing that progress and exploding the debt with their contempt for fiscal responsibility.
Republicans exploded deficits by more than $2 trillion with their GOP Tax Scam and its massive handouts to corporations and the wealthiest 1 percent.
Just this week, the CBO exposed the staggering cost of the Republican special interest agenda, forecasting deficits of nearly $1 trillion or more every year President Trump remains in office.
Understand that the Trump trillion-dollar deficit is here for the life of his presidency. May that be sure. Yet, Republicans have the nerve to demand that seniors and little children sacrifice to pay for their tax cuts for the rich and corporate America, for their fiscal recklessness.
GOP has nothing but contempt for the health and security of America’s families. The Trump Budget slashed a half trillion dollars from Medicare, $1.4 trillion from Medicaid. $72 billion from Social Security disability benefits. Why? So, they could give a tax cut of $1.5 trillion to corporate America – with the interest that it incurred it would be over $2 trillion deficit – paid for by cuts in Medicare, Medicaid and Social Security.
Their legislation priorities add to a mountain of utter, utter derision, disregard and distain for hard-working families: from slashing SNAP, the food stamps, to gutting consumer protections for seniors and servicemembers, our men and women in uniform, to sabotaging America’s affordable quality health care.
And now with this constitutional amendment, the Republicans found another cynical tool to gut the bedrock guarantees of Medicare, Medicaid and Social Security. This so-called balanced budget amendment – which is going nowhere, it won’t even win the vote on the floor today – is budgetary engineering designed to slash Medicare, Medicaid and Social Security.
As the AARP warn the GOP balanced budget amendment, so-called, would subject Social Security and Medicare to deep cuts that would be, in their words, ‘devastating for millions of Americans.’ The American people cannot afford Republicans’ fiscal hypocrisy and their relentless efforts to gut Medicare, Medicaid and Social Security. I can’t say it enough, just to enrich the special interests.
Democrats know that investments in the health and strength of the American people are the best ways to reduce the deficit and grow the economy. In fact, nothing brings more money to the Treasury than investing in the education of the American people – early childhood, K-12, higher education, post-grad, lifetime learning for our workers.
This is a big clue to Democratic candidates in red or purple districts who are trying to figure out how or whether to distance themselves from the Democratic leadership. On issues of fiscal discipline, the answer is: Don't. Republicans don't care about fiscal discipline, and they only use it as an excuse to pursue what they really do care about: cutting government programs that help people.
Republicans point to the record deficits built up early in the Obama administration, but Obama inherited an economy in freefall, and a deficit that already was exploding. He used the same economic tool that President Franklin D. Roosevelt used to dig us out of the Great Depression: Keynesian stimulus. That meant a short-term spike in the federal deficit, as money was spent both to help people suffering under the Bush economic collapse and to create jobs and stimulate the economy. In fact, the stimulus and the deficit spike it necessitated should have been larger, and when the stimulative effect faltered before the 2010 mid-term election, Democrats paid a political price. But it was recusant Blue Dog Democrats who fared the worst. They hadn't learned, and it cost them their jobs.
Many Blue Dogs came from red or purple congressional districts, which is part of why they played the economic games they played. But they were wrong, both on policy and politics. They should have supported a larger stimulus, and they should have been prepared to explain why short-term deficits were necessary. And if worried about holding onto the congressional seats that they ending up losing anyway, they should have been prepared to call out Republican hypocrisy on fiscal responsibility. This is why narrative matters. And it matters as we contemplate the possibility of a wave or tsunami election this year, with so many red and purple districts once again possibly winnable for Democrats.
Democratic candidates in red or purple districts need not fear running as Democrats. Candidates in those districts must not promote false narratives ostensibly to bolster their odds of winning. Democrats are the party of facts, because the facts are on the Democrats' side. And the fact is that the entire Republican economic model is and always has been wrong. And the fact is that deficit spending under President Obama saved somewhere between 1.4 to 3.3 million jobs, and ultimately reduced the deficit as the economy staggered back to its feet and more people began earning more income and paying more taxes:
The Treasury said wage and salary growth made individual and payroll tax collection strong throughout the year. Corporate receipts climbed on growth in taxable profits.
Because deficit spending as a means of economic recovery works:
The stimulus could have done more good had it been bigger and more carefully constructed. But put simply, it prevented a second recession that could have turned into a depression. It created or saved an average of 1.6 million jobs a year for four years. (There are the jobs, Mr. Boehner.) It raised the nation’s economic output by 2 to 3 percent from 2009 to 2011. It prevented a significant increase in poverty — without it, 5.3 million additional people would have become poor in 2010.
The deficit began to climb again during Obama's final year in office, but it immediately began to fall again in the months after he left office. And despite typical Republican posturing, no, that wasn't because of the change in administrations. Trump didn't do a damn thing in those early months, and the first months of his administration merely reaped the benefits of Obama's policies, just as the exploding deficit and crashing economy in the first months of Obama's presidency were attributable to Bush. But once Obama's stimulus was enacted and took effect, the economy was his. And it rebounded. And continues to grow. And now that the Trump/GOP tax disaster has been enacted, they own what comes next.
And what comes next? Exploding deficits:
America’s deficit is rising sharply and will surpass $1 trillion per year by 2020, a gap that has grown since Congress cut taxes and increased spending, the Congressional Budget Office reported Monday.
The federal deficit — the gap between how much the government takes in and how much it spends — will hit $804 billion in fiscal 2018, up 21 percent from 2017, the CBO said.
“The federal budget deficit grows substantially over the next several years,” CBO Budget Director Keith Hall said Wednesday after his agency released the report. “Federal debt is projected to be on a steadily rising trajectory throughout the decade.”
The tax law that President Trump and congressional Republicans passed in December will cut government revenue by $1.3 trillion from 2018 to 2028, the CBO reported. When the costs of paying interest on that debt are included, the tax cuts’ total addition to the deficit comes to $1.9 trillion, the CBO said.
What comes next? Exploding trade deficits:
Among President Donald Trump’s most deeply held economic convictions is that trade deficits are bad, yet his signature economic policy—a major tax cut—likely will deepen the trade deficits he abhors for years to come.
What comes next?
The IMF predicts U.S. growth will hit 2.9 percent this year and 2.7 percent in 2019, a level of growth that hasn't been achieved since 2006. But the IMF also predicts the United States will be the only advanced economy in the world to have its debt-to-GDP ratio get worse in the next five years as the government budgets become even more unbalanced, adding to the debt.
“Given the increased fiscal deficit, which will require adjustment down the road, and the temporary nature of some [tax] provisions, growth is expected to be lower than in previous forecasts for a few years from 2022 onward, offsetting some of the earlier growth gains,” the IMF warned Tuesday.
The economy had been growing and will keep growing, but the Trump/GOP tax fiasco will undermine that growth.
The consensus among the world's top economic forecasters is that the United States is in for good times through 2019 or even 2020, but that will probably be followed by an economic hangover of sorts. Not only is growth expected to slow, but it could end up being weaker than it would have been without all the stimulus because the U.S. government will have a harder time spending any more money to try to aid the economy, and the large debt that already exists will cause investors to buy U.S. Treasurys instead of investing in the private sector where it would be more likely to boost growth.
“There's less reason to behave like it's 'morning in America' than 'happy hour in America,'” wrote Morgan Stanley in a research paper released Tuesday. “The feel-good aspects of [fiscal stimulus] appear at or nearly in the price of U.S. markets, whereas the downsides are less accounted for.”
The lesson is clear. From Reagan onward, Republicans have pretended to care about fiscal discipline, holding out a so-called Balanced Budget Amendment as a decoy. No doubt they will campaign on one this year. Meanwhile, their policies have exploded deficits, while Democratic presidents have reduced deficits, even in the aftermath of robust Keynesian stimulus. The message to Democratic candidates is clear: Be proud of your party affiliation. The facts make the case. Anyone who cares about fiscal responsibility needs to vote for the party of fiscal responsibility: The Democratic Party.