How many times have you heard these comments?
- Democrats have to clean up Republican created deficits
- Democrats are the “adults in the room” because they “pay for” their programs
- Republicans are hypocrites when they say they care about deficits
All true.
But also one important reason why Democrats now control none of the federal government and a minority of state houses.
Let’s look at the last 25 years:
1980: Reagan elected;
1981-92: Reagan and HW Bush increase deficit from $73 billion to nearly $300 billion.
1988-90: HW Bush pledges “no new taxes;” then agrees to raise taxes
1992: HW Bush loses to Clinton.
1993: Clinton increases taxes to cut deficit, including not just high end tax increases, but a gas tax increase.
1994: Gingrich and Co. sweep to power. Tax increases play a big part in the victory.
2000: W Bush “elected” despite Clinton surplus.
2001: W Bush tax cuts pass: “unpaid for.”
2003: Iraq War begins: “unpaid for.”
2004: Bush re-elected despite $400-450 billion deficit, compared with surplus four years earlier.
2005: Medicare D passes: “unpaid for.”
2008: Obama wins, greatest factor is Great Recession, not deficit.
2009-10: ACA passes: “paid for” by high end tax increases, other taxes and cuts to Medicare Advantage.
2010: Republicans sweep to power again, based on anger at ACA — focused not just on bogus “death panels,” but higher taxes and “$700B cuts to Medicare,” which had enough factual basis to make it a decisive issue.
2016: Trump “elected,” promising “cheaper medical care for all.” Clinton was the “responsible” candidate — everything was “paid for” in her programs. Voters don’t care. (She lost for a lot of reasons, but her plans being “paid for” got her few votes, if any.)
2017: Republicans pass tax cuts. Democrats howl about “blowing a hole in the deficit” of possibly $1.5 trillion. Republicans shrug and just say growth will take care of it.
2018: Main campaign issue is Healthcare, not deficit.
Do you see a pattern here?
What political price have Republicans paid for their unpaid for programs?
What political price have Democrats paid for their paid for programs?
The answer is obvious.
But we do get to tut tut about what hypocrites the Republicans are and how responsible we are and how Republicans don’t give a shit about the deficit except when Democrats try to pass things they hate.
But notice something else: What is absent from the 38 years of history above? What dog did not bark?
INFLATION
As the deficit went up, down and then up, inflation went steadily down, from 103% in the late seventies to 10% between 2010-2015.
But everyone knows budget deficits cause inflation, don’t they? And what about the seventies?
The seventies inflation was a “cost-push” inflation, beginning in 1973, created by OPEC’s oil embargo.
The other type of inflation is “demand pull” inflation, when aggregate demand in an economy outpaces aggregate supply. Conventional wisdom (at least for Democrats and Republicans when Democrats are in control) says deficits lead to inflation.
The record of the last 50 years shows otherwise.
The ‘70s inflation was caused by the oil shock, not deficits (though deficits resulted)
Reagan’s deficit didn’t cause inflation.
Bush’s deficit didn’t cause inflation.
For Republicans, deficits are simply an excuse to cut or stop Democratic programs.
There is simply no reason, political or economic, to have deficit cutting as a goal.
Coming: Part II: Balance the Economy, not the Budget