Republicans used to profess to be extremely worried about the budget deficit. Many of us suspected at the time that they were full of it. And one big thing we’ve learned this week is that they were, indeed, full of it.
The budget deal the Senate is passing today will raise spending by $320 billion, split between defense and non-defense measures, in the context of deficits that have already soared to more than $1 trillion per year.
In 2012, Senate Majority Leader Mitch McConnell called the budget deficit “the nation’s most serious long-term problem.” That same year, House Speaker Paul Ryan called it a “serious threat” to the economy. They were full of it.
Not just in the narrow sense that they both went on to enthusiastically endorse a $1.5 trillion tax cut in 2017 — a tax cut that the Congressional Budget Office says did little to boost the economy but a great deal to boost payouts to rich shareholders. Nor even in the somewhat broader sense that the real cost of that tax cut is much higher than $1.5 trillion when you consider the various accounting gimmicks and bad-faith phaseouts.
Even under the weird linguistic conventions of American conservative politics where deficits caused by tax cuts don’t count as real deficits, this week’s budget deal — a big, multibillion-dollar increase in military spending “offset” by a nearly as large increase in nonmilitary spending — gives up the game entirely. Republicans don’t care, on any level, about the size of the federal deficit.
In some ways, this is healthy since deficit alarmism was never a good idea. Interest rates have been perpetually low, and there is zero sign that either Obama’s deficits or Trump’s have “crowded out” any kind of useful economic activity. But it’s critical for everyone else to learn this lesson, since millions of people suffered years of unnecessary unemployment due to bad-faith deficit hawkery. Republicans, meanwhile, won’t always be in the White House, and when they pirouette on this topic again, it’s critically important that they not be listened to.
The pivot to deficits
To actually believe that Obama-era Republican leaders cared about the federal budget deficit required one to ignore those exact same leaders’ prior conduct during George W. Bush’s administration.
When Bush was president, he signed two rounds of massive tax cuts, oversaw a large increase in military spending, expanded Medicare and Supplemental Nutrition Assistance Program benefits, hiked education spending, and didn’t come close to offsetting any of that with cuts anywhere else. The deficit ballooned. But McConnell, Ryan, and other prominent Obama-era Republican leaders like former Speaker John Boehner were enthusiastic proponents of all this. And, of course, they all duly backed the 2008 bank bailouts when the economy came crashing down around our heads.
With Bushonomics completely discredited by 2009, however, the GOP was clearly in need of a brand refresh.
What they came up with was the Tea Party and the insistence that the big lesson of the Bush years was that Republicans had moved away from conservative economic orthodoxy. Deficit fearmongering and stringent anti-spending ideology were in; devil-may-care tax-cutting was out. That is why Republicans opposed Obama’s stimulus bill in 2009, why they opposed extensions of a payroll tax holiday, and why they insisted on creating the budget sequester in exchange for lifting the debt ceiling in 2011.
All this made the budget deficit lower than, economically speaking, it should have been at a time when the unemployment rate was very high and the Federal Reserve was committed to holding interest rates at zero.
Fun fact: Federal government spending grew at 7.9% in Q2. That was the fastest pace since Q2 2009 -- i.e., immediately after the Recovery Act went into effect to combat the Great Recession. pic.twitter.com/uX2fTQlFrs— Catherine Rampell (@crampell) July 26, 2019
The economy suffered through years of slow growth induced in part by cuts in government spending, cuts that have now been reversed and are belatedly powering the economy forward.
Well, whatever, never mind
Then Donald Trump won the 2016 election, and the rebrand became obsolete.
Republicans were no longer stringent fiscal hawks; they were instead “populists,” and the Freedom Caucus is now primarily focused on anti-immigration causes. Like magic, deficits were good again. You’d never get a giant, unpopular corporate income tax cut passed if you offset it with spending cuts. Instead, you attach it to some smaller, temporary middle-class tax cuts and watch the deficit soar. Want more money for the military? Simple — agree to Democratic demands for more domestic spending!
It’s at least possible that at some point this will become unsustainable and we really will need to change course economically.
But at the moment, the Fed is back in interest-rate-cutting mode, so the deficits are honestly welcome news — even if deploying that fiscal capacity in smarter ways could have led to better results.
The critical thing, however, is that if not for hypocritical Republican opposition, we could have been running these higher deficits in 2011, 2012, 2013, 2014, and 2015. And if we had done that, the economy could have recovered faster from the Great Recession, the unemployment rate could have fallen more rapidly, and hundreds of billions of dollars of national income that is now irretrievably lost could have been earned.
In some sense, all’s well that ends well. But in another critically important sense, the nation lived through a massive economic trauma for no good reason.