Deficit hand-wringing is a venerable American political tradition, a staple of rhetoric on both sides of the aisle — especially for the party out of power. But here’s the rub: hardly anybody can say exactly how a high deficit leads to serious economic problems, and it’s not actually clear that it does. Increasingly, left-wing (and even not-so-left-wing) economists are urging us to rethink the accepted notion that government debt is a harbinger of a nation’s future insolvency. In fact, these economists point out, it’s far from clear that deficits have any macroeconomic effect at all. Meanwhile, more public social spending is correlated with a host of positive social outcomes for everyone except the wealthiest few.
The deficit-scolding script is familiar: Republicans attack every Democratic effort to increase spending on social programs by agonizing over the nation’s mounting debt, vowing that soaring numbers spell imminent ruin. Democrats claim that this or that military campaign or top-bracket tax cut is bad because it will break the bank — often at the expense of actual political arguments against war or inequality. Not even progressive Democrats — hell, not even Bernie Sanders — can resist the temptation to use this weapon, even though their own progressive policies rely on a diametrically different logic: namely that social investment is important in its own right, and that reducing inequality is more essential to building a healthy society than frugality in the abstract.
Deficit-scolding became a fixture of modern politics in the Reagan years, when government borrowing ballooned thanks to tax cuts and a historic military buildup. At the time, many in the Democratic Party, especially those who earned the nickname “Atari Democrats,” were beginning to set their electoral sights on upscale professional voters, as the power of the organized working class eroded. Though Reagan’s 1984 opponent, Walter Mondale, had a background as a union-friendly New Dealer, he heeded the party’s new political winds by focusing his attack on Reagan’s red ink. “I’m going to raise your taxes,” Mondale famously pledged, prompting the New York Times to applaud his fiscal prudence:
That’s a tough promise to make, and it will be tougher to keep. But it’s necessary for the Democrats, who’ve been tagged as a party with a propensity to spend more, not less. Only a firm commitment of this type is likely to make their conversion to budget balancing credible.
Mondale lost, and as the Atari Democrats took over, the Democratic Party’s commitment to ambitious public programs dwindled. But the deficit fixation stuck. By the early nineties the Atari Democrats had given way to the New Democrats, whose primary organ was the Democratic Leadership Council (DLC) and whose political orientation was Third Way centrism. Their poster boy was Bill Clinton, who made deficit reduction a cornerstone of his economic policy. When a strong economy ended up shifting the budget into surplus in the late 1990s, Clinton touted it as his presidency’s crowning achievement.
There’s compelling evidence that Clinton’s surpluses actually created long-run problems that ended up laying the groundwork for the 2008 economic crisis. But it was too late: Democrats had turned deficit reduction into a party shibboleth. Much of the 2000 presidential election debate focused on what should be done with the Clinton surpluses, with Al Gore tying the surplus to Social Security and promising to put it in a “lockbox.” Of course, his Republican opponent, George W. Bush, had no such self-defeating scruples — in fact, he justified his tax cuts by openly critiquing Clinton’s surplus:
The last time taxes were this high as a percentage of our economy, there was a good reason . . . We were fighting World War II. Today, our high taxes fund a surplus. Some say that growing federal surplus means Washington has more money to spend. But they’ve got it backwards. The surplus is not the government’s money. The surplus is the people’s money.
In 2002, Dick Cheney went a step further and admitted that deficits are a non-issue, famously saying that “Reagan proved deficits don’t matter.” This was, in essence, correct. But at the time, it was a truth that only Republicans were willing to acknowledge.
Of course, once Obama was in office, Republicans quickly “forgot” that deficits don’t matter. The Tea Party made the recession-era deficit the centerpiece of its anti-Obama attacks — showing once again how the Right sees the issue solely as a matter of political expediency. In response, Obama followed the liberal script and embraced the deficit issue with utter seriousness, launching (ultimately fruitless) “grand bargain” negotiations with the GOP in which he conceded what would have been significant cuts to Social Security, Medicare, and other programs. It became undeniable: the Right was using the size of the deficit — a non-issue deliberately legitimized by Democrats — as a cudgel to bully Democrats out of public investment. And Democrats were apparently fine with that.
Now the Trump administration is doing what Republicans do, spending government money like crazy — just not on our public schools, housing, health care, or anything else that improves ordinary working people’s economic prospects and quality of life. And once again, Democrats have leapt at the opportunity to deride Trump as a reckless philistine, constitutionally incapable of “real-world budget discipline.”
Democrats have reveled in highlighting the GOP’s post-Obama budget hypocrisy. They’ve mentioned deficits at every turn, even when a political argument against Trump’s monstrous policies would do just fine. “We are going to borrow our children and grandchildren’s future in order to go deeply into debt to fund more tax breaks at the high end,” said Nancy Pelosi during the recent tax-reform debate. The legislation was a “debt-inducing, make-rich-people-richer tax bill” said Claire McCaskill. Neither politician could resist couching her opposition to worsening economic inequality in fiscally conservative deficit rhetoric.
Attempting to balance a commitment to deficit reduction alongside a theoretical responsibility to protect and expand public programs, Democrats end up imposing false limitations on themselves and neutering their own supposed political agenda. One wonders if the party, increasingly reliant on an elite capitalist donor class, is actually using deficit reduction to weasel out of the responsibility to make life better for the working-class majority of their constituency. The GOP inevitably spends every penny the Democrats save; the difference is that they spend it advancing right-wing policies, not left-wing ones, and lining the pockets of the rich, not the rest of us. The Republicans may be hypocrites, but the Democrats are either suckers or they’re throwing the game.