Deficit Confusion

I’m afraid that, at this point, I’m quite confused about where the Republicans stand on deficits. Both President Reagan and President Bush grew massive deficits during their time in office, but ever since President Obama took office the Republicans seem to have finally discovered the need for a balanced budget. Or at least, that’s what they’ve been saying.

Each week, President Obama gives a radio address, which the Republicans then respond to. Senator Saxby Chambliss recently gave this response. In it, he called the debt “one of the most dangerous threats confronting America today.” Going further, he said, “At some point we have to say ‘enough is enough.’” This was, of course, in response to the Democrats’ desire to extend about $30 billion in unemployment benefits at a time when there are 5 unemployed Americans for every available job. And as the effect of the stimulus bill wears off, and with no second bill coming, that number will probably only increase.

No one likes deficit spending (except apparently Bush’s Republican Congress), but $30 billion more in deficit spending isn’t going to be the straw that breaks the camel’s back. Investors are still buying government bonds at low interest rates, showing that they are confident in the government’s ability to pay off its debt and that they are not yet concerned about inflation. In other words, ensuring that American citizens can keep food on the table will not have a significant impact on the future economic outlook of our country.

However, I can understand the Republican position; again, no one actually wants deficits. Which made this surprising. On Monday, Senator Jon Kyl, the Senate Minority Whip, was asked why, if deficits are such a problem, Republicans are advocating for an extension of the Bush tax cuts to the richest 2% of Americans. This would result in at least $650 billion in lost revenue over the next decade and the Republicans have yet to say what government programs they want cut to pay for the tax cuts.

Kyl’s response? “You do need to offset the cost of increase spending. And that’s what Republicans object to. But you should never have to offset the cost of a deliberate decision to reduce tax rates on Americans.” And when he says Americans, he means only rich Americans, since part of the Obama stimulus plan the Republicans so strongly objected to included a tax cut for 95% of Americans.

But maybe Kyl had gone off the reservation? Maybe his boss, Senate Minority Leader Mitch McConnell, would set the record straight.

Or not.

“There’s no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increase revenue, because of the vibrancy of these tax cuts in the economy. So I think what Senator Kyl was expressing was the view of virtually every Republican on that subject.”

I have one question for Senator McConnell: on what planet do you spend most of your time?

First, in the years leading up to the financial collapse, the American economy was underperforming. Second, trickle-down economics has never worked. Ever. So, no, it won’t lead to increased government revenues; it will lead to even larger deficits. The Republicans never stop talking about how President Obama should cut government spending, but when in power, the Republicans refuse to do so. They also never say which programs they want to cut. Will they reduce Medicare spending? How about ending Social Security? Shall we cut education spending? Or what about defense? Where is the “wasteful spending” they want to cut?

To put this all in perspective, in an interview yesterday Alan Greenspan said that it was time to let the tax cuts expire. This is the same Alan Greenspan who, as Chairman of the Federal Reserve, helped pass the tax cuts in the first place. Why does he support letting them expire? “…unless we start to come to grips with this long-term outlook, we are going to have major problems.” In other words, tax cuts will lead to more deficits. And since $650 billion is about 20 times greater than $30 billion, one has to assume the Republicans are lying about being concerned about the deficit. So why are they blocking unemployment benefits?

3 Responses to Deficit Confusion

  1. Mr. Lynne says:

    Yglesias had three recent blog posts on conservatives and deficit concern. And his conclusion is that conservatives don’t care about the deficit“:

    1) There have been two presidents who were members of the modern conservative movement, Ronald Reagan and George W Bush, and they both presided over massive increases in both present and projected deficits.

    2) The major deficit reduction packages of the modern era, in 1990 and 1993, were both uniformly opposed by the conservative movement.

    3) When the deficit was temporarily eliminated in the late-1990s, the mainstream conservative view was that this showed that the deficit was too low and needed to be increased via large tax cuts.

    4) Senator Mitch McConnell says it’s a uniform view in his caucus that tax cuts needn’t be offset by other changes in spending.

    5) The deficit reduction commission is having trouble because they think conservative politicians won’t vote for any form of tax increase.

    In sum, there are zero historical examples of conservatives mobilizing to make the deficit smaller. What is true is that most conservatives oppose increases in non-military spending when those increases are proposed by Democratic presidents.

    Of course, allegedly, Republican and Conservatives aren’t interchangeable, right?

    One piece of pushback I got from some right-of-center folks to yesterday’s post on how conservatives don’t care about the deficit was to say that well maybe some Republican Party elected officials are bad on this, but the conservative movement is different. I think that’s entirely false. President George H.W. Bush struck a bargain with congressional Democrats that reduced spending and decreased the deficit. Some Republican Party elected officials backed him. But conservatives were apoplectic. …

    …But while it’s true that conservatives do care about spending, it’s important to remember that their overwhelming preoccupation is with taxes. The major examples of spending reductions we have, the 1990 and 1993 deficit reduction bills, are both loathed by conservatives because they included tax hikes.

    And it is clear what is in store for GOP pols who dare worry about the deficit over tax cuts:

    Some conservatives keep accusing me of mixing up conservatives with Republicans, who opportunistically fail to cut spending, but I think this is backwards. Just compare the difference in reaction to Republican President George H.W. Bush who made taxes higher, spending lower, and the deficit smaller versus Republican President George W. Bush who made taxes lower, spending higher, and the deficit bigger.

    To the extent that the GOP identifies as conservative, they don’t really care about deficits.

  2. norris hall says:

    In these rough economic times is it right to borrow money to help the jobless?
    Republicans say NO. Borrowing that money is just going to add to the already bloated deficit.
    But Republicans sing a different tune when it comes to spending billions of dollars in borrowed money for reconstruction in Iraq.
    American taxpayers…including many now in the ranks of the unemployed spent tens of billions of dollars building new schools , roads and bridges in Iraq. We trained and equipped their entire army and police forces. We spent hundreds of millions of dollars trying to get their electrical grid working and to provide clean drinking water. We built hospitals for them. Even gave cash grants to shopkeepers so they could keep their businesses up and running.
    And ever nickle that went into all those projects is borrowed money. Money our children will have to repay when they are adults.

    Now when it comes to helping AMERICANS, the Republicans want to play scrooge.

    Republicans seem to have more concern for Iraqis rather than Americans.

  3. JoeS says:

    It’s not the Iraqis they care about, but they are willing to bribe them for their oil. Just like BP did to get rights to Libyan oil.