Deficits Do Not Matter

Before our economy blew up in 2008 and before George W. Bush invaded Iraq under false pretenses, a guy named Paul O’Neill, who you might remember as Bush’s first Treasury Secretary, was shut down by Vice President Cheney when O’Neill attempted to throw cold water on another round of tax cuts the Bushies were plotting for 2003. According to O’Neill, Cheney brusquely observed that “Reagan taught us deficits don’t matter.” The tax cuts got enacted and O’Neill was shitcanned shortly after his face-to-face with Cheney. 

But a funny thing happens any time a Democrat is handed the keys to 1600 Pennsylvania Avenue. Suddenly, those profligate Republicans who gladly starve the government of actual money and borrow it instead, become very concerned about budget deficits and debt. It happened when Bill Clinton was President and came back with even greater force once Barack Obama took office. 

Once Republicans took over the House, and continuing when they assumed power in the Senate, any time Obama wanted to do something like extend unemployment insurance to people who were out of work because of the crippling effect of the Great Recession, there was a demand for a so-called “offset” - a dollar for dollar removal of funds from place A to fund priority B. It got so bad that emergency funding for New Jersey and New York after Superstorm Sandy was held up for weeks while Congress quibbled over the small details. That tens of thousands suffered needlessly seemed of no moment. Of course, none of this was required when George W. Bush was spending hundreds of billions in Iraq, Medicare was expanded to provide a prescription drug benefit, or when tax cuts were enacted in 2001 and 2003 that drained the Treasury of needed money just as we were embarking on that grave error of an invasion in the Middle East.

There were few voices louder in demanding austerity and cuts to social programs, while simultaneously cutting taxes even more than Paul Ryan. While his economic view was roundly panned when he was made Mitt Romney’s Vice Presidential running mate in 2012, Ryan never gave up the ghost. Now that he has risen to the third-most powerful office in the land, you would think a journalist such as Chuck Todd would devote a significant portion of time when interviewing now-Speaker Ryan about the recently enacted federal budget and a companion bill that cut taxes by nearly $700 billion over ten years. Yes, you read that right, SEVEN HUNDRED BILLION DOLLARS - but you would be wrong. Here is their entire exchange:

What does this even MEAN? “by keeping taxes where they are that means we’re keeping them where they are.” Yes, yes you are, sir. “Not raising taxes is not cutting taxes.” WHAT? This is the same guy who helped block a $9.7 billion unemployment extension in 2014 because it did not have offsets and the same guy who voted against the emergency relief bill after Superstorm Sandy, but is totally fine with handing almost $700 billion in tax cuts, mostly to corporations and businesses, without cuts elsewhere to make up the difference. No mention of how this will require more borrowing and increase the deficit over time. No questioning of why it is suddenly okay to increase the deficit when it was supposedly such a huge problem less than five years ago. Nope. Nada. Nothing. 

Unsurprisingly, this steaming pile of horse manure got no follow-up from the guy who hosts the top rated Sunday morning talk show in America. The media literally spent months not too long ago obsessing over the need for a “grand bargain” that would rein in the supposedly swollen deficit that risked destroying the nation. Of course, as the budget deficit has receded, less and less time has been spent reporting on it and even less interest in calling out shameless politicians who are happy to stick it to people without jobs or a home so long as the bill being signed has a whiff of bipartisanship and a novelty beard attached to it. 

To recap, Chuck Todd asked a whole ONE question about this apparent hypocrisy, Paul Ryan gave a word salad answer that literally made no sense, and Chuck Todd moved on. So, the next time Republicans refuse to pay for something or claim we cannot afford it, do not expect Chuck Todd, or anyone else in the Beltway media to question it. 

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The Curious Case of the Disappearing Deficit

Buried on page A21 of Friday's New York Times was news that our budget deficit for the fiscal year that ended on September 30th was $439 billion - $44 billion less than the prior year, almost $1 trillion less than its peak during the Great Recession, and a mere 2.5% of Gross Domestic Product (GDP). 

That you may not be aware of this fact is unsurprising. If the "paper of record" deems this story inconsequential, do not hold your breath that the nightly news, the Sunday chat shows, or anyone else in the media will do anything other than make passing reference to this fact. And that too says something. It was not so long ago that the media was obsessed with the budget deficit, egged on by Republicans who pulled out Talking Points 101 from their playbook about the need to slash Social Security and Medicare or fear becoming a beggar nation like Greece. There was breathless coverage of the tick-tock of "grand bargain" negotiations between the President and John Boehner and one of DC's favorite creations, the blue ribbon commission, was formed to provide a blueprint for long-term deficit reduction.

But a funny thing happened on the way to no one remembering Simpson-Bowles and opting against trimming earned benefits like Social Security or Medicare. The budget deficit is no longer a problem. Indeed, not only is the total amount less than what it was before the Great Recession, but because our economy is larger, it is also even less as a share of our GDP. Indeed, at 2.5% of GDP, our current deficit is less than the modern historical average and a half-percent below what economists think appropriate for sound fiscal policy. 

Of course, we have seen this movie before. When Bill Clinton inherited a massive budget deficit after 12 years of runaway deficit spending by Reagan and Bush, he passed a tax increase on the wealthy, reined in government spending, and the economic boom resulted in a flood of tax receipts that left a $236 billion surplus when he left office. Barack Obama and the Democrats passed the American Recovery and Reinvestment Act and the Affordable Care Act, invested in research and development, saw unemployment plummet, and passed a teensy-weensy tax hike on the top 1%. The reductions in health care spending, the increase in tax receipts from an improving economy (and stock market), and marginal cuts to federal spending have all helped drop the deficit by almost 75 percent from its 2009 high. 

Why the Beltway media continues to fall for the Republican trope that they are the fiscally prudent party while the Democrats are shameless spendthrifts is beyond me. We now have 35 years and five Presidents of proof that Republican Presidents spend like teenagers with their parents' credit card and leave it to Democratic Presidents to pay the bill. 

But the ho-hum, Obama-cut-one-trillion-from-the-deficit shoulder shrug emoji from the Beltway media is really disappointing.

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