WASHINGTON ― Republicans ran against the rising national debt in the 2010 midterm elections, and it worked. The party won big and regained control of the House of Representatives.
And regardless of what actually motivated the voters who propelled the Republican takeover that year, the tea party-fueled GOP claimed a mandate to curb President Barack Obama’s public spending habits.
Throughout that period, progressive economists, activists and a growing number of Democratic lawmakers steadily advanced the idea that budget deficits, especially in a sluggish economy, are actually a good thing. Many of these thinkers even criticized Obama for seemingly buying into deficit hawks’ policy arguments and seeking a so-called fiscal “grand bargain” with congressional Republicans that would have cut Social Security and Medicare.
Now, with the historically unpopular President Donald Trump in the White House, it’s Democrats’ turn to try and ride the midterm election wave. And since congressional Republicans’ massive tax cut bill is projected to add $1.4 trillion to the debt over the next decade, Democrats have stumbled on a seemingly delicious talking point to aid them in their quest: calling out the hypocrisy of Republicans and their supposed concern for budget deficits.
“The poor deficit hawk,” Pelosi said. “It’s become, if not an endangered species, extinct, because the Republicans only seem to care about the deficit when it comes time to invest in people. Not when it comes time to give giveaways to corporate America and the wealthiest.”
But some of the same economists who admonished Obama for embracing deficit concerns now worry that Democrats’ focus on the budgetary impact of the tax cuts could undermine the party’s political viability in the 2018 midterm elections ― as well as its policy agenda, should it regain power.
“It’s wrong from just about every angle,” said Dean Baker, co-director of the Center for Economic and Policy Research, a progressive think tank. “First off, people don’t really care about the deficit.”
Democrats “can complain about inconsistency,” Baker added, “but that also doesn’t go anywhere.”
What Americans do care about, according to Baker, is the money in their pockets. And while the tax cuts’ benefits are skewed to the super-rich, the bill is expected to add 0.8 percent growth to the economy over the next 10 years. Plus, lower tax rates are expected, on average, to modestly fatten the paychecks of millions of middle-class Americans.
So while the tax bill is deeply unpopular now, there is no guarantee its unpopularity will hold once the law’s benefits kick in.
“Democrats are underestimating the extent to which the tax cuts are going to deliver in some respects,” said Stephanie Kelton, an economist at Stonybrook University and fellow at the Sanders Institute, the think tank of Sen. Bernie Sanders (I-Vt.). “I don’t think Democrats can bank on this thing being a disaster ― in the next year and a half, anyway.”
What’s more, in the event that Democrats are able to take back one or both chambers of Congress in 2018, running as more responsible stewards of the federal budget could paint them into a corner.
Rather than reorient the government’s spending priorities toward infrastructure, health care and education, Democrats might feel obligated to waste valuable political capital trying to clean up the GOP’s “fiscal mess” at a time when low inflation would make deficit reduction unnecessary, Kelton said. And since Republicans would at least retain control of the White House until 2020, the GOP would be able to thwart any efforts to raise taxes, she noted.
In that scenario, Kelton warned, Democrats are “not gonna get anything done. The agenda will languish.”
Democrats are underestimating the extent to which the tax cuts are gonna deliver in some respects. Stephanie Kelton, Stonybrook University
HuffPost asked Democratic National Committee Chairman Tom Perez and 10 House Democrats whether they harbored any concern that attacking the GOP tax cuts for raising the national debt could backfire on them by reinforcing the conservative idea that America is somehow “broke.”
Perez responded that when it comes to deficit concerns, Republican “hypocrisy is rank.”
The tax bill, in his view, has proven once again that Democrats are the more fiscally responsible party.
“The Democrats have been the job creators over the last 36 years,” Perez said. “The Republicans have been the deficit creators.”
Several of the Democratic members of Congress approached by HuffPost were puzzled by the question, and likewise returned to the idea that they had finally exposed Republican hypocrisy on budget deficits.
“Listen, there is not a member who has not heard from the other side of the aisle their concerns of deficits. It’s becoming very hypocritical at this stage,” said Rep. Yvette Clarke (D-N.Y.).
Rep. Michael Capuano (D-Mass.) appeared to interpret the question as an unlikely challenge to the party’s fiscal bona fides, chuckling at the idea in the context of the GOP’s budget-busting tax cuts.
“The last time I knew, when Dems ran the world, the deficit was not an issue,” he said. “We were paying down our debt and paying our bills, and funding the government.”
Capuano later conceded that under pressure from budget hawks, Obama “may” have pivoted to deficit reduction too early, but said he was not worried “at this time” that Democrats’ rhetoric would revive deficit alarmism.
Rep. Tim Ryan (D-Ohio) similarly touted Democrats’ fiscal stewardship. “We have a pretty good record through the Clinton years,” he said.
As a co-chair of the Congressional Progressive Caucus, Rep. Raúl Grijalva (D-Ariz.) helped lead progressive opposition to Obama’s efforts to broker a deal that would have cut Social Security and Medicare. On Thursday, Grijalva admitted that focusing on the deficit effects of the tax bill is less than ideal.
“It’s about the revenue our country needs to take care of its people. I would prefer if we framed it that way,” Grijalva said.
He nonetheless argued that it is “also important to point out the hypocrisy. These are the deficit hawks, these are the deficit people.”
A number of Democrats maintained that they are less concerned about the effects of budget deficits per se than about the prospect that congressional Republicans might turn around and use the deficits created by the tax cuts they enacted to make the case for major cuts in social insurance programs. Indeed, House Speaker Paul Ryan (R-Wis.) declared earlier this month that congressional Republicans would be pivoting to so-called “entitlement reform” ― a euphemism for cuts to Social Security, Medicare and Medicaid. (For his part, Senate Majority Leader Mitch McConnell (R-Ky.) said that overhauling the programs is unlikely due to Democratic opposition.)
“We use the conversation about deficits as shorthand for saying… ‘we know how you are, we know what you do, we know what your M.O. is, and now instead of paying for these things in what we think is a respectable and honest way, you’re gonna try to cut Medicare and Medicaid and Social Security,’” said Rep. Donald McEachin (D-Va.).
Rep. Ted Lieu (D-Calif.) framed it in similar terms, predicting that “in a few weeks they’re gonna run around and say, ‘Oh, look at this big deficit we have. Now we have to cut Medicare and Social Security.’”
I would have been much more comfortable if this looked more like mortgage debt ― by financing a trillion and a half dollars’ worth of infrastructure. Rep. Dan Kildee (D-Mich.)
Several Democratic lawmakers also acknowledged that generating budget deficits can have a positive effect on the economy. They argued that a tax bill targeted at high earners and corporations is a waste of budget deficits that would have a much greater impact if used to finance infrastructure and education investment.
“There are reasons to deficit-spend if you were gonna invest in infrastructure right now, which we need, and we’re gonna have to invest in at some point,” said Rep. Beto O’Rourke (D-Texas).
Referring to low interest rates, O’Rourke added, “Money’s really fucking cheap. And people are gonna need work in places that I care about in Texas. I’m happy to add to the debt for that.”
Rep. Dan Kildee (D-Mich.), who represents Flint, a city still reeling from the lead-poisoning of its water supply, likened the tax bill to credit card debt, when proverbial “mortgage debt” ― that is, debt-financed investment in a long-term asset ― is what the country needs.
“I would have been much more comfortable if this looked more like mortgage debt ― by financing a trillion and a half dollars’ worth of infrastructure,” Kildee said. “But to borrow a trillion and half dollars from China to give it away to people with no commitment that they’re gonna use it for anything other than their own wealth, it’s a totally different question.”
With the amount of money the tax cuts would add to the debt, said Rep. John Yarmuth (D-Ky.), “you could pay off every student loan in the country. You could probably rebuild every bridge and repair every roadway that needs work.”
When it comes to campaigning against the GOP tax bill’s benefits for middle-class people, the congressional Democrats interviewed by HuffPost were confident that pointing out the disproportionate benefits of the bill for wealthy people would be a winning message.
They repeatedly cited the nonpartisan Tax Policy Center’s estimate that 82 percent of the bill’s benefits would go to the top 1 percent of earners over the next decade. The lopsided gains of the bill reflect the fact that while the bill’s corporate tax cuts are permanent, the lower individual tax rates would expire in 2025.
“I suspect our response will be that you didn’t keep your promise ― ‘You put corporations over regular people. If you wanted to, you could have made the tax changes permanent just like you did for corporations, but you deliberately chose not to do that,’” McEachin said.
And the elimination of the Affordable Care Act’s individual mandate is due to drive up health insurance premiums for many households, offsetting the tax cuts’ effect on incomes, Kildee noted.
“If you get a slight increase in your take-home pay but you have to pay all of that and more to make up for increased health care premiums, it’s not a good deal,” he said.
Democrats were less united about whether they would prioritize reducing budget deficits, including a politically difficult reversal of the tax cuts, should they gain control of one or both chambers of Congress in 2018.
Democrats would need to be “responsible” in terms of financing any infrastructure investment, McEachin said. “We may need to redo the tax code, to the extent we make sure that folks are paying their fair share and that it’s not being balanced on the backs of the poor or the middle class.”
When asked whether closing budget gaps would be on Democrats’ shortlist if the party won big in 2018, Lieu responded: “I don’t know. I think we would actually ask the American people.”
However, Yarmuth, who stands to become chairman of the House Budget Committee if Democrats take back the House, flatly stated that Democrats would prioritize their spending goals ― including infrastructure, student loan relief and expanding community college access ― over deficit reduction.
“All things being equal, if 2019 is the same as it is today, with interest rates at the same level and employment at the same level, I would say that we would be very aggressive in our program and in our agenda,” he said.
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