It may seem like ancient history, but a decade ago, when Democrats controlled the levers of federal power, Republicans were hysterical about the need to balance the budget. GOP officials not only wanted to amend the Constitution to prohibit deficits, they also condemned any proposal, no matter how beneficial to the public, if it added so much as a penny to the budget shortfall.
It was, even at the time, a ridiculous approach to economic policy. In the midst of a jobs crisis, Republicans saw a debt crisis. When the economy desperately needed more capital, GOP policymakers fought tooth and nail to take capital out of the economy.
Thankfully, the Democratic economic agenda worked, the Great Recession ended, the unemployment rate dramatically improved, and toward the end of Barack Obama’s second term, the deficit had shrunk by roughly a trillion dollars.
That was then, this is now.
The federal budget deficit ballooned rapidly in the first four months of the fiscal year amid falling tax revenue and higher spending, the Treasury Department said Tuesday, posing a new challenge for the White House and Congress as they prepare for a number of budget battles.
The deficit grew 77 percent in the first four months of fiscal 2019 compared with the same period one year before, Treasury said.
The total deficit for the four-month period was $310 billion, Treasury said, up from $176 billion for the same period one year earlier.
There’s no great mystery as to the contributing factors. The Republican tax plan slashed the corporate tax rate, and as the Washington Post’s report added, the Treasury Department “noted a major reduction in corporate tax payments over the first four months of the fiscal year.”
In case this isn’t obvious, current economic conditions – healthy growth, very low unemployment – suggest the deficit should be shrinking, not growing. Indeed, when Donald Trump spent months leading up to Election Day bragging that he knew how to eliminate – not just reduce, but eliminate – the nation’s budget deficit “easily” and “quickly,” these are precisely the conditions he was referring to.
But the Republican tax cuts make that impossible – because they don’t pay for themselves.
This clearly isn’t what the president and his party want to hear. At the heart of contemporary GOP orthodoxy is the idea that tax breaks for the wealthy fuels growth, which leads to good jobs, which leads to more taxpayers, which leads to increased tax revenue, which leads to shrinking deficits.
Even Sen. Susan Collins (R-Maine), ostensibly her party’s most moderate federal lawmaker, defended her support for the regressive Republican tax plan in late 2017 by insisting, more than once, that tax breaks would pay for themselves.
Any chance Collins and her colleagues will look at the ballooning budget deficit and acknowledge they were wrong?
Postscript: Every time we discuss the deficit, I feel compelled to point out again that I’m not a deficit hawk, and I firmly believe that larger deficits, under some circumstances, are absolutely worthwhile and necessary.
These are not, however, those circumstances. When the economy is in trouble, it makes sense for the United States to borrow more, invest more, cushion the blow, and help strengthen the economy.
The Trump White House and the Republican-led Congress, however, decided to approve massive tax breaks for the wealthy and big corporations when the economy was already healthy – not because they were addressing a policy need, but because they were fulfilling an ideological goal.