How can this be? Republicans
embrace once-hated deficits
By Michael Kinsley: Dec.
30, 2002: Special to The Washington Post.
and I as individuals can, by
borrowing, live beyond, our means, but for only a limited period of
time. Why, then, should we think that collectively, as a nation, we are
not bound by that same limitation?”
-Ronald Reagan’s First Inaugural Address 1981
“Glenn Hubbard, chairman of the White House's Council of Economic
Advisers… derides the current fixation’ with budget deficits, and
labels as ‘nonsense’ and Rubinomics' the view espoused by former
Clinton Treasury Secretary Robert Rubin that higher deficits lead to
- The Wall Street Journal, Dec. 17
How in the world did this happen? Once upon a time, federal
government deficits were denounced by St. Ronald as a focus of evil
barely less threatening than communism itself. Now that concern is
mocked by a Republican White House as the nonsensical “fixation” of a
previous Democratic administration. In recent weeks the term
“Rebinomics” has spread through the press like a rash promoted by
people who apparently believe the best way to discredit anything is to
associate it with Bill Clinton.
They are not deterred by the inconvenient fact that
the economy did rather well under Clinton and Rubin better than under
either of the Bushes or Reagan himself. Even more astonishing is that
the Republican propaganda machine is trying to stamp “Clinton” all over
one of the cornerstones of Reaganism.
In fact, the coming White
House campaign for changes in the tax code is starting to look like a
world class weird combination of extreme frankness and extreme fantasy.
For a quarter century, Democrats have been saying that Republican tax
cuts favor the rich, and Republicans have been indignantly denying it.
prominent Republicans are saying. Heck, yes, were out to shift the
tax burden from the very affluent to the middle class.
R. Glenn Hubbard, chairman
of the president's Council of Economic Advisers, has declared that rich
folks deserve a break and ordinary folks deserve to pay for it.
In an administration in which economic advisers are fired merely
wearing a bad tie while loyally mouthing the party line in perfect
iambic pentameter, Hubbard is still in good odor. So this bolt of
honesty is apparently intentional.
There is an honest element in the new party line about deficits,
too. At least the Republicans no longer are pretending that deficits,
if they happen to occur, are detritus left behind by the previous
administration, like those McDonald’s wrappers behind the dresser in
the Lincoln Bedroom. Instead,
Republicans embrace the coming deficits as their own and pooh-pooh any
desire for a balanced budget as some kind of liberal Democratic folly.
But this is breathtakingly dishonest on three levels.
First is the utter contradiction between the new “deficits don’t
matter" line and what Republicans have said they stood for over
decades. Nothing is wrong with changing your mind. But if you decide
that a core value in your political philosophy is misguided, you should
say so before launching a campaign of ridicule against those who
believe what you believed until the day before yesterday.
Even if Republicans hadn’t been demonizing deficits for decades,
their deficits-don’t-matter line would contradict other allegedly core
That is the second level of dishonesty. The explanation of why
deficits don’t matter goes something like this: When the government
spends more than it takes in and borrows the difference, this has two
potential effects. The borrowing reduces the amount of capital
available for private investment, raises interest rates and makes us
poorer. But the extra spending or lower taxes stimulate economic
activity and make us richer. The question is: Which effect is bigger?
A battle of empirical studies is going on about whether deficits
actually raise interest rates. And maybe they don’t but only if the law
of supply and demand and other tenets of free market capitalism have
been repealed, which is an odd position for Republicans to take.
Meanwhile the short term stimulus is a classic “Keynesian”
strategy a word Republicans usually can’t even pronounce without
Keynes argued that modern economies have a tendency for
inadequate demand that can produce a self feeding spiral into recession
or worse, and that government, deficits can be used as weapons against
this danger. Republicans have gone from mocking that idea to parodying
it. There hasn’t been a moment since 1980 when Republicans thought it
was the wrong time for a fiscal stimulus in the form of a tax cut. They
were right to eschew Keynesianism - one taste, and they became addicts.
government borrowing never hurts the economy and if taxes
always do, why torture ourselves with taxes all? Why not borrow the
whole cost government? If you suspect that won’t work, you’re right
if those who anathemize “Rubinomics” have a theory of when deficits can
become too big they haven’t shared it. Meanwhile, we have the evidence
of our own eyes that Clinton and Rubin delivered levels of job
creation, investment and economic growth that this administration would
be thrilled to duplicate. And “Rubinomics” did it without the shots of
short term stimulus Bush is demanding.
Thus the third level of dishonesty in the newfound Republican
fondness for deficits: It conflicts with obvious reality. But I suppose
that’s a minor consideration.
Michael Kinsley is the editor of Slate, an online magazine.