How can this be? Republicans embrace once-hated deficits
By Michael Kinsley: Dec. 30, 2002: Special to The Washington Post.

“You 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 lower growth."

- 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. Now 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 for 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 party beliefs.
  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 a sneer.
  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.
  But if 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 but 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.