The view taken by some in Washington that major reductions in the United States’ national debt can be achieved without addressing revenues is essentially a pledge to do nothing serious about the debt or deficit. The reason: the ideology of supply-side tax-cut-only social policy not only requires, but admires “deficit spending”.
Some critics of this way of thinking, most notably fiscally conservative, pro-middle-class Republicans, have called it “voodoo economics”—a mystical and unverifiable faith tradition posing as economic policy, which only serves to divert wealth away from the middle class, draining the federal budget to deliver wealth to the already wealthy.
Some take the view that this is overly harsh, but the question of deficit spending is clear: in the 1980s, during the heyday of “Reaganomics”, the US fell into massive, historically unprecedented budget deficits, and proponents of the policy actively talked up the virtues of spending beyond our means. You can’t get credit if you don’t borrow, goes the argument.
In the 1990s, it was a Democratic president that wrested the economy back from the deficit brink, actually balancing the budget, curbing spending (through the Reinventing Government program) and generating record budget surpluses. It was, then, the most radically supply-side-favorable administration, that of George W. Bush, that presided over the most massive spending increases to date. (The bulk of federal budget rises during the Obama presidency comes from actually including the Iraq and Afghanistan wars in the budget.)
What’s more, the radical spending increases of the Bush presidency were almost entirely unfunded. (There was no sound fiscal plan for funding the Iraq or Afghanistan wars, the Medicare Prescription Drug Benefit, the doubling of regular Pentagon spending, or the tax cuts.)
The point is not intended to be partisan; the point is that supply-side theorists demand (and activate) massive deficit spending and have never presented any serious plan to curb deficit spending. At present, supply-side plans that demand a balanced budget with no solution to revenue shortfalls are as unserious and anti-middle-class as supply-side policies have tended to be.
Between the years 2001 and 2004 (in which George W. Bush’s two record tax giveaways to the ultrawealthy were passed), the median income of the wealthiest 1% of American households jumped by 17 times the total median income for the rest of American households, nearly half of what it had taken the previous 50 years for that wealthiest 1% to gain.
The 2001 tax cut was not stimulative and it did not “create jobs”; it was the single largest transfer of wealth in world history, it plunged the federal budget into massive deficits, and left the economy reeling: household borrowing at record highs, median household income falling, and less economic clout bound up in the middle class and small businesses than at any time since the 1890s.
Any independent voter seeking to make sense of all the talk about debt and deficit, about the debt ceiling question, and about the hype and hyperbole coming from the Washington press corps, needs to first consider that our political and economic system demands above all things a vibrant and resilient middle class. Continuing, or even radically expanding, policies that have so degraded the middle class, will not cure what ails our economy or our federal budget model.
More precisely: any approach to debt and deficit that does nothing concrete to address shortfalls in revenue —almost entirely attributable to the voodoo economics of the period 2001-2008— is not a plan to deal with debt or deficit, but a political manipulation posing as economic policy. Fiscal conservatives owe it to their movement and to the people who believe in their principles to 1) be honest about the viability of unfunded policy adjustments, and 2) make sure they take concrete action to shore up the middle class first of all.