Honest talk from political partisans about the federal budget situation has always been rare. With the ascendance of progressives in the Democrat party and right-populists in the Republican party, it’s nonexistent.
Consider first the progressives. Progressives champion an extravagant expansion of the welfare state.
Free health care, free college, guaranteed jobs paying $15 an hour, and lots more. The cost of the most popular progressive programs is estimated to be around $42.5 trillion over the next decade.
To put that in perspective, federal spending currently amounts to 22 percent of GDP. Add the progressive programs and the percentage doubles.
How to pay for it all? Progressive Alexandria Ocasio-Cortez has proposed imposing a 28 percent tax rate on corporations, a 15 percent surcharge on millionaires and a carbon emissions tax.
According to the Congressional Budget Office, those taxes would raise about $2 trillion over the next ten years. How to pay for the remaining $40.5 trillion? That’s a detail to be worked out later.
Republican mendacity about the federal budget is more interesting.
In the first two-thirds of the last century, Republicans preached “sound finance” — the view that budget deficits, except in a state of emergency, are fiscally irresponsible. Republicans denigrated the notion, associated with British economist John Maynard Keynes, that tax cuts and spending increases can stimulate an economy in recession.
Then came Ronald Reagan, who threw sound finance out the window.
The Reagan administration won major tax cuts and major spending increases. The tax cuts, the administration claimed, would pay for themselves by stimulating the supply side of the economy.
They didn’t.
Republicans to this day condemn Franklin Roosevelt for the budget deficits run during the Great Depression. Yet the budget deficits under Reagan in a growing economy were slightly larger than the deficits under Roosevelt during the depression.
In the four years between 1933 and 1936, the federal budget deficit under Roosevelt averaged 4.9 percent of GDP. By 1938, the deficit was 0.1 percent of GDP.
In the four years between 1983 and 1986, the federal budget deficit under Reagan averaged 5.1 percent of GDP. It was still 3 percent of GDP in Reagan’s last year of office.
Republicans are now selective in preaching sound finance. Republicans are all for balanced budgets and fiscal responsibility when a Democrat is president. When one of their own is president, deficits are “supply-side economics.”
Consider the two most recent presidents.
Obama inherited a wicked recession. So Obama, like Regan, pushed for and won an economic “stimulus package.”
There were important differences between the Reagan stimulus and the Obama stimulus, but the essence of the two was the same: big tax cuts and big spending increases. And big deficits.
One difference was that Reagan was a bigger spender than Obama.
Under Regan, federal spending increased at an inflation-adjusted average annual rate of 2.5 percent, compared to 1.9 percent under Obama.
Yet in Republican circles, Reagan is hailed as a fiscal policy marvel while Obama is excoriated as a profligate spender.
And now?
In the first 11 months of fiscal year 2018, the federal budget deficit was $895 billion. In fiscal year 2016, the last under Obama, the federal budget deficit was $585 billion.
It has taken Republicans in control of the White House and Congress less than two years to increase the federal budget deficit by 53 percent.
And not a peep of concern from Republicans. Or Democrats.
So, each of the two major political parties has demonstrated that it could not care less about the fiscal state of the federal government.
Reg Murphy Center