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Why Obama Can Spend, Spend, Spend
Jae C. Hong / AP
A decade after Bill Clinton made Democrats the party of fiscal responsibility, the president-elect is about to turn the tables.
Sometime early next year, Barack Obama will likely take out his pen and sign a stimulus bill that creates the biggest budget deficit in the history of man. And somewhere, Daniel Patrick Moynihan will be smiling.
In 1988, the late, great senator from New York accused the Republican Party of a dastardly plot, which flipped American politics on its head. Historically, the GOP had been the party of fiscal discipline. In the 1950s, most Republicans wouldn’t even support large defense budgets, because—it was said—that while they feared communism, they feared budget deficits even more. It was Moynihan’s party, the Keynesian-inspired Democrats, which relished deficit spending, since it pumped up the economy, and kept people employed.
Serving broccoli may be the right thing to do. But it’s not the best way to get the chef reelected.
Then in the 1980s, the Reagan administration changed all that. The Gipper slashed tax rates, all the while promising he would restrain spending as well, thus keeping deficits down. But Moynihan, citing secret conversations with Reagan’s budget director, David Stockman, said it was all a sham. The Reaganites had no intention of cutting the big, popular spending programs that middle class Americans loved—and handing the Democrats a club with which to beat them. Instead, they gave Americans tax cuts, defense hikes, and middle class spending, leaving Democrats to carp about deficits. Republicans, once the broccoli party, were now dishing out ice cream.
When Democrats took power again in 1993, they fell right into Stockman’s trap. Facing big deficits, Clinton shelved his popular proposals for a middle-class tax cut and an economic stimulus in favor of a package of tax hikes and spending cuts meant to restore fiscal discipline. The bond market cheered, but Clinton’s foul-tasting economic medicine played a big role in the GOP’s massive victory in 1994. As Thomas Frank and others have argued, what traditionally drew culturally conservative working class voters to the Democrats was its economic populism. But it was hard to be the party of Wall Street and the party of the lunch-pail at the same time. As Clinton once exclaimed in frustration, “We’re Eisenhower Republicans here and we are fighting the Reagan Republicans.”
By the time Bill Clinton left office, the budget was in surplus. But under George W. Bush, the cycle started all over again. Like Reagan, Bush passed massive tax cuts and dramatically boosted military spending while allowing popular middle class domestic spending to grow. The result, predictably enough, was huge deficits, about which Republicans shed crocodile tears, but did almost nothing.
Had the economy not imploded a few months back, this story of Charlie Brown and the football might well have continued. Like Clinton in 1993, Barack Obama would have been forced to make agonizing choices between his popular campaign proposals for a middle-class tax cut and new spending on things like health care, and the need to get America’s fiscal house in order. Given that in today’s Democratic Party—as opposed to the party of the 1950s—Wall Street bankers and academic economists usually trump labor officials, he might have made the same basic decision as Clinton. As policy, the decision might have been wise. But politically, the Democrats would have abandoned their populist heritage once again, exacerbating their problem with working class whites. Serving broccoli may be the right thing to do. But it’s not the best way to get the chef reelected.
Because of the economic crisis, however, all that’s out the window. For the time being, virtually all Democrats believe Obama should spend whatever it takes to avert a depression, deficits be damned. Middle-class tax cuts, public works projects, big health care initiatives—it’s ice cream all around. As a result, in the years to come, Democrats will be the party of deficits once again. And Republicans, as they tend to do in opposition, when big upper-income tax cuts aren’t an option, will rediscover the virtues of fiscal discipline. In other words, what Reagan flipped, Obama will likely flip back. He could well leave office after eight years, as Reagan did, with a legacy of economic recovery, popular spending and tax-cutting, and a mountain of red ink, which his Republican predecessor has to turn black.
For Democrats, being associated with deficits once again has perils. One reason the party has made inroads among more highly educated whites is that these voters—unlike their parents—don’t see Democrats as fiscally irresponsible. If Obama doesn’t follow up his stimulus with painful (and politically dangerous) efforts to reduce the deficit, fiscal hard-liners like Paul Volcker might turn against him. But if the great deficit flip has its dangers, they still pale in comparison to its benefits. As Reagan understood, in American politics, Santa Claus usually beats Scrooge. And for Obama and the Democrats, it’s suddenly Ho, Ho, Ho.
Peter Beinart is a Senior Fellow at the Council on Foreign Relations.
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I often comment on how we are now all of a sudden worried about the deficit (how nice would it be to have some of the $656 billion we spent on defense this year alone to help us out of the economic disaster we are in). The difference is that for this $800 billion we might actually have something to show for it besides 4,500 dead in Iraq like roads, levees, bridges, power grids, green industry etc...
For all the 'socialist spendocrat' rhetoric on the campaign trail it is interesting to note that the biggest debt is racked up during Republican rule (also it is interesting to note is that the abortion rate also goes up while Republicans are in power)......perhaps rigid adherence to ideology does not always get the results you would expect???
I've said it before: no politician who wants to be elected president can tell the whole truth, and nothing but the thruth so help me God. I'm not sure anyone who wants to be elected dogcatcher in Podunk USA can tell the truth and get elected. Solon, the ancient Greek philosopher, said that democracies work until the people discover that they can vote themselves bread and circuses. This is a truth Barrack Obama cannot escape. Ideas that might - repeat: might - make a difference are unpalatable to either voters, entrenched bureaucrats, politicians and media elite, and so rarely see the light of open public discussion, Anybody heard of a graduated flat-rate income tax? Of keeping the Social Security pool sacrosanct instead of 'borrowing' it to pay for other things? Of allowing bankruptcy judges some leeway when dealing with home mortgages? Of charging income tax on big businesses on all their profits, including the overseas production? Maybe even taxing big companies who outsource both their production facilities, costing the US jobs, and their banking, costing the US tax dollars? Anybody ever heard of responsible business practices? Anybody ever heard of using the system of IRS audits to get the biggest fish first?
These aren't my ideas, but they are ideas that merit serious discussion. They won't get it. Look who benefits from the silent status quo: politicians who want to be elected, robber barons, life-long bureaucrats and short-sighted voters who can't see beyond their immediate self-interest to think about who will pay for what they want. Does Joe the Plumber know about thise ideas? Not unless he is an internet junkie over economics and politics. Does Barrack Obama and his advisors and appointees know about these ideas? Maybe. But explaining them to voters in a way that makes logical sense, is pretty hard when folks whose self-interest is all that matters and who perceive that ideas like these might cost them something, aren't going to allow much open discussion of ideas like this. So we are just going to get more bread and circuses until it's all gone. Then what?
FTA:
"The Gipper slashed tax cuts"
Should be changed to something like:
"The Gipper slashed tax rates" or "The Gipper pushed tax cuts". The current formulation is nonsensical.
Also, I assume the sentence with the phrase:
" . . . which his Republican predecessor has to turn black." was supposed to use the word "successor" instead of "predecessor".
Copy editors: gotta love 'em.
In the 1980s this country was do for an infrastructure makeover. Sainted Ronnie skipped it so he could, as you say, pass out ice-cream. Clinton did not have the spine to insist on an Iran-Contra tribunal and Ronnie became the patron saint of swindlers and ponzie sceamers. I fear Obama will let the Bushies off the hook too and we will swing even lower on the next pass.
Only time will tell how Obama will fair. Lord help us till then.
@ jericho4119
Good eyes
A pretty good article but with some misleading statements, such as "For Democrats, being associated with deficits once again has perils. One reason the party has made inroads among more highly educated whites is that these voters-unlike their parents-don't see Democrats as fiscally irresponsible."
What it overlooks is that it has made far greater inroads among the poorly informed and gullible, by promising them everything they want to hear. I have seen enough interviews of Obama voters to see that they were overwhelmingly stupid and clueless - typically, they did not know which party controls Congress, and were unable to name a single Supreme Court judge, or explain who the Taliban are. What they did "know" was that Obama was going to provide them with free medical care, help them pay off their debts, and get them good-paying jobs. The old Democratic mantra of promise everything and deliver half of it by inflating the money supply has worked again.
Spend mightily and at once. Second, construct the two Great Grids of America -- the Universal Free Broadband Grid (most of the Interstate highways Ike built are free). Then the Two-Way Micro Electric Grid. Each household should have a 'Solar Victory Garden' on their roof or against the West Fence of their backyard. We must massively get meters which run both ways so folks can both 'take and give' from/to the revamped Electric Grid. These are supreme & smart investments without which the Future of Our Children, much trumpeted, will be bleak. On Jan 21, start putting the latest solar on every rooftop of every federal building in the nation, by fiat. On jan 21, start building carport-style solar roofs over every federal parking lot in America -- talking about available & wasted space, unholy moly. (Forget corn and most other ethanols -- we're at Peak Soil already. Using food-soil for fuel sources is madness. Figure out the sun, the wind, the geo.)
First, someone's gotta get the gonads to say that the main Defense of our Nation is in HealthCare and we should invest comparable sums in it. Repeat after me "single payer" -- c'mon now say the sensible, bleedingly obvious word, "single-payer." As a person who hasn't been to a doctor since 1979, I can tell you that not having HealthCare is painful and dangerous and it sucks. It's a joke that you can make HealthCare "affordable" to poor people. $25 is a major expense to a poor person. (ALL elected officials & supercilious bloggocommenteers should have to live on minimum wage and take only public transportation for one week of each month while they're in office or comment-slinging. Then some truth would prevail.) Oh, we'll provide for 'the truly needy' -- sure, let's insure that poor people must humiliate themselves to get identified as sufficiently dirtpoor & downtrodden to get some medical subsidy or other. It's disgusting. So they lose their dignity along with their health.
Spend spend spend to make up for the Ronnie-Wrought stupid and selfish uber-capitalism ruin & meanness that has been done unto our shattered non-society. Time for some serious and gladfull rebuilding of a commonwealth. From which, unlike the other way around, the Kindness-Starved Rich will benefit as well.
wfleet's suggestion on solar panels is the sort of unthought-out idea that can waste 500 billion of the trillion dollar stimulus package. There are places where solar panels make sense and places where they do not.
I am afraid that the package will be overburdened with such bright ideas, coming from both well-intentioned people and grasping lobbyists, as well as maniacal Green fanatics.
If we have $700 billion for the banks, and $35 billion for the auto industry, and a cool TRILLION for blowing up people in some faraway place, then we have all the money we need for any and every project to rebuild the infastructure, provide education and health care to all, and green this country. I mean, damn, wouldn't $500 billion buy an electric car for everyone?
My favorite part is how the Republicans have put the world's biggest foot in their mouth. For the next four years, and complaints about spending or big government will be answered by pointing to the money they spent on their war and bailing out their banker buddies.
I, everyday American, need a motherf**kin bailout, you heard?!
"ANY complaints about spending . . ."
wfleet - I agree. Let's have every appointed and elected public official and every media mogul and talking head and every supercillious blog-o-teer spend one week a month living totally on minimum wage, making too much for help and not enough to cover expenses. Things would change rapidly after that!
In truth, we are governed largely by an elite, by people who have not only no real experience, but who have no insight into real, middle-to-lower class American life. everyboyd read stories about the homelss, or those displaced by a hurricane, but there aren't to many stories about those who work hard, make $7.85 an hour, live frugally, and cannot pay their damn bills. Forget doctors, vacations, and mortages - those folks can't pay rent and cell phones. I grant you: compared to many countries in the world, Americans are rich beyond compare. Compared to what even the poorest should be able to do here, we are not so hot.
Put all the politicians in a one-bedroom closer to tbe bad neighborhood, let 'em ride the bus every day for a week, put their kids in public school for a week...let's just see that they would have to say then!
finderj, you are right in pointing out that we are governed by an elite who have no insight...etc.
Fortunately, that will soon be remedied by having TWO rather than a mere one Kennedy in the Senate.
Solar, wind and geothermal energy are all well and good and should definitely have a place at the table, but the ONLY energy source that will supply power in the amount needed is nuclear energy.
I applaud Obama for wanting to re-invest in America's infrastructure. If it's done right it'll not only upgrade a seriously faltering system of patchworked "fixes" but it'll provide jobs (which is good for the economy) and lessen our dependence on foreign oil.
Doing it right means spending a hefty chunk on nuclear power.
The fun is over. Everyone should join the Libertarian party and deal with reality.
Thank you.
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