Debt Ceiling Crisis: GOP Has Double Amnesia on Deficits, Regulation

Republicans forget the Bush era of big deficits and GOP failure to regulate business, says Peter Beinart.

If the debt-ceiling negotiations reveal anything about America in 2011, it is this: we live in an age of political amnesia. From the day the Twin Towers fell until the day Barack Obama was elected president, Washington Republicans did virtually everything in their power to increase the deficit.

George W. Bush and his congressional allies pushed through tax cuts in 2001 and 2003 that, according to the Congressional Budget Office, added more than $2 trillion to the deficit over 10 years. In 2002, when National Economic Council director Lawrence Lindsey suggested the Iraq War might cost $100 billion to $200 billion, he was rebuked by Office of Management and Budget director Mitch Daniels and Defense Secretary Donald Rumsfeld and then fired. According to the CBO, the war has now cost more than $1 trillion.

In 2003, the Republican Congress passed the Medicare prescription-drug bill, which former U.S. comptroller general David Walker has called "the most fiscally irresponsible piece of legislation since the 1960s." When Medicare’s chief actuary calculated that the legislation would likely cost more than $500 billion, a Bush appointee at the Department of Health and Human Services threatened to fire him if he released the information.

Had Republicans wanted to amend the Constitution to require a balanced budget, as they’re demanding now, they could certainly have tried during the Bush years, when they pretty much ran Washington. But they didn’t. Given their remarkable success at unbalancing the budget, such an effort would have been absurd.

Republicans have every right, of course, to admit their error and work to undo the deficit they helped create. But instead, today’s GOP leaders act as if the Bush years are irrelevant to America’s debt problem, and largely defend the tax cuts and wartime spending that helped cause it. It’s the same ideological double flip the GOP did in the Gingrich years, when Washington Republicans reinvented themselves as deficit hawks and pretended the Reagan administration had never happened.

But at least six years elapsed between Reagan’s departure from the White House and Gingrich’s ascent to the speaker’s chair. This time, the gap between President Bush and Speaker John Boehner was a mere two years. I guess everything happens faster these days.

Even more remarkable than the GOP’s deficit amnesia is its regulatory amnesia. Less than three years ago, the American financial system virtually collapsed, leaving an economic disaster that still blights the lives of tens of millions of Americans. That collapse may be partly the result of federal efforts that pushed too hard to make Americans with lousy credit become homeowners.

But it was also undoubtedly a result of the fact that under Presidents Clinton and Bush, the U.S. government egged on Wall Street as it created new and largely unregulated financial markets. Then, in 2010, after a BP oil spill almost destroyed the Gulf of Mexico, reporters discovered that the Department of Interior's Minerals Management Service, which supposedly regulates offshore drilling, was as toothless as the agencies that supposedly regulated derivatives trading.

That was last summer, and yet, amazingly, the GOP is more adamant today in its support of deregulation than it was during the Bush years. Every single Republican in the House opposed Dodd-Frank, the 2010 bill aimed at modestly strengthening America’s financial regulatory system—and Mitt Romney has said he would consider repealing it. Not to be outdone, Tim Pawlenty has proposed repealing all government regulations except for those Congress expressly votes to retain.

Deregulation is, to be sure, one of the American right’s longstanding principles. But it was one thing to demand deregulation in the 1970s and 1980s after many years of slow growth and increasing government intrusion into the economy. It is quite another to demand it now, after decades of deregulation that have helped produce two of the greatest disasters in recent U.S. history.

When Obama was elected in the financial crisis’s wake, I thought it heralded a historic leftward shift in American politics. And in some ways, it has. The health-care bill and the stimulus are, despite their limitations, more ambitious pieces of progressive legislation than anything passed under Jimmy Carter or Bill Clinton. Still, what distinguishes the Obama era from the New Deal and Great Society is, first, that today’s Democratic Party—given its reliance on Wall Street to finance its campaigns—simply cannot frontally challenge America’s “economic royalists” the way FDR once did. Second, the Obama Democrats are not being pushed by any significant left-wing populist movement, as FDR was in the days of Huey Long.

But third, and perhaps most important, today’s Republican Party is united behind an antigovernment theology powerful enough to survive virtually any combination of real-world events. It is a theology based, in large measure, on amnesia. Whatever the powers of the presidency, Barack Obama simply cannot get the Republican Party to remember what it so fervently wishes to forget.