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.