Last Thursday, the White House released its latest budget. Republicans have not tabled a specific counterproposal, but appear to be rallying around a plan proposed by Russell Vought, Donald Trump’s last budget director. Neither of the two plans will become law, but both are designed to establish the positions of the two sides in the face of the imminent confrontation over the federal debt ceiling.
But let’s not fall into false equivalences. Joe Biden’s budget may be political theater, but his numbers make sense. Republican numbers, no. In a way, we’ve already been through this. A decade ago, Barack Obama also faced off against a Republican-controlled House of Representatives, which was trying to use the blackmail of the debt ceiling to win policy changes that could not have been passed through a normal budget process. And Vought’s plan bears a marked family resemblance to the one put forward then by Paul Ryan, who would become House speaker in 2015.
But this time the political and intellectual environment is different. In 2013, Washington was full of serious people obsessed with the budget imbalance and believed the Republicans who claimed to be deficit hawks. Ryan in particular was the subject of much media fascination, though anyone looking into the details of his proposal knew he was a scam. Today the deficit curmudgeons have much less influence than before. Claims by Republicans that they have a plan to balance the deficit are treated with deserved derision by the media in general. And the parties themselves have changed: the Democrats have become more progressive without being ashamed of it, while the Republican Party seems less interested in fiscal policy, or politics as a whole, than in the past.
On President Biden’s budget: The starting point for the plan is that the president’s people obviously view deficits as a source of concern, but not as a crisis. In general, the presidential plan proposes increasing social benefits on a number of fronts, even if this means increasing debt. However, it also proposes to reduce the budget deficit, albeit only to a small extent. Indeed, he claims that it will cut it by almost $3 trillion over the next decade, but that represents less than 1% of GDP.
How can Biden reduce the deficit while expanding social programs? Primarily by raising taxes on corporations and the wealthy, with additional help from measures to reduce healthcare costs, especially by using the bargaining power of Medicare to cut spending on prescription drugs. Are Biden’s figures credible? Yes. Above all, the economic forecasts on which the budget is based are reasonable, and not much different from those of the Congressional Budget Office. The forecasts even call for a significant, if temporary, rise in unemployment over the next year or so.
Now, even economists who, like yourselves, have been pretty relaxed when it comes to budget deficits, generally think that at some point we’re going to have to do something else. We’re going to need a much broader drive to bring down healthcare costs, and we’re also going to need more revenue than can be raised just by taxing very high-income Americans. But Biden’s plan is a step in the right direction.
And the Republicans? They claim to believe that increasing the federal debt is a serious crisis. But if they really believed it, they would be willing to accept at least some pain in the name of deficit reduction. And they are not. Vought’s proposal advocates maintaining Trump’s tax cuts while avoiding any cuts in defense, Social Security or Medicare that pose political risk. However, it also aims to balance the budget, which is basically impossible with those constraints. Indeed, even by making savage cuts in Medicaid and slashing funding for critical government functions, Vought is able to claim that it will ultimately keep the budget balanced only on the promise that tax cuts and liberalization will pay off. result in a large increase in the growth rate of the economy. Tax cut supporters often make these kinds of claims, but they never, and I mean never, follow through on their promises.
What I find a bit puzzling is why Republicans continue to defend these things. The current Republican Party draws its energy from the culture war and racial hostility, not from faith in the miraculous power of tax cuts and the weak state. So why not make the case for a strong social safety net, but only for straight whites?
Part of the answer may be that the party still needs money from billionaires who want to keep their taxes low. But it also seems to me that the right-wing economic peddlers have done an extremely good job of marketing their wares to politicians who don’t care too much about the substance of politics or know much about it. Vought’s proposal, as I’ve said, sounds a lot like Paul Ryan’s plans from a decade ago, but it’s titled “A Commitment to End Socially Conscious, Weaponized Government” and somehow manages to mention critical race theory not once or twice, but 16 times. In any case, the current situation is that Biden is proposing a basically reasonable tax plan, while the Republicans are spouting malicious nonsense.
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