The federal deficit is out of control. It is growing faster than was expected. Shocking I know, but the tax cut is not paying for itself with economic growth. As usual, trickle-down fantasies are not trickling down and inflation is starting to eat away any actual wage growth.
None of this is surprising. In fact, some of this was expected. The tax cut worked as a short-term stimulus, which came to an overheated economy. There are other effects that were expected and we are starting to see. Among them, increasing income inequality and a soaring federal deficit. The net effect on the economy was short term, and now we will need to pay the piper.
We all should remember that when the tax cut was pushed forwards, there were dire warnings. The deficit was going to explode. It was not just the usual suspects, and by that I mean the political opposition. The Office of Management and Budget (OMB) issued equally dire threats of disaster. They were all underestimating how fast the deficit has grown. And none of this is accidental. This is critical to understand.
Let’s adopt for a second the preferred analogy used by so-called fiscal conservatives. The budget is like your household spending habits. Let’s ignore for the moment why it does not apply. Republicans decided that they needed to give money to their very rich friends, but to do so, they broke the finances of our collective house. They are earning less than they are spending, and the people they are favoring are very rich donors. Not surprisingly, the bank account is quickly going into the red. In fact, we are spending far more than we are bringing in, and spending cuts, what you would do, are not happening. It is as if you got a pay cut, massive and all, but you kept your top of the line cable service, your games, your entertainment, and the rest. Never mind that in a couple of months there won’t be money in that account to cover things like the mortgage and a basic food bill.
So what are Republicans proposing? Nope, not what you would do, increase your income, in other words, raise taxes. Or for that matter cut your entertainment budget. Rather, what they want to cut is precisely essential services for millions of Americans. And while at it, they want another tax cut. The Washington Post reports:
House Republicans bracing for November’s midterm elections unveiled a second round of tax cuts on Monday that could add more than $2 trillion to the federal deficit over a decade, aiming to cement the steep cuts they passed last fall despite criticisms of fiscal profligacy and tailoring their policies to help the rich.
The GOP’s “tax reform 2.0” aims to make permanent the tax cuts for individuals that President Trump signed into law in December 2017, including the law’s temporary reductions in individual filers’ rates, a doubling of the Child Tax Credit, and cuts to the estate tax paid by a small fraction of the wealthiest families.
This will only accelerate deficit growth, and if this was proposed by Democrats the party of fiscal responsibility would scream. Oh and it goes without saying, do not try this at home. So why is a party that pretends to be fiscally responsible, doing this? Why are they hell-bent on bankrupting the country? After all, they are not going to reduce spending in the military. They are not going to reduce any spending in areas of the government that *benefit their friends*. They will cut money on basic research, and foreign affairs because we all know science and good relations are expendable.
So what is going on? None of this is accidental, and they have been plain about this. It is not a mystery if you have listened to these people. Republicans have been telling us for years that their goal is to gut Social Security, and whatever remains of the New Deal or LBJ’s war on poverty. Tax cuts are the only way to do it. Politically they need to almost bankrupt the country because this is hardly popular. The programs are well-liked and they still remain, somewhat, the third rail of American politics. And mind you, I am hardly the only one saying this.
Ordinarily, projections like these would stop true Republican deficit hawks in their tracks, except for the fact that soaring debt projections are exactly the point of these tax cuts. The thinking is pretty simple, if cynical: if you can’t muster the support to cut entitlements outright, just make future benefits impossible to pay for.
Republican leadership has already tipped their hand toward this “starve the beast” strategy. In a recent interview, Speaker Paul Ryan said his members “have to get back next year at entitlement reform, which is how you tackle the debt and the deficit.” Staying on message, Senator Marco Rubio reiterated that “you also have to bring spending under control. . .The driver of our debt is the structure of Social Security and Medicare for future beneficiaries.” And President Donald Trump announced last week that welfare reform will “take place right after taxes, very soon, very shortly after taxes.”
This is the goal. They have wanted to do this since the *New Deal* became law. They see the safety net for Americans as a form of communism, pure and simple. This is ideological. So the party of fiscal responsibility is willing to break the country in order to destroy the safety net. And cynically they are already using the expected deficit their policies caused to go on to phase two of their plan.
Leader Mitch McConnell recently said, “I think it’s pretty safe to say that entitlement changes, which is the real driver of the debt by any objective standard, may well be difficult if not impossible to achieve when you have unified government.” He also said that it will be “very difficult to do entitlement reform, and we’re talking about Medicare, Social Security, and Medicaid.” He said this in an interview with Bloomberg.
Now let's go into how dishonest this is. First off, these three programs are not integral to the budget. These programs cannot spend the money they do not have. And when budgeting they are considered separate from the rest of the budget. Nor can they spend a penny they do not have. He is also honest in telling us how much political poison this is. Why he needs DEMOCRATS to go along with the plan.
This matters. Republicans are playing with illusions and fantasies when it comes to budgetary policy to destroy programs that benefit the poor and the elderly. They simply do not like those Americans, oh never mind that Speaker Paul Ryan benefitted from the Social Security program when he was young, for example. That was then, this is now, and he is a follower of Ayn Rand. So there is that. Incidentally, she did take her social security as well, but that is the nature of these people. And she is the creator of Objectivism, which places individual interests above all others, including altruism. It is a toxic ideology, and you could describe it as I got mine, so there.
Sadly there are more than a few Americans, in the corridors of power, who believe that self-interest is above anything else. Never mind that they will take those services if available, and exploit them to the limits.
So why create an artificial budgetary crisis? It is purely ideological, and it is a goal of the far right to destroy the public safety net. This is not good policy. It is not laudable. It is simply something that they want to do, and like climate change denial facts don’t matter. They simply are in this to benefit the very small group of people who believe like them. Those people finance their political careers and they owe them.
The question is whether center-right Democrats. also financed by the same powerful economic minority, will seek a grand bargain when they take the House in November? And for the moment, I am making the assumption they will. They have fallen for this tactic a few times starting in the 1980s. Now let’s be clear. it is not because they are stupid. This tap dance between the two parties is now almost three generations old. Republicans know that passing these reforms as a unified government is a political suicide. But when the other party controls at least some part of the government, *it makes it bipartisan*, and politically easier to do. Republicans are not stupid, or suicidal. And for the record, neither are neoliberal Dems.
Both agree that the New Deal is obsolete at best. They both agree on privatizing everything not nailed down. They both take money from the exact same political interests and Wall Street wants the Social Security system, so they can game with it.
Center-right Democrats may pay homage to Franklin Delano Roosevelt, but that’s it. This is why the country needs, badly, a new direction. Center-left Democrats are starting to offer different options, and while progressives are the majority of the country, they do not hold the political power yet. This is also why you are starting to see the propaganda from special interests, and the media, about the radical, far left. We have nothing even approaching a far left, but how else do you continue to ratchet rightwards?