Republican Congressman John Anderson’s 1980 presidential debate performance against Ronald Reagan was devastatingly accurate when asked of him “How is it possible [for Reagan] to raise defense spending, cut income taxes, and balance the budget, all at the same time?,” he said it was possible only with “smoke and mirrors.” David Stockman, Reagan’s budget director, confessed famously in an Atlantic Monthly article and later in his book The Triumph of Politics, that supply-side economics was simply a facade for tax cuts for their rich supporters and that the fear of a large federal deficit would be used to leverage down the size of the welfare state. They both told the truth about a Republican strategy that continues into the Trump era.
As a result of the Reagan era, the federal deficit exploded, the national debt expanded, and ever since the real legacy of the Reagan era has been to leave a fiscal mess that has constrained the ability of the federal government to act, crippling efforts by Democrats to enact their own agenda who are hemmed in by low taxes, large deficits, and little fiscal room to manoeuver. History is now repeating itself, this type not just as a tragedy but a farce since we ought to know better.
Many seem astonished now that the Republican Party has abandoned fiscal austerity for deficit spending by enacting large tax cuts and spending proposals. There should be no surprise here. When Republicans were the party in power during both the Reagan and second Bush eras they spent heavily without regard for the bill to benefit their supporters. They generated the largest deficits ever. Second, as David Stockman pointed out, running up deficits was a strategic decision. Generate huge deficits and it will eventually place pressure on both discretionary spending and entitlements, serving as a ratchet to cut them. Big deficits also will limit the ability of Democrats, when they eventually take control, to push their agenda. They will be forced to deal with these deficits by either cutting spending or raising taxes. Pressed into this situation, Democrats either cannot move their policies, reward their supporters (to stay in power), or are required into raising taxes, thereby reinforcing their image as the tax and spend party.
This is what happened to Bill Clinton and Barack Obama. Republican spending sprees forced Democrats deeper into their neo-liberalism. They had to be the party of fiscal austerity, tax cuts, and minimal government. Clinton spent most of his time cleaning up the Reagan-Bush era, Obama did the same for the second Bush. Republicans under Trump have and will ass trillions to the deficit and national debt, already dooming the agenda of Democrats whether they seize control in 2018, 2020, or later. Additionally, the exploding budget deficit will strength Republican calls for cuts to social welfare programs. Already Speaker Paul Ryan has said that the exploding deficit (since the passage of the tax cuts) are a result of social spending.
Should Democrats fail to capture at least one house in Congress come November, Republican-induced fiscal irresponsibility will provide the cover for a new round of cuts. But even if Democrats do manage to take over, their economic room to maneuver is just about gone. They will not have a large enough majority to make major tax policy changes to shift spending priorities. Trump will veto them. And assume that Trump’s trade wars backfire and that repealing restrictions on bank regulations help bring an end to economic growth. Democrats will then inherit a recession
that just about closes the door on anything they can do to move public policy.
True.
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