[…] Just as the White House and Congress were wrapping up their negotiations on the health care bill in the early months of 2010, Obama announced that the great challenge of the age was debt reduction. Though it’s often argued that Obama was pushed into that position by the Republican takeover of the House in November 2010, the fact is that he created the Bowles-Simpson Commission in February 2010, with the declared purpose of balancing the budget by 2015 and reducing the debt. The committee’s membership, chosen by Obama, included on the Democratic side deficit hawks like Max Baucus and on the Republican side…Paul Ryan.
At every step, then, of the two major initiatives of his administration—the stimulus and health care bills—Obama shouldered the load of debt and deficits. Whether that was by default or design remains the subject of much debate. But what’s not in dispute is that the debt has become the Democrats’ burden and/or vocation, which the Republicans are free to flout at will.
This became especially clear during the debt-ceiling crisis of 2011 and since. Once the Republicans began to threaten a default in the spring of 2011, Obama made one concession after another in a desperate attempt to make a deal. He offered to cut Social Security benefits, raise the Medicare eligibility age to 67, increase premiums, and more. Thankfully, GOP intransigence saved those proposals from becoming part of the deal.
The final deal, announced at the end of July 2011, included $1 trillion in cuts, divided evenly between defense and non-defense spending. There would be no tax increase. Instead, the White House tellingly emphasized that the cuts would “reduce non-defense discretionary spending to its lowest level since Dwight Eisenhower was President.” The deal also created a bipartisan congressional super committee tasked with coming up with an additional $1.5 trillion in savings. If the committee failed, an automatic process of savings measures would be triggered, which would include tax increases and spending cuts, with Social Security, Medicaid, and a few other programs exempted from the cuts.
Since the announcement of that deal, we’ve seen two developments. First, the congressional super committee tried—and failed—to come to an agreement. At each phase in the negotiations, which ended in November, the Democrats played the responsible adult, the Republicans the wild child. The Democrats came in with a proposal to raise taxes by $1.3 trillion and cut spending by $1.7 trillion (including cuts to Medicare and Medicaid). The Republican response: $2.2 trillion in cuts (not much more than the Democrats) and no tax increases. By the end of the negotiations, the Democrats had reduced their tax increase proposal to $400 billion and were offering nearly a $1 trillion in spending cuts; the Republicans tendered $640 billion in spending cuts and $3 billion in tax increases. In other words, not only were the Democrats promising to cut far more than were the Republicans, but they also promised to reduce the debt overwhelmingly through spending cuts rather than tax increases.
Second, now that that the super committee has failed, the GOP has predictably begun to balk at the defense cuts mandated by the deal. (I say predictably because just after the deal was announced, I got into a heated argument with a political scientist over that very issue. Where he was elated by the defense cuts, I warned that the Republicans would almost certainly renege on them.) Throughout this past summer, the GOP promised to make the so-called sequester a major issue in the election, and the 2012 Republican Party platform (see page 40) enshrines their opposition to it:
Sequestration—which is severe, automatic, across-the-board cuts in defense spending over the next decade—of the nation’s military budget would be a disaster for national security, imperiling the safety of our servicemen and women, accelerating the decline of our nation’s defense industrial base, and resulting in the layoff of more than 1 million skilled workers. Opposition to sequester is bipartisan; even the current Secretary of Defense has said the cuts will be “devastating” to America’s military. Yet the current President supported sequestration, signed it into law, and has threatened to veto Republican efforts to prevent it. If he allows an additional half trillion dollars to be cut from the defense budget, America will be left with the smallest ground force since 1940,the smallest number of ships since 1915, and the smallest Air Force in its history—at a time when our Nation faces a growing range of threats to our national security and a struggling economy that can ill afford to lose 1.5 million defense-related jobs.
So here we are, entering a campaign with Obama begging the media to recognize him and the Democrats as the party of austerity—for being willing to make difficult and deep cuts to Medicare and Social Security—and Republicans happily calling for a constitutional amendment requiring congressional super majorities for tax increases (see page 4).
Ironically, it was during the heyday of the New Deal that we first got a glimpse of the way we live now—from none other than John Kenneth Galbraith. As Bartlett shows, when Galbraith learned of Kennedy’s plans for a large tax cut in 1962, he shrewdly observed in his diary that “lower tax revenues will become a ceiling on spending.” Though the economics of the tax cut were impeccably Keynesian, Galbraith was far more concerned about the politics, which he thought were dangerous. As he explained in his testimony to Congress in 1965:
I was never as enthusiastic as many of my fellow economists over the tax reductions of last year. The case for it as an isolated action was undoubtedly good. But there was danger that conservatives, once introduced to the delights of tax reduction, would like it too much. Tax reduction would then become a substitute for increased outlays on urgent social needs. We would have a new and reactionary form of Keynesianism with which to contend.
What Galbraith could not have foreseen—ensconced in the New Deal consensus as he was—was that that the real ceiling on social spending would be set not merely by the Republicans but also, and perhaps more fatally, by the Democrats.
Once upon a time Republicans were tax collectors for the welfare state. Now Democrats are the austerians of reactionary Keynesianism.