Democrats, Avoid The Deficit Trap

Senate Majority Leader Mitch McConnell (R-KY), Senator Chuck Schumer (D-NY), House Speaker Paul Ryan (R-WI), House Majority L
Senate Majority Leader Mitch McConnell (R-KY), Senator Chuck Schumer (D-NY), House Speaker Paul Ryan (R-WI), House Majority Leader Kevin McCarthy (R-CA) and House Minority Leader Nancy Pelosi (D-CA) participate in the "first nail ceremony" kicking off the Inauguration Platform construction on the West Front of the U.S. Capitol in Washington, U.S., September 21, 2016. REUTERS/Yuri Gripas

"Fool me once, shame on you; fool me twice, shame on me." How about three times? The Democrats have responded to Republican criticism that they are burdening future generations with debt by making great effort to reduce deficits; this often entailed capping social expenditures. The following Republican administrations then used the slack created by the lower deficits to pay for huge tax benefits to the rich and to balloon the deficit. And then the GOP demanded that the next Democratic administration cut the deficits! We are about to witness another round of this same sequence. It's time for the Democrats to recognize it, and to respond to the GOP's crocodile tears about deficit is a fool's errand.

Jimmy Carter's first budget had an inflation-adjusted deficit of $218 billion. Carter acknowledged that the deficit was too high, and soberly informed the American people that "reducing the deficit will require difficult and unpleasant decisions. We must face a time of national austerity. Hard choices are necessary if we want to avoid consequences that are even worse." Carter only reduced the deficit slightly; his final budget had a deficit of $208 billion. However, to achieve that modest reduction, he reduced the size of the Federal workforce, and vetoed a public works bill that had passed through both Houses of Congress (I served as a Senior Advisor to the Carter White House. My suggestions for a bold agenda for rebuilding the economy and the society did not fare better than many other ideas, because Carter rejected suggested policies that involved increased expenditures).

Next, Ronald Reagan came into office, having campaigned against "out-of-control debt." Once in office, he implemented major income tax cuts as well as deep cuts to estate taxes and corporate taxes. His first budget had a deficit of $318 billion, and the deficits would only grow larger: in FY 1983, the deficit ballooned to $500 billion. The deficit in his final budget was his smallest - at $295 billion - but this was still quite a bit larger than the one Carter had left behind.

Reagan then passed the torch to George H.W. Bush, who continued his predecessor's legacy of growing the national debt. His first budget contained a deficit of $405 billion and his final budget contained a deficit of $423 billion.

Then Bill Clinton became president. Facing a national debt that had increased by more than $2.5 trillion (in nominal terms) during 12 years of Republican control of the White House, Clinton promised to tackle the deficit and to "end welfare as we know it." He agreed to cut food stamps, eliminate the Aid to Families With Dependent Children program and to impose a five-year lifetime limit on receiving welfare aid. The effect on the budget was impressive. The deficit shrunk in each of Clinton's first four budgets, and each of his last four budgets contained a budget surplus. Clinton's final budget contained a $172 billion surplus.

President George W. Bush quickly moved to introduce a massive tax cut. The surpluses of the Clinton years were quickly reversed: Bush Jr.'s first budget had a deficit of $210 billion. His final budget contained a deficit of $1.58 trillion (the first time in US history that the US ran a 13-digit budget deficit).

President Obama came into office, promising to clean up the fiscal mess made by the previous administration. His first budget director, Peter Orszag, said the country faced a "serious" and "unsustainable" deficit problem. And so, President Obama began to trim away at the deficit, held at fiscal gunpoint by Congressional Republicans who would only allow spending cuts - and not tax increases - to be part of the solution. Obama managed to reduce the deficit from $1.42 trillion in his first budget to $441 billion (projected) in the current fiscal year.

Now comes Donald J. Trump. It is far from clear what he will do and what the Republican-dominated Congress will let him do. However, one thing you can safely bet on: he will introduce another tax cut that will largely benefit the rich and corporations, and he will balloon the deficit.

The lessons for the Democrats is to get the voters to see who causes deficits, show them that some deficits are beneficial (when the economy is weak, for example). Worry about deficits if they grow disproportionately during a period of high economic growth. And best to leave the task of reducing the deficits to a future Republican administration.

N.B. All figures are taken from Office of Management and Budget and are inflation-adjusted unless otherwise noted. I sounded the same alarm here in 2010.

Amitai Etzioni is a University Professor and Professor of International Affairs at The George Washington University. His latest book, Foreign Policy: Thinking Outside the Box, was recently published by Routledge.