Deficit hawk sightings used to be quite common in Washington, D.C., but early indications are that this bird’s about to become a lot rarer. It may even wind up on the endangered species list, in fact. This sort of thing normally happens every time a Republican is in the White House (remember Dick Cheney’s infamous “deficits don’t matter” line?), but this time around it’s already looking like the deficit hawks could disappear entirely from within the Beltway.
Donald Trump’s agenda includes many items which are going to cost a bunch of money, but few explanations of how any of it will be paid for. Of course, the favorite Republican way to pay for stuff is to shred the safety net, but Trump actually spoke out against this while campaigning, so that’s going to be an interesting battle to watch as budgets are hammered out between Congress and the White House.
Congressional Republicans, of course, will be pushing for a huge tax cut for the wealthiest Americans. It’s what they do best, after all. They still firmly believe in the fantasy that “tax cuts pay for themselves,” even when the numbers clearly show this not to be true. But exacerbating the situation will be Trump’s costly agenda, which includes a big military buildup, a trillion-dollar infrastructure plan, and a wall/fence on the southern border (although Trump insists that he’s somehow going to make Mexico pay for this ― just about the only time Trump addressed how any of his agenda will be paid for). All of this costs money. Even Trump’s smaller promises ― like doubling or tripling the Border Patrol ― will require more federal money be spent. And if Trump follows through on his deportation plan, that also will require a lot more federal cops to implement. The crowning cherry on top of this mountainous sundae of spending is repealing Obamacare ― which actually saves the federal government a lot of money, meaning a repeal will drive the deficit up.
Trump never really talked much about deficits while running, except to occasionally take a shot at Obama. He’s obviously not a deficit hawk himself, as evidenced by his numerous bankruptcies. If he sticks to his promise not to touch Social Security, Medicare, and Medicaid, then pretty much everything both Trump and a Republican Congress does is going to increase federal deficits. The only tax hike Trump ever supported was to close the carried-interest loophole, but it’s highly doubtful that Republicans in Congress are going to go along with this.
The problem with Republican ideology is that the numbers just never seem to add up. If they begin by slashing federal revenues with a big tax cut for the wealthy and then enact major parts of Trump’s agenda, the deficit will explode. I leave it to the economists as to whether that’s a good thing or a bad thing right now, but no matter how you feel about deficits, math is math.
Jared Bernstein helpfully explains how the standard Republican model usually works:
“There’s no plausible pathway that gets you from a huge trickle-down tax cut to a doubling of the growth rate,” said Jared Bernstein, a senior fellow at the liberal Center on Budget and Policy Priorities and former chief economic adviser to Vice President Biden. “What will happen is what always happens in these moments: You exacerbate after-tax inequality, and you generate large deficits.”
. . .
“When their phony growth agenda doesn’t work,” he said, “they’re going to throw their hands up and say, ‘Sorry, folks, we’re going to have to cut entitlements.’”
Except this time Trump may reject entitlement cuts altogether. If he sticks to this promise (anything’s possible), Republicans won’t have any other answer and they’ll all start channeling their inner Cheney (”deficits don’t matter... because a Republican’s in the White House!”).
Perhaps all of this will unleash record growth and the tax cuts will pay for themselves and the deficit will go down. Again, anything’s possible, right? But what happens if the record-long expansion period we are in ends? The business cycle often shifts almost independently of what is happening in Washington, and some economists already say we’re overdue for another recession. What happens if that occurs in the midst of the grand Republican experiment? This isn’t so far-fetched when you consider that Trump and the Republicans are already salivating at the prospects of freeing Wall Street from meaningful oversight, which might result in another financial crisis.
Whether such a downturn happens on Trump’s watch or not, if Trump gets what he wants (massive spending increases) and the congressional Republicans get what they always want (a big tax cut for the wealthy), the only real possible result is larger deficits. Republicans may attempt to do away with agencies like the Department of Education and the Environmental Protection Agency, but even those savings will likely be swallowed up by the growing deficit.
Which means the most likely outcome is that Republicans just conveniently stop caring about deficits altogether. After all, it’s easier to shift your ideology than it is to balance a budget. Which is why I’m predicting that deficit hawks will become so rare in Washington that they will merit inclusion on the endangered species list. Their numbers will decrease to the point of extinction, right up to the time when a Democrat wins back the White House. When that happens, the deficit hawks will stage an amazing recovery, and be seen everywhere in Washington once again.
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