Is It Time to Become a Deficit Scold?
Congressional Republicans are in the middle of negotiating and (possibly) passing an absolutely disastrous and cruel budget bill, with the only question being how many people it will impoverish, harm, and kill if it passes. One thing we do know is that any eventual bill will also result in larger annual budget deficits and thus a larger overall federal debt, which is what Republicans do when they are in power. When Democrats are in power, however, Republicans suddenly become deficit hawks and complain bitterly about increases in debt.
Pointing out Republicans' hypocrisy being so five minutes ago, however, I want to ask whether the time has come even for deficit doves like me to move over to the anti-borrowing brigade. In fact, one might think that I have already done so, because my column earlier this week discussing Social Security included this: "The bottom line is that the now-real concerns about overall federal debt and deficits are entirely a matter of Republicans' endlessly successful efforts to under-fund the government." To most people, that might seem unremarkable to the point of being humdrum, but I typed those words almost with my hands shaking. What is going on?
Being a deficit dove does not mean loving borrowing. It only means that one is not against borrowing under all circumstances. Dovishness in this context, in other words, is a catchy term that I readily embrace but is literally incorrect. The political and media conversation around government borrowing has long been so overwhelmed by idiotic and mindless absolutism on the topic that having any nuance at all makes a person a dove. Why be surprised? Republicans are now calling anyone who believes in economic redistribution a commie/Socialist/Marxist, so nuance is dead.
Here is the opening sentence of one of my first published law review articles, which I wrote twenty years ago: "There are bad deficits and there are good deficits." Admittedly, I led with "bad" rather than "good" to pander to my perceived audience of second-year law review editors, but that simple sentence is still explosive. It should not be, but every time I have said anything resembling that in interviews with news reporters (print and broadcast, straight news and opinion), I have received either direct push-back or stunned silence.
One of the most-used quotes in my writing is from Ezra Klein in 2013: "For reasons I've never quite understood, the rules of reportorial neutrality don't apply when it comes to the deficit [and debt]. On this one issue, reporters are permitted to openly cheer a particular set of highly controversial policy solutions." I doubt that that is the sole exception (sanewashing Trump comes to mind as another), but Klein's point is certainly correct. Media types and politicians are in the ultimate echo chamber when it comes to government borrowing.
To return to my somehow-shocking sentence, what is the difference between a good deficit and a bad deficit? Nothing new here: good deficits are those that are used to end or avoid a recession and those that are used to finance productive public investment (such as mass transit, scientific research, early-childhood nutrition, all levels of education, and so on). Bad deficits are everything else, where we end up in greater debt but getting nothing for it. I am always careful to avoid direct comparisons of government finances with household finances, but it is sometimes appropriate: If a person borrows money to get a good education, that is a good deficit: if they borrow money to buy lottery tickets, that is a bad deficit.
When I wrote earlier this week about "the now-real concerns about overall federal debt and deficits," then, I was saying that the Trump/Republican fiscal plan is nothing but bad deficits. They actually slash public investment, and they mostly just give money to people who do not need it and who will generally not use it in a way that helps everyone else (because "trickle-down" tax cuts are, and have always been, nonsense). But their being bad deficits does not necessarily mean that we should be concerned about overall debt. After all, even if there were no debt at all, borrowing money and spending it stupidly would still be a bad idea.
The possible problem is that now, after decades of not knowing how high is too high, the Republicans seem set on actually finding out what will destroy the economy. And they are doing so while Trump is making it more likely that the US dollar will become weaker and federal debt will no longer be treated by financial markets as risk-free (which is necessary to keep interest rates as low as possible). In other words, it is possible that the (often wrongly forecast) "wrath of the financial markets" could arrive soon.
Or maybe not. In an interview earlier this week, New Mexico Democratic Congresswoman Melanie Stansbury (of whom I had previously known nothing) said this, starting at the 13:20 mark: "This is the largest increase in the deficit ever. They're talking 37 trillion dollars over the next thirty years. That is gonna put the United States on a course to bankruptcy essentially." I have to admit that I shouted an epithet at the screen when she said that, because the whole loosey-goosey use of the word bankruptcy is infuriating. Even so, her overall point is that all of the new debt is much too much. I am not sure where she gets her numbers, but a total of just above one trillion per year for thirty years is not enough to destroy the financial markets. I have not read whatever report the Congresswoman was most likely misquoting, but I am skeptical.
Even without financial Armageddon, however, the fact is that the deficits in the Republicans' plans are bad, which means that they will make the economy weaker even while they hurt everyone but the richest Americans. Last week, I noted that I had finally given up on The Washington Post and have replaced it in my daily reading rotation with The Guardian, and I have already been rewarded. Earlier this week, their editorial board wrote this:
Republicans understand what Democrats still don’t: deficits aren’t the danger. It’s what you do with them that matters.
…
But too many Democrats remain trapped by outdated budget dogma. While Republicans rack up deficits for the rich, Democrats cling to the Reagan-era Byrd rule and “pay for” logic – treating a 1970s economy as today’s reality. The former is a procedural constraint, but it was born of a political age obsessed with balanced budgets, and it continues to shrink ambition by demanding offsets for moral imperatives. In 2021, the most effective anti-child-poverty policy in decades expired because some Democrats fretted over funding it, despite record corporate profits.
The US needs to tax the wealthy properly – not least because rampant inequality is destroying democracy. But the economist Stephanie Kelton is right that the question about deficits isn’t so much “how big?” but “who benefits?” That’s the language Democrats need. Not budget sermons. Deficits should be for public purpose, not private plunder. Rather than scare stories about debt, Democrats should say America can run a deficit to fund healthcare, housing and green tech – not to bankroll authoritarian deportation squads or gift cash to the donor class.
Couldn't have said it better myself. So no, it is not time to become a deficit scold. Indeed, I should not have added the word "overall" in my column earlier this week, so I am going to edit that out in a few minutes. But bad deficits are bad, and they always have been. Republicans are simply becoming more reckless in creating them.
- Neil H. Buchanan