Friday, May 10, 2013

The 90's Can Help With That Reihan!

Conservative blogger Reihan Salam wrote a piece where he bemoaned the recent plunging deficit figures as a potential disaster for the Republican Party in 2016.  As he sees it without a big deficit the GOP will lose both its leverage for entitlement reform and its main argument to be made with middle class voters:
James Pethokoukis cites a new report from Potomac Research to suggest that there is at least a slim chance that the U.S. federal government will achieve a budget surplus by fiscal year 2015. Pethokoukis makes the most important political points — a surplus will make it difficult for the Obama administration to make the case for further tax increases, yet it will also undermine the case for entitlement reform. But to be cynical and political for a moment, a surplus would be even worse news for the Republican Party. Since the start of the Obama presidency, the GOP has put all of its eggs in the basket of short- to medium-term fiscal consolidation.

So imagine 2016 in the unlikely but not completely impossible event that a budget surplus does materialize. Republican elevation of the deficit issue will allow the Obama administration and its Democratic allies to declare “mission accomplished,” all without taking the blame for entitlement reform. The House-passed budget that promised a balanced budget within the ten-year budget window by making unrealistically deep cuts in Medicaid and domestic discretionary spending will continue to be hung around the necks of congressional Republicans. One hopes that one or several of the GOP presidential candidates will devise a more compelling economic message and reform agenda.
Salam is right that as the deficit shrinks, fear mongering over it will become more and more difficult as will claims that we will soon turn into Greece.  I also love how he seems to think that Obama wants to raise taxes just to raise taxes (Matt Yglesias pointed out how wrong this idea is back in 2005).  But he is missing the broader point, the GOP hasn't cared about deficits for a while.

As far as I can tell the the battle inside the Republican Party to see if they were actually interested in balancing budgets was lost back in the early 80's.  If you go way back, think Eisenhower or Dewey, you do see a political party interested in balancing budgets, by doing things like cutting military spending or raising taxes, but since Reagan the GOP has always favored cutting taxes over lower deficits.  The last last hurah of the balanced budget Republicans was in 1980 when George H. W. Bush famously called Reagan's so called "supply side" economic plan to massively cut taxes, expand military spending AND balance the budget "voodoo economics."  Bush of course lost to the Gipper in the primaries.  Ever since then the GOP has thrown the laws of mathematics out the window and focused on cutting taxes no matter what this does to deficit figures.

So if we did have a budget surplus in 2016 the GOP strategy is simple.  They claim that the surplus is because of Paul Ryan's "tough fiscal management" or something and demand a big tax cut for the rich because it will create jobs or the American people can spend their money better than the Government can or whatever.  They then fear monger about a made up entitlement "crisis" and roll out a plan to privatize Social Security and Medicare.  In fact even if there isn't a surplus they will still call for tax cuts to create jobs or whatever.  This is precisely what happened in the 90's; as the deficit shrunk Republicans in Congress called for Clinton to "now take on Social Security" and once they got in the White House they passed a big tax cut and deficits ceased to matter.  They will almost certainly follow a similar strategy in the future.

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