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The Crypto-Reactionary Deficit Scolds

Today on X-Date: Squint at the Committee for a Responsible Federal
Budget, and you see MAGA conservatives endorsing legislative
hostage-taking.

 

 

Tom Williams/CQ Roll Call via AP Images

By Ryan Cooper

**** Most Democrats agree that President Obama's biggest
mistake during his presidency was attempting to get a deficit-reducing
"grand bargain" with Republicans in 2011. This not only set the
precedent of negotiating with an extremist party taking the nation's
full faith and credit hostage, but Obama also put sweeping cuts
<[link removed]>
to Social Security and Medicare on the table. It was a bad tactic with a
bad objective, and at a bad time to boot-unemployment in July 2011 was
still 9 percent <[link removed]>. The only
reason the cuts didn't go through is the extreme right of the House
GOP caucus wouldn't accept even a slight concession
<[link removed]>
of small tax hikes on the rich.

Obama deserves most of the blame for this mistake. But the national
political discourse was also a major contributor. As someone who was a
cub reporter in Washington at the time, current complaints about the
national debt don't remotely compare to the absolute frenzy of debt
hysteria that gripped elite conventional wisdom inside the Beltway after
the Great Recession. After the official recession ended in early 2009,
but a decade before anything like full employment was reached, analysts,
reporters, and pundits from across the political spectrum had a
yearslong meltdown about borrowing.

One of the pre-eminent scold organizations was the Committee for a
Responsible Federal Budget (CRFB). Throughout the 2010s, they got wide
play as a supposedly bipartisan organization earnestly worried about
"too much" borrowing. During the 2016 election, for instance, they got
four different questions
<[link removed]>
put before the candidates. But today, things have changed. We still hear
President Biden talking about the need to cut down on borrowing, but not
with anything like the vehemence of President Obama-and he's
speaking at a time when unemployment is low and interest rates are high,
rather than the reverse.

Partly as a result, the CRFB has moved into more of an open alliance
with the far right, to the point where the organization is tacitly
endorsing the legislative terrorism of House Speaker Kevin McCarthy and
his right-wing extremist allies-deemed a "reasonable proposal," per a
statement <[link removed]>
from CRFB President Maya MacGuineas.

**Read all of our debt ceiling coverage here**
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It's hard to exaggerate the damage CRFB-style deficit scolding has
inflicted on the United States. This ideology was a core reason why the
Recovery Act stimulus in 2009 was so undersized, and why practically no
additional stimulus was passed. As a result
<[link removed]>,
unemployment was chronically high for a decade
<[link removed]>. Growth was cut roughly in
half, and as of 2019 U.S. GDP was 15 percent below where it would have
been on its pre-crisis growth trajectory-meaning output greater than
that of California and Virginia put together was thrown in the trash.
Viable careers and economic ecosystems were ended permanently, with dire
effects on social cohesion, opioid addiction and alcoholism, and no end
of other social ills.

For Democrats, the failure to fix the Great Recession was politically
disastrous as well, which is one reason why even many centrist liberals
have wised up to the CRFB routine. It is now widely agreed in Democratic
policymaking circles that the Recovery Act being way smaller than it
should have been-which meant that unemployment was 10 percent on
Election Day 2010 instead of 5 to 6 percent-badly worsened the ensuing
Democratic defeat, which in turn helped cement a decade of Republican
victories through gerrymandered district boundaries.

The Dems corrected course with the gigantic American Rescue Plan in
2021, which despite being accused of fueling inflation somewhat (the
jury is very much out on that relative to supply shocks caused by
pandemic and war), helped ensure full employment was restored in two
years instead of a decade. This led to a much more satisfactory midterm
performance.

So even while Biden mouths the usual clichés about cutting the deficit
(which in fact is coming down quite fast
<[link removed]>), the CRFB must look
elsewhere for a friendly hearing for their brand of extreme austerity.
MacGuineas found one recently on Fox News, where she had a friendly chat
<[link removed]>
with former conservative congressman Trey Gowdy about House
Republicans' debt ceiling ransom note, the Limit, Save, Grow Act,
which she called "a serious plan, a solid plan." She offered that it
wasn't a "pie-in-the-sky" plan because it didn't try to balance the
budget in ten years.

[link removed]

This is blatantly dishonest. The House debt ceiling list of demands is a
right-wing wish list
<[link removed]>.
They would cut federal spending to 2022 levels and impose a nonsensical
1 percent per year growth cap (except at the Pentagon, of course), stop
forgiveness of student loans, add work requirements to Medicaid and food
stamps, and repeal the green-energy tax credits that are the core of the
Inflation Reduction Act-not only Biden's greatest accomplishment but
the only major action the U.S. has taken to confront climate change. I
guess drowning Florida is a small price to pay to make a number on a
spreadsheet go down.

We see the same dishonesty in MacGuineas's initial statement
<[link removed]> mentioned
above. "The Limit, Save, Grow Act is a reasonable proposal to raise the
debt limit and begin addressing our nation's severe fiscal
challenges," it reads, only to quickly backtrack: "We must not threaten
default or play chicken with the full faith and credit of the U.S.
dollar." This is like saying, "The Joker's Make the Schools Laugh plan
is a reasonable proposal to address fiscal imbalances in the Gotham City
school district. We must not threaten to gas the children or play
chicken with Batman." The

**entire point** of the House GOP move here is to try to extract
concessions by threatening national default and playing chicken with the
dollar.

As a closing comment, if the budget deficit were actually a problem,
then the appropriate way to solve it would be through the normal budget
process (coming up in just a few months) in which the House, Senate, and
president negotiate over funding levels for agencies and programs, not
by one party taking the full faith and credit of the government hostage
to shove their agenda through by force.

But in truth, there is no evidence that America is borrowing too much.
The deficit is coming down, debt service costs as a share of GDP are
only at modest levels
<[link removed]>, and in any case
it's equally dangerous to borrow too little as too much. Because the
dollar is the global reserve currency, the world needs a large supply of
dollar-denominated assets to lubricate the flows of world trade. If
those aren't available in the form of U.S. government debt, then
market forces will work to create them by pushing up the trade deficit
<[link removed]>, which
kills American jobs. America does not have "severe fiscal challenges,"
and there's no reason to think it will have them anytime soon.

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