During the Biden transition, the long-time Democratic policy expert Bruce Reed saw his hopes of serving in the new administration imperiled by persistent rumors — subsequently confirmed by news organizations — that a decade ago he was intimately involved with the National Commission on Fiscal Responsibility and Reform.
Whoa …Talk about TMI.
The revelations about Reed were uncomfortable for people who like to think of themselves as open-minded progressives. On the one hand, psychologists would assure us an interest in deficit reduction is a normal variant of human behavior. Reed should not be shamed for his history as executive director of the so-called Simpson-Bowles commission. On the other hand, there is a difference between tolerance and endorsement. In a powerful government job, Reed could be in position to proselytize for his fantasies of fiscal discipline and impose those on other people.
That’s a big reason important voices on the left, led by Rep. Alexandria Ocasio-Cortez (D-N.Y.), implored President Joe Biden not to give Reed a job, and succeeded in keeping him out of one critical post, director of the Office of Management and Budget, for which he was a contender. Instead he was named White House deputy chief of staff.
Reed surely did not appreciate having his past involvement with Simpson-Bowles paraded through the news, but he can take solace that he is in good company.
For a certain generation of Democratic political and policy officials — as it happens, the generation that now holds the vast majority of top posts in the new administration, including Biden himself — one of the most disorienting developments of the past generation has been the demolition of deficit politics.
That demolition, of course, has also transformed politics for Republican politicians, who no longer regard spending restraint and resistance to debt as an important policy objective, except when a Democrat happens to be president.
For the moment, however, it is on the Democratic side that the shift on deficits — not just on politics but on the actual substance — is more consequential.
For much of the past 30 years, the idea that progressives should reckon forthrightly with the costs of government and propose credible ways to pay for the programs they favor was considered a basic test of seriousness for Democrats. That test, incidentally, was administered in part by journalists, most of whom fully embraced the underlying premise.
Budget politics was not merely a matter of numbers. It had moral overtones. In the old days, concerned about deficits showed that an officeholder was not letting good policy be diluted by irresponsible political considerations—specifically the temptation to surrender the long-term interest in sound budgeting for the short-term reward of popularity.
These days, concern about deficits raises suspicions that an officeholder is letting good policy be diluted by irresponsible political considerations. As the choice is now framed, the temptation involves surrendering the short-term imperative of helping individuals and the broader economy to a bogus pursuit of bipartisanship or a foolish adherence to discredited orthodoxies about the long-term dangers of deficit spending.
For younger people, the notion of Democrats obsessing about fiscal restraint may seem like smoking on commercial airline flights: Did that really used to be a thing? Yes, and not that long ago. Bill Clinton got elected in 1992 in large measure by assuring voters that he would be responsible with government spending. And he delivered on that promise. The fact that he finished his eight years with robust budget surpluses was not an acquiescence to conservative priorities. It was regarded as a substantial progressive achievement, since he and other Democrats did this in concert with expanded social spending and a strong job-creating economy.
Even Barack Obama, with bigger spending ambitions and less of Clinton’s centrist aura, started his administration in 2009 with a “fiscal responsibility summit” and a promise to curb what was then commonly regarded as unsustainable costs of the Social Security and Medicare entitlement programs, and vowing: “We have to signal seriousness in this by making sure some of the hard decisions are made under my watch, not someone else’s."
In the years since Clinton, both the political and intellectual context have changed. The political context is that even Republicans, who used to deplore both big spending and the deficits that funded it, showed during their years in power during both the George W. Bush and Donald Trump administrations that they didn’t really care and that there was no political gain in trying very hard to pretend that they did. But the intellectual change was just as important: There wasn’t much evidence in the actual performance of the economy that there was a big penalty to be paid in higher interest rates or slow growth for deficit spending, nor much reward from the marketplace for what used to qualify as responsible budgeting.
The vogueish idea of “modern monetary theory” — which basically argues that national governments of the largest economies don’t need to worry about deficits ever, since unlike businesses and individuals they can create more money — is mostly not embraced by the mainstream of economists.
But that is at the conceptual level. At the practical level, both Trump and Biden are a little like Richard Nixon, a conservative who in 1971 made headlines by announcing, “I am now a Keynesian in economics.” In their decisions, both recent presidents have been devotees of MMT. Neither has looked to be overly constrained by old warnings about deficits. In Biden’s case, the warnings from his party have been in the other direction: Don’t be too timid or we will pay a price in public health and the economy.
Of course, once the old constraints of “how will you pay for it?” budgeting have been lifted in certain circumstances, it’s not self-evident when, if ever, the constraints will kick back in. Biden wants to spend two trillion dollars to help recover from the pandemic. Sounds good. But wouldn’t four trillion be better? Or eight trillion?
Austan Goolsbee, who was an economic adviser to Obama, said that Biden is right to recognize, in the wake of Clinton’s and Obama’s experiences, that Republican concerns about deficits are “not on the level,” and are just being invoked now to “block an electoral mandate” the new president has on his program. Still, he said, policymakers must make rational distinctions between spending that just addresses current needs versus spending on things like infrastructure that can credibly be counted on to produce long-term growth. Unless MMT advocates really have shown a way to reverse the laws of scarcity, he notes, today’s young people will likely pay a higher lifetime share of income in taxes than, say, someone born in 1955 will end up paying.
In any event, it’s clear the political gods are playing a joke on someone. Perhaps it is on people like Bill Clinton and Bruce Reed, who organized much of their public lives on the idea that what they regarded as fiscal responsibility was a supreme virtue, but that idea was a mirage. Oh, well. (I count myself as one who wrote extensively about, and believed in, the alleged mirage.) In historical terms, that may look a little like the way cereal pioneer John Harvey Kellogg was an evangelist for the health benefits of high volume enemas.
But perhaps the joke will turn out to be on others — that there will be a large and unpleasant price to be paid someday for what looks like ambitious yet still responsible policy now. Since, as ever, the highest price would likely be paid by the most vulnerable people, that would not be funny at all.
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