As The Republicans Shift Further Right, The Democrats Follow Them And Are Now Your Father's GOP

"The Republicans," explained Kyle Kulinski last week, "have shifted further right to some weird brew of theocracy and authoritarianism and fascism and outright oligarchy." He forgot kakistocracy and kleptocracy but no need to quibble. "The Democrats," he continued, "are acting like the Republican Party." In a simple, straight-forward tweet over the weekend, Ro Khanna laid out an economic platform the Democrats need to be running on, something that Pelosi's and Hoyer's PAY-GO bullsit would largely negate: Medicare-For-All, Job Guarantee, debt free public college, and tackling climate change for real. Their ideas on being "fiscally responsible" are according to economist Stephanie Kelton,  "oldthink." Kelton was the Democrats' Chief Economist on the Senate Budget Committee in 2015 and then Bernie's top economic advisor during his 2016 campaign and she regularly preaches against the kind of austerity the establishment of both parties seek to impose on the country. In January she suggested I read Josh Mound’s piece from last July, The Democrats Are Eisenhower Republicans. It sounds like Kulinski may have read it as well.

For the last fifty years, the Right has waged a war on “objective” fiscal analysis in order to further their goal of upward redistribution. Republicans and their conservative allies invoke mainstream studies when they undermine progressive policy ideas, then discard those same analyses when they get in the way of their agenda.

In contrast, Democrats have touted themselves as denizens of the “reality-based community” and “the party of fiscal responsibility,” as Bill Clinton often put it.

The result is that, for decades, the parties have operated according to completely different rules on taxing and spending.

When Republicans put forward unrealistic tax and budget proposals, they waive away projected deficits by improbably claiming that economic growth will cover the massive shortfall. When Democrats are in power, they treat “pay fors” and budget balancing as paramount and CBO analyses as sacrosanct. And whenever a progressive figure like Bernie Sanders steps outside the neoliberal budgetary consensus, elected Democrats and liberal pundits join conservatives to smack down their proposals as “unrealistic.”

The predictable upshot of this policymaking asymmetry is that Democrats have spent the last forty years trimming their sails, inadvertently underwriting the GOP’s next tax cut.

Jimmy Carter’s austerity funded Ronald Reagan’s top-heavy tax cuts. Bill Clinton’s austerity funded George W. Bush’s top-heavy tax cuts. And now, the deficit reduction Obama worked so hard to achieve in the second half of his presidency will likely help fund Donald Trump’s top-heavy tax cuts.

Throughout the 1950s and ’60s, members of the incipient conservative movement bristled at the GOP’s balanced-budget orthodoxy, as embodied by President Dwight Eisenhower. Republicans’ fear of inflation, they argued, drove the GOP to balance the budget at all costs, unwittingly helping Democrats grow the size of government.

Some on the Right-- advancing what would become known as the “starve the beast” strategy-- began insisting that Republicans put all their focus on slashing taxes, rather than balancing the budget. Any deficits that resulted from tax reduction, these conservatives argued, would serve as a check on Democrats’ spending plans.

“I honor the Republicans for putting what they regard as the national interest ahead of partisan considerations. But I believe that they have been shortsighted in judging the national interest,” libertarian economist Milton Friedman wrote in a Newsweek column in 1968. “True fiscal responsibility requires resisting every tax increase and promoting tax decreases at every opportunity. That is the only way to put an effective ceiling on Federal spending.”

…President Jimmy Carter-- despite calling for a higher capital gains tax while running for president in 1976-- was, in many ways, the personification of this new centrist neoliberalism. And many conservative Democrats in Congress were sympathetic to lowering taxes on investment income. The combination of the Republicans’ “Tax Blitz” campaign and a concerted lobbying effort from business groups like the Chamber of Commerce, the National Association of Manufacturers, and the American Council for Capital Formation made the passage of Steiger’s bill a fait accompli.

The conservatives backing the capital gains reduction weren’t shy about its distributional effects. “Who will benefit from my amendment? Taxpayers in the upper bracket would benefit,” Steiger frankly admitted. He wasn’t kidding. The final version of Steiger’s plan, which was signed into law by Carter, gave a four-person family making $20,000-- just above median income-- approximately $100; a taxpayer making over $200,000 saw a tax reduction of more than $25,000.

By the 1980 presidential campaign, Carter had assumed the role of “green eyeshade” fiscal scold and Reagan the role of sunny spendthrift.

In late 1978, Carter had told the nation that the country was facing a “time of national austerity” that would require “difficult and unpleasant” belt-tightening. Throughout the rest of his presidency, Carter made clear that he believed his role as a president in a time of high inflation was to be “fiscally responsible in reducing the Federal deficit.”

He opposed any spending increases or further tax cuts, including indexing federal income tax brackets to inflation-- one of the few tax changes that would’ve disproportionally helped low- and middle-income taxpayers.

Reagan, in contrast, not only pushed a version of the Kemp-Roth rate cuts during his presidential campaign, he also favored indexation. He denied that his tax cuts would cause the deficit to balloon or that additional austerity was needed to fight inflation. Instead, he promised to replace the “eerie, ghostly silence of economic stagnation, unemployment, inflation, and despair” with the “confident roar of American progress and growth and optimism.”

Ironically, the only area in which Carter claimed to support more generous provisions than Reagan was in tax cuts for business. The inversion of the parties’ fiscal roles was complete.

Once in office, Reagan used language nearly identical to Friedman’s to justify tax cuts that would send the deficit spiraling.

“Over the past decades we’ve talked of curtailing government spending so that we can then lower the tax burden. Sometimes we’ve even taken a run at doing that,” Reagan told the nation in a televised address one month after taking office. “But there were always those who told us that taxes couldn’t be cut until spending was reduced. Well, you know, we can lecture our children about extravagance until we run out of voice and breath. Or we can cure their extravagance by simply reducing their allowance.”

When the CBO predicted huge deficits from Reagan’s cuts, the White House reacted just as the GOP is today. “That’s them practicing what they’ve been preaching for the last thirty years,” Reagan groused. “Their figures are phony.” The administration even attempted to oust CBO director Alice Rivlin and replace her with someone more pliable.

Despite the bill’s regressive effects, a majority of Democrats in the House and the Senate voted for Reagan’s Economic Recovery Tax Act of 1981. It was the largest tax cut in post–World War II history, and it exploded the deficit. Yet it did little to spur the growth that supply-siders had promised. As studies by the CBO, the Joint Committee on Taxation, and the Joint Economic Committee all found, Reagan’s cuts made the federal tax system less progressive and worsened income inequality. Between 1980 and 1983, the bottom half saw their after-tax incomes fall while the top 1 percent enjoyed a more than 20 percent increase.

In the end, Carter’s legacy was laying the fiscal groundwork for Reagan’s giveaway to the rich.

The next Democratic president, Bill Clinton, would make the same mistake.

…[I]n typical “supply-side” fashion, the tax windfall for the rich blew a hole in the budget. By this time, the idea that there was no political downside to growing the deficit had become the Republican conventional wisdom. As Vice President Dick Cheney told Treasury Secretary Paul O’Neill, “Reagan proved deficits don’t matter.”

The Bush deficits had the intended effect on Democrats, too.

When Barack Obama took office, the deficit was enormous and the country was entering the deepest recession since the Great Depression. Obama initially pursued a more ambitious agenda than either Carter or Clinton, but both his stimulus package and the Affordable Care Act were scaled back in an effort to avoid sticker shock. And after his health care law passed, Obama shifted into deficit-reduction mode. He appointed a “bipartisan” National Commission on Fiscal Responsibility and Reform that only heightened deficit hysteria, and he worked to strike a deficit-reducing “grand bargain” with John Boehner that would’ve slashed Social Security.

Now, Obama’s fiscal probity is likely to be undone by Trump and the Republicans in Congress.

…[T]he the top-heavy tax cuts contained in the GOP’s ACA repeal bill and Trump’s tax plan would mark yet another “Two Santas” victory for the Republicans.

And this time they’re pulling out all the stops.

The Republican ACA repeal plan is essentially a tax cut for the rich disguised as a health care bill. The richest 1 percent would enjoy a more than 2 percent bump in their after-tax incomes, while few in the 99 percent would see any tax benefits. Translated into dollar terms, the most recent Senate GOP bill would provide a tax cut of a few hundred dollars for most people and a quarter of a million dollars for the top one-tenth of 1 percent. And the price? Tens of millions of people losing their health insurance and the virtual destruction of the Medicaid program.

…Republicans have made clear time and time again that they don’t care about the deficit. And Democrats shouldn’t either. Rather than fixating on the GOP’s shaky math, Democrats should highlight the cruelty of shoveling money to the rich at a time when inequality is soaring and millions languish in poverty.

Fiscal policy is ultimately about distribution, not growth or deficits. Republicans understand this. Unfortunately, Democrats don’t.

Instead of worrying about crafting practical, deficit-neutral proposals, Democrats should be bold and single-mindedly focus on downwardly redistributive taxing and spending. Go for Medicare for All, public child care, green jobs. Propose popular programs, and don’t worry about the cost. If the GOP raises deficit concerns, waive them away by predicting fabulous economic growth, just like Republicans do.

And if, once enacted, the progressive programs do end up increasing the deficit? Let the next Republican president worry about balancing the budget.

This morning Alan Grayson put it more succinctly for us: "Pay-Go is a good example of self-hating Democrats trying to be the 'fiscally responsible' Republicans that the Republicans themselves never are. The GOP just passed a $3 trillion tax cut for the rich, with no offsetting revenue or budget cuts whatsoever. A Pay-Go rule means that all we’ll ever see is GOP tax cuts for the rich, never Democratic tax cuts for the middle class and seniors. The Republicans figured this out a long time ago: there are exceedingly few 'fiscal responsibility' voters, and they’re going to vote Republican no matter what."

Rashida Tlaib (D-MI) is the most recent candidate endorsed by Blue America. More on her tomorrow; I promise. I asked her about this whole PAY-GO scheme. She gets it... in a big way: "Our families in MI-13 reside in the second poorest congressional district in the country, and they need real help from the federal government. House Democrats insisting on paying for progressive legislation that elevates working families with budget cuts elsewhere needlessly ties our hands before we even begin to fight. If Democratic leadership is going to buy into right-wing talking points and stand in the way of progress for our families, we will replace them with representatives more in touch with the families we represent."

Kelton also told me she thinks Hawaii's junior senator, Brian Schatz, has demonstrated a more astute read of the political game than, perhaps, any other Congressmember. "The GOP," he said, "is skillful about never talking about paying for what they want and Dems are always trying to satisfy the 13 people who are doing Third Way work on K Street. It’s a game that disadvantages Democrats. I don’t want to play it anymore.

Attention Nancy Pelosi: Kelton added that "PAYGO is a self-imposed, economically illiterate approach to budgeting. Republicans know this. They understand that deficits pose no risk to our national solvency and that the budget can be used to improve the financial well-being of the donor class. So they have unabashedly used their power to expand deficits and, hence, deliver windfall gains for big corporations and the already well-to-do. Instead of vowing budget chastity, Democrats should be articulating an agenda that will excite voters so that-- when the time comes-- they can unleash the full power of the public purse on their behalf-- a cleaner planet, good jobs, a secure retirement, affordable child care, debt-free college, and Medicare-for-All."