David Brodwin is a cofounder and board member of American Sustainable Business Council. Follow him on Twitter at @davidbrodwin.
President Obama and Rep. Paul Ryan stalk each other, each seeking advantage in the epic negotiations over taxes and spending driven by deficit worries. Obama launched a charm offensive this week, trying to pry loose a few Republicans to get a "grand bargain" done. Meanwhile Ryan's new budget proposal defines a starting point for negotiation that's to the right of what the electorate rejected less than four months ago. To Obama, "winning" means getting a deal with the fewest possible concessions—few enough to avoid earning the undying enmity of the coalition that put him back in office. For Ryan, winning means holding fiercely to wavering Republicans and making Obama pay the steepest possible for a deal. Ryan and his less extreme colleagues have caught Obama in a classic "good cop/bad cop" negotiating strategy.
Though Obama may want a deal, a good deal is not possible without recognizing the central element in the Republican strategy. This is the opportunistic and selective way that Republicans invoke debt and deficit. Right now the Republicans are deficit hawks: They point to the large and growing deficit, link that to a steadfast refusal to raise taxes, and claim that the only way to reduce the deficit and save America is to cut social programs.
But at other times, the Republicans are not deficit hawks. They were not deficit hawks in 2000 when they pushed through the Bush tax cuts, despite predictions that these cuts would eliminate the surplus that accumulated under Clinton. They were not deficit hawks when they launched the Iraq War with no discussion of paying for it. And they were not deficit hawks when they passed the prescription drug component of Medicare, despite its unfunded, 10-year cost of over $700 billion.
Republicans use deficits opportunistically the way both parties have long used the doctrine of "states rights". Both parties embrace states rights when they lack control in Washington yet support something a state is trying to do. But they champion strong federal government when they control it. Republicans are for states rights when it comes to states being able pass election laws that suppress voter turnout, but against states rights when it comes to federal pre-emption of state fracking regulations or same sex marriage or the personal use of marijuana. Democrats are little better.
It's impossible to craft a grand bargain with someone who frames their position in slippery, opportunistic terms, because the bargain won't stick. Suppose Obama cuts education spending and Social Security to reduce the deficit without raising taxes, closing loopholes, or taking on defense spending. This approach will work initially; the deficit will go down. Eventually, economic recovery will return a surplus and make it possible to pay down the debt. As soon as this happens though, the same people who claim to care so much about the deficit today will slash taxes again. "We're running a surplus" they will say. "Why should the government be taking all that money?" "We should give the money back to the American people who will spend it more wisely than the government can." Apparently these people never heard of the idea of saving for a rainy day.
When the next cyclical downturn comes (and surely it will) federal income tax revenues will fall while unemployment claims rise. The latest round of tax cutting will once again bring on a deficit and rising debt. The deficit hawks will find their principles again, and demand again that we slash programs further to solve the problem. This disingenuous use of the deficit is nothing more than a ratchet. It can only tighten. It can never relax.
Republicans say to the Democrats: "Join us, dear colleagues, in eradicating the scourge of debt from our fair nation. Even though the sacrifices are harsh, we have no choice if we are to preserve America." But they go on to say: "Taxes are far worse than deficits. As bad as deficits are, we can't raise taxes to solve them. "
Not true. We can raise taxes to where they were during the dot-com boom of the '90s, during the computer boom of the 1980s, even to where they were during the plastics and aerospace boom of the 1960s. In all these periods and many others, taxes were higher than today, sometimes unimaginably higher, and yet the economy grew vigorously with a rising stock market, low unemployment, strong wages and healthy consumer demand. These led to government surpluses which paid off the debt from World War II, then Korea, then Vietnam, while building the world's best education system. Then this boom paid for the social programs of the Great Society.
Democrats can't let themselves be lulled into the false premise that deficits are always bad, and taxes are always worse than deficits. To their opponents, deficits are good at least half the time (even though they won't admit it publicly) because deficits serve as a whip to scourge the middle class between rounds of tax cuts. The abuse of deficit fears to ratchet down essential government programs, without raising taxes, must be repudiated, clearly and publicly. We must name and reject the ratchet. Our economy is cyclical and we must keep taxes at a level that will to run surpluses in good times so we can run deficits in bad time. No grand bargain can work otherwise.