Why the National Debt Doesn't Matter--Right Now

With a tax cut and a budget deal in hand, the Republicans would have a record to run on for 2012.


Both American presidents governed during harsh economic times and suffered big losses in the midterm elections for Congress. One went on to be vilified as one of the worst to hold the office; the other is hailed as one of the best.

Both were Republicans. Both faced concerns about government debt. Herbert Hoover decided that deficits mattered. Ronald Reagan did not. You know the rest of the story.

There are many differences between the domestic and international economic conditions that confronted Hoover in 1930, Reagan in 1982, and Barack Obama in 2010. There is an argument to be made, no doubt, that we should not be overly influenced by historic precedent. There is no wisdom in continuing forever with our current policy: borrowing more billions from Chinese bankers to pay Chinese workers to make our toys and gizmos.

But I find it reassuring that the Republican leadership in Congress is not listening to its Tea Party crazies, and instead has plans in the foreseeable future to add hundreds of billions of dollars in more debt. The two parties will get in a big fight during the lame duck session, but it will be over whose taxes to cut--not whether. Very Reagan.

Hoover took a different approach. I took David Kennedy’s awesome history, Freedom From Fear, from the bookshelf last night and checked out poor Herbert’s record. Hoover raised taxes and tariffs at the worst possible time, fueling the deflation that led to the Great Depression, and lost in a landslide. He may be excused. There were no Keynesian precedents to guide him. The “panics” that his parents had endured were cured when Wall Street barons like J.P. Morgan interceded to ensure that the treasury was “sound.”

Though inflation remains ridiculously low, and unemployment is still too high, the Tea Party types--like Hoover before them--have their knickers in a twist about the federal debt. In the long term, we will need to do something about what we’re committed to spending. It’s tough being the cop of the world, and paying for the healthcare and retirement costs of an aging population, isn’t it?

But if Speaker Boehner (Have we voted yet? Did I miss it?) has an ounce of patriotic blood in him, he’ll join the Democrats and pass a fair tax cut, and then follow Tip O’Neill’s lead and use Alan Simpson’s commission, like Tip and Reagan used Alan Greenspan’s group in 1983, as a shield for a bipartisan deal that reduces long-term entitlement costs.

(Watch for that word--“fair”--to make a comeback in Democratic rhetoric in the next two years, by the way.)

[See where Boehner gets his campaign money.]

It’s good policy, and good politics. With a tax cut and a budget deal in hand, the Republicans would have a record to run on, and that would free their 2012 candidates from self-defeating propitiation to more Tea Party nuttiness.

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