Will Republicans' deficit hypocrisy haunt them this year?
The Republican Party indulged for years in brazen hypocrisy on deficit spending. Will 2019 be the year that hypocrisy comes back to bite it?
This question will be put to the test this year with three big budget decisions.
The first will be raising the debt ceiling. This is the statutory limit on how much total debt the U.S. federal government can have outstanding. Congress and the president used to just raise it whenever necessary. But that process collapsed into dysfunction during President Obama's term. (More on that in a moment.) If we hit the debt limit, we can't take out new debt to pay previous obligations. The government has to immediately cut back until spending — including debt payments — matches current tax revenue. And that would be a crushing blow to the economy.
Officially, we hit the debt ceiling this past weekend. But the Treasury Department can use "extraordinary measures" to move money around to continue meet our debt obligations. That stopgap will only last until early fall. So the clock is ticking.
The second big decision comes this month, when the Trump administration will release its broad plan for the federal budget going forward.
Finally, the third big decision hits in October, when the government has to decide what to do about the sequester caps. You might recall the budget clashes between Obama and the Republicans ended with the creation of the sequester. Every year going forward, if the government can't agree on a budget, then automatic and across-the-board cuts hit both defense and non-defense spending. The idea was for Congress to force budget discipline on itself, by threatening the most painful sort of indiscriminate spending cuts if everyone can’t agree on a more reasonable alternative.
A budget deal back in 2018 agreed on spending for that fiscal year and the next. The sequester cuts for those years were canceled. But in October, the government will have to decide what to do for fiscal year 2020. And the looming threat of the sequester is back.
Now, how does the GOP's long history of budget hypocrisy play into all this?
For decades, the Republicans have managed to sell themselves as the sober, serious party when it comes to fiscal balance. In practice, they've only abided by that principle when out of power. When they ran things under George W. Bush, the Republicans embraced massive deficits to cut taxes, launch two wars, and expand Medicare. More recently, under Trump, they embraced big deficits again to finance their giant tax cut in 2017. They also passed a budget last year with a noticeable increase in net federal spending.
But in between, under Obama, when the GOP only controlled the House, they railed against deficit spending and the rising debt load as existential threats to the country. Despite the need for recovery from the brutal recession in 2008, Republicans insisted on austerity. They even used the debt ceiling as leverage, effectively threatening to deliberately set off an economic crisis if they didn't get what they wanted.
This history revealed a few things.
First, the GOP is split between a small population of genuine budget hawks and a much bigger population of politicians who are only budget hawks when it's politically expedient. When the party controls the White House and all of Congress — as it did through much of the Bush years and the first two Trump years — it's deficits that become politically expedient. When the Democrats control the White House, it's budget hawkery.
The other thing we discovered is that the Democrats actually believe in budget discipline on the merits. They paid for every last cent of ObamaCare's spending and got no credit for doing so. Now that they've taken back the House of Representatives, the Democrats want to impose political limitations on their own deficit-spending — despite the party's sweepingly ambitious agenda — just to prove who the real fiscal hawks in the room are.
When it comes time to deal with debt ceiling in the fall, how forgiving will the Democrats will be, now that the shoe's on the other foot?
As I said, the Trump administration's next budget proposal is coming later this month. If they took the opportunity to offer something reasonable, that could lay the groundwork for healthy negotiations. But according to Politico, "the White House now plans to reposition itself as an unlikely enforcer of fiscal responsibility." The Trump administration did this with a previous budget as well, proposing insanely brutal cuts to everything that isn't either defense or entitlement spending on the elderly. Of course, the GOP actually passed no such thing. And it will be the same this time. But the dynamic just shows Trump and his party have no interest in being reasonable — or even intellectually honest.
Meanwhile, the zero hour for negotiating a debt ceiling increase will hit right around the same time as the deadline for negotiating fiscal year 2020: The debt ceiling, the looming sequester, and a possible government shutdown, all rolled up into one big package. And with a newly empowered Democratic Party, itching to give the Republicans a taste of their own disciplinary medicine. At the very least, the Democrats could demand the GOP cancel a whole bunch of its 2017 tax cuts in exchange for a debt ceiling hike. The Democratic Party isn't really about cuts to aid programs or public investment, but they might demand military spending reductions.
The point is, the Democrats hold the whip hand now. And they have every reason to demand concessions that maximize the GOP's ideological humiliation.
Ironically, if your party doesn't control the presidency and both houses of Congress, you're better off just being the party that controls the House or the Senate. This is what the Republicans figured out under Obama. When the other party holds the White House, they're held responsible by voters for any crises that erupt. That leaves the other party free to play whatever games of chicken they want. Holding the presidency while your opponents control at least part of Congress is the weakest possible bargaining position to be in.
Trump's Republican Party has never been in this position before. We're about to find out how they'll handle it.