This time is different

On Thursday, the White House released its latest budget; Republicans haven’t offered a specific counter-proposal, but they seem to be coalescing around a plan released by Russell Vought, Donald Trump’s last budget director.

Neither plan will become law. Instead, they’re intended to position the two sides for the looming confrontation over the federal debt ceiling.

But let’s not engage in false equivalence. The Biden budget may be political theater, but its numbers make sense. The Republican numbers don’t.

In some ways we’ve been here before. A decade ago, President Barack Obama also confronted a Republican-controlled House, which sought to use blackmail over the debt ceiling to extract policy changes it couldn’t have enacted through the normal budget process. Vought’s plan bears a strong family resemblance to the plan advanced then by Paul Ryan, who would become speaker of the House in 2015.

But the political and intellectual environment is different this time.

In 2013, Washington was full of Very Serious People who were obsessed with the budget deficit and believed Republicans who claimed to be deficit hawks. Ryan, in particular, was the subject of much media swooning, although anyone who looked at the details of his proposal realized it was flimflam.

These days the deficit scolds are much less influential. The news media is treating Republican claims that they have a plan to balance the budget with the ridicule they deserve. And the parties themselves have changed: Democrats have become more unapologetically progressive, while the GOP seems far less interested in fiscal policy, or policy in general, than in the past.

The starting point for President Biden’s budget is that Biden’s people evidently view deficits as a source of concern, but not a crisis. Overall, Biden’s budget proposes increasing social benefits on a number of fronts even in the face of rising debt. It nonetheless proposes to reduce the budget deficit, but only modestly—it claims to shrink the deficit over the next decade by almost $3 trillion, but that’s less than 1 percent of gross domestic product.

How can Biden reduce deficits while expanding social programs? Mainly by raising taxes on corporations and wealthy individuals, with an assist from cost-cutting measures in health care, especially using Medicare’s bargaining power to reduce spending on prescription drugs.

Are Biden’s numbers plausible? Yes. Notably, the economic projections underlying the budget are reasonable, not very different from those of the Congressional Budget Office. The projections even assume a substantial but temporary rise in unemployment over the next year or so.

Even economists like yours truly, who have been fairly relaxed about budget deficits, generally believe that at some point we’ll need a much broader effort to bring down health-care costs, and we’re also going to need more revenue than you can raise solely by taxing Americans with very high incomes. But Biden’s plan is a step in the right direction.

What about the Republicans? They claim to believe that rising federal debt is a major crisis. But if they really believed that, they’d be willing to accept at least some pain—accept some policies they dislike, take on popular spending programs—in the name of deficit reduction. They aren’t. The Vought proposal calls for preserving the Trump tax cuts in full, while also avoiding any politically risky cuts in defense, Social Security or Medicare.

Yet it also claims to balance the budget, which is basically impossible under these constraints. In fact, even with savage cuts to Medicaid and drastically reduced funding for the basic functions of government, Vought is able to claim an eventually balanced budget only by promising that tax cuts and deregulation will cause a big rise in the economy’s growth rate. Tax cutters often make such claims; they never, and I mean never, deliver on their promises.

WHAT I find puzzling is why Republicans are still rallying around this stuff. The modern GOP gets its energy from culture war and racial hostility, not faith in the miraculous power of tax cuts and small government. So why not give up on the ghost of Reaganomics? Why not come out for a strong social safety net, but only for straight white people?

Part of the answer may be that the party still needs money from billionaires who want to keep their taxes low. But it also seems to me that the peddlers of right-wing economics have done an extremely good job of marketing their wares to politicians who don’t know or care much about policy substance.

That Vought proposal, as I said, looks a lot like Paul Ryan’s plans a decade ago—but it’s titled “A Commitment to End Woke and Weaponized Government,” and somehow manages to mention critical race theory—which is not exactly a line item in the budget—not once, not twice, but 16 times.

In any case, where we are now is that Biden is offering a basically reasonable fiscal plan, while Republicans are talking mean-spirited nonsense.