It’s been nearly 35 years since we’ve had a “tax and spend” political party. During the 1970s, the Democrats gave up fighting the Republicans about the “tax and spend” label, and the Carter Administration tried to escape from that charge by making very serious attempts to balance the budget. During the 1980s, more and more Democrats emphasized their concern for reducing deficits and balancing budgets as a way of distinguishing themselves from the Reagan Administration’s unprecedented peacetime deficits. This didn’t work for them during Reagan’s time, but they finally were able to use the balanced budget old-time religion game to get George Bush to violate his no new taxes pledge, which both contributed to the Bush recession and, as a further consequence, was a big reason why Bill Clinton was elected.
Clinton, of course, embraced the philosophy of deficit neutrality. He relied primarily on credit expansions in the private sector to drive the economy, raised taxes on higher income people, and basked in the glory of unexpected budget surpluses in the last four years of his tenure. Clinton’s surpluses withdrew demand from the private economy, and were the proximate cause, along with the collapse of “the dot com boom,” in creating the recession at the very end of Clinton’s term. During the Bush Administration, the Democrats continued to attack the Republicans for the Bush tax cuts from a deficit neutrality perspective, while preparing to run against them in 2004, 2006, and 2008.
And Barack Obama, even after the crash of 2008, ran on a promise of fiscal responsibility in the White House, while also promising to end “The Great Recession.” Since taking office, he’s shown a reluctance to spend more in a way that isn’t deficit neutral. Yes, the stimulus package was pure deficit spending. But it was about half the size needed to end the recession decisively. And, in addition, the President’s health care reform was limited to $800 Billion over ten years, and the Democrats in Congress worked hard to see that it was scored by CBO as likely to have a surplus over a 10 year period. In addition, the President is trying to end the Bush tax cuts for higher income people; everything else he’s proposing that will cost money is apparently shaped with deficit neutrality in mind, while, finally, his “Catfood Commission” is apparently going to recommend deep cuts in entitlements, along with some tax increases, after the election.
In short, the Democrats haven’t been the “tax and spend” Party for close to 35 years now. And the Republicans have mostly been a “spend and spend” Party, though not, of course, on the social safety net, education, infrastructure, or in areas of other public need, but rather on various wars and the military-industrial complex. So, what’s happened to America without a “tax and spend Party” that will do a lot of Federal deficit spending on domestic needs, while complementing that spending with a progressive taxation system with high marginal tax rates? . . . Read the rest of this entry →