the national interest

Democrats Need to Plan Right Now for Republican Fiscal Sabotage

Photo: Andrew Harrer/Bloomberg via Getty Images

The economy may or may not be heading into a recession. Either way, former Obama economist Jason Furman has a recommendation: Start planning the budget to respond now. In a Wall Street Journal op-ed, Furman argues for instituting an automatic fiscal response to a recession. If Democrats are smart, they’ll push to institute this as fast as they can, while they still have a chance to get Republican support.

The federal budget already contains some automatic stabilizers that counteract recessions. When the economy slows down, tax revenue falls (because people are earning less money), and some spending categories — unemployment insurance, anti-poverty spending, and so on — grows, because more people qualify for aid. But the automatic stabilizers are not large enough to fully counteract the harm of a recession. That’s why Congress always has to pass stimulus bills as an additional boost. Furman is making the case for making the automatic stabilizers larger, with cuts to payroll taxes and anti-poverty grants locked in when the economy hits a set trip wire. (Furman proposes the trip wire be when the unemployment rate has risen by at least half a percentage point above its low point in the previous 12 months, called the “Sahm rule.”)

There’s another reason to lock in automatic stabilizers now, one that Furman doesn’t mention (among other reasons, the Journal would never publish his op-ed if he did): Democrats need to lock in stimulus while there’s still a Republican president.

Republicans have followed a consistent pattern over the last four presidencies: They favor expansionary fiscal and monetary policy when their party controls the White House, and contractionary fiscal and monetary policy when Democrats do. Republicans happily endorsed fiscal stimulus and Keynesian policy under George W. Bush, but turned massively against it after the economy crashed and a Democrat took office.

Republicans assume Democrats would do the same, which is why they’re accusing liberals of trying to induce a recession under Trump. The truth is that Democrats have been willing to vote for stimulus under Republican presidents. The Republican Party alone is willing to engage in economic sabotage when out of power. I am not a mind reader, and our brains are highly adept at convincing us that whatever we perceive to be our self-interest also happens to be just and good. It is possible that Republicans genuinely convert into Keynesian skeptics who believe that austerity will cure recessions under Democratic administrations, then genuinely unconvert under Republican ones.

Whatever their conscious or unconscious motive may be, the pattern is unmistakable: Republicans will block any fiscal stimulus under a Democratic president, however dire the economic emergency may be, and however open a Democrat be may to their ideas for counteracting it. (When President Obama welcomed Republicans to help write the stimulus, their response was alarm that he was making it difficult for them to paint him as partisan.)

As long as Republicans hold the White House and have some reasonable prospect of keeping it another term, Republicans will support economic stimulus. That means Democrats have, at most, a year to enact enhanced automatic stabilizers. Once Democrats win the election, the GOP will flip into sabotage mode. If Democrats want to avoid Republican obstruction of the rescue effort against the next recession, they need to get their name on the dotted line right now.

Democrats Need to Plan Now for Republican Fiscal Sabotage