the national interest

Republicans Stopped Sabotaging the Economy Because They Have the White House Now

President Barack Obama talks with President-elect Donald Trump in the Oval Office of the White House in Washington, Thursday, November 10, 2016. Photo: The Washington Post/Getty Images

During the Obama era, Democrats frequently believed, but only rarely uttered aloud in official forums, that the Republican Party was engaged in economic sabotage. Not a coldly conscious plot, exactly. But it seemed just a little too convenient that the party had reversed its fiscal ideology at precisely the time when doing so would damage Democrats and thereby smooth the GOP’s return to power.

Now that Republicans have reversed their position once again, also in a way that happens to redound to their political benefit, the answer seems a little more clear. Republicans have used their control of government to virtually double the budget deficit, which had been hovering around half a trillion dollars per year, and will now likely run well over $1 trillion — during the peak of an economic expansion. There is no economic rationale for this behavior. Their policy is simply to support fiscal contraction under Democratic presidents and fiscal expansion under Republican ones. Cynicism is the only basis to explain their behavior.

During the Bush administration, the party followed Dick Cheney’s famous dictum, “Reagan proved deficits don’t matter,” as a basic guide. Republicans financed two large tax cuts, a Medicare prescription-drug benefit, two wars, and a large domestic-security hike entirely through higher borrowing.

Importantly, in addition to supporting permanent deficit increases, they also supported temporary deficit increases in order to ward off recessions. When the economy slowed in 2001, Republicans supported a Democratic plan to mail out short-term tax credits. Here, they were following the perfectly sound logic of Keynesian economics, which held that during a recession, the government should boost demand by temporarily increasing the deficit. Even committed right-wing ideologues like Grover Norquist and Paul Ryan supported fiscal stimulus explicitly on these grounds. (“I like my porridge hot,” said Ryan at one hearing, explaining why he agreed with the Keynesian arguments made by Republican economist Kevin Hassett that it was vital to inject demand into the economy as quickly as possible.)

When the economy entered another recession at the end of Bush’s second term, Republicans again overwhelmingly supported another temporary stimulus bill. In February of 2008, Congress voted, by margins of 380 to 24 and 81 to 16, to mail out flat checks to every American household in order to stimulate more spending. “This is the Senate at its finest, recognizing this was an opportunity to demonstrate to the public that we could come together, do something important for the country and do it quickly,” said a satisfied Mitch McConnell.

As it turned out, what looked like a mild recession at the beginning of 2008 developed into a global economic crisis of staggering size. By 2009, the economy was plunging into the deepest crisis since the Great Depression. But at that point, which also coincided with partisan control of the presidency changing hands, Republicans decided they no longer agreed with Keynesian economics. Or they believed the scale of the crisis somehow failed to justify the cost to the Treasury. So thoroughly and so rapidly did this conversion permeate the Republican Party that, by the time Obama took office, it was almost impossible to find a conservative of any sort who had a kind word for the stimulus. Even the most openminded conservatives seemed more concerned about deficits than the calamity of unemployment that could top double digits. “The issue is the risk the Democrats are taking, period, by spending enormous sums that aren’t obviously justified by the current crisis,” wrote Ross Douthat in February 2009.

Republicans whipped themselves into a frenzy over the debt, which threatened a “debt crisis,” even a Greece-style social upheaval. In 2011, Republicans cited this urgent fiscal threat to justify their extraordinary tactic of threatening to refuse to lift the debt ceiling, possibly triggering global economic calamity, in order to coerce Obama to adopt their policies. Obama mistakenly took the threat as an opportunity to enter into long-term fiscal policy negotiations. The end result of the fiasco was “sequestration”: caps on the discretionary portion of the federal budget. Obama assumed that, since the caps were designed to be painful rather than to identify tolerable savings, and since they squeezed defense spending in particular, Republicans would be willing to negotiate to lift them.

They weren’t, though. Republicans instead decided sequestration was wonderful, the crown jewel of their achievements since taking control of Congress. Sequestration made for bad government, and dragged down the economy, but since Obama didn’t like it, Republicans decided they wanted to keep it. Eventually, when defense cuts bothered them too much, they negotiated deals to slightly alleviate the caps year by year. But their insistence that lifting the caps be paid for by finding offsetting savings made it hard to negotiate much relief.

The solution to this problem turned out to be simple. Once a Republican held the White House, Republicans simply abandoned the whole idea that sequestration, or anything at all, needed to be paid for. They have happily reverted to the Bush-era practice of putting everything on the national credit card. Not only has this allowed them to cut taxes and lift sequestration, they are also ready to finance an infrastructure bill through deficit spending — a position they adamantly opposed under Obama.

Republicans are implementing fiscal stimulus on the largest scale since 2009. One could make the case (as Eric Levitz does) that, despite low unemployment, additional stimulus is still justified in order to heat up the labor market enough to produce really strong wage growth. I’m more persuaded by the need for stimulus when unemployment was above 6 percent, and that it’s no longer worth the additional debt. Alternatively, one could oppose stimulus now and also in 2009, if you seriously oppose it always. But supporting fiscal stimulus now with unemployment close to 4 percent while opposing it when unemployment was far higher is a position no economist in the world would justify.

And yet that literally-no-economist-supported stance is in fact the stance of the overwhelming majority of the Republican Party.

Whether this represents a conscious strategy of economic sabotage is not exactly an answerable question. The human brain is very good at concocting rationales for our self-interest. Republicans found reason to be receptive to arguments for Keynesianism under Bush, to reject them under Obama, and then to forget their old position under Trump.

What is beyond dispute is the partisan benefit to the Republican Party of these reversals of fiscal conviction that occur every time the White House changes hands. When Democrats passed major social legislation, they had to scratch and claw to offset every dollar of spending — alienating powerful constituencies by making them pony up to cover the cost of Obamacare. Republicans, on the other hand, have had the luxury of letting other people worry about how to pay for their priorities. Obama had to govern with the headwind of a congressional party obstinate about maintaining economically harmful spending caps that it’s now admitting — by voting to remove them — it didn’t even like.

This remarkably bad-faith fiscal policy does not present Democrats with any attractive options. On the one hand, they probably don’t want to withhold support for important spending programs just to make life difficult for Trump. On the other, they also don’t want to go along with a system in which the government systematically understimulates the economy under Democratic presidents and overstimulates it under Republican ones. The second option is probably the less-bad of the two. At the very least, Democrats should be prepared for the inevitable hypocritical GOP flip back to hysterical deficit-hawkery that’s bound to come whenever Democrats win the next presidential election.

Obama’s Gone, So Republicans Stopped Sabotaging the Economy