house democrats

Democrats Are Fighting About Whether Deficits Matter. That’s Good.

The revolution will not be deficit-neutral. Photo: Don Emmert/AFP/Getty Images

Last year, House Republicans voted to add $1.5 trillion to the deficit, for the sake of delivering enormous tax breaks to the wealthy and corporations. Now, as one of their first acts upon taking power, House Democrats are preparing to prohibit themselves from adding a penny to the deficit for any purpose — including investments in things like climate preparedness, which could plausibly pay for themselves in the long run. This plan has outraged the party’s far-left flank, seeding a (small-scale) rebellion against Nancy Pelosi’s leadership before she’s even taken the Speaker’s gavel.

And all of this constitutes a welcome sign of progress.

But before we examine why this particular episode of “Dems in Disarray” is a happy one, let’s take a more detailed look at the plot. The Washington Post’s Mike DeBonis and Jeff Stein offer a succinct synopsis:

House Democratic leaders faced the prospect of a liberal rebellion on their first day in charge after prominent Democrats said they would oppose a package of rules changes endorsed by Nancy Pelosi, the incoming speaker.

Rep. Ro Khanna (Calif.) and Rep.-elect Alexandria Ocasio-Cortez (N.Y.) said they would vote against the rules changes on Thursday — in the second vote Democrats will take in the majority, after electing Pelosi (D-Calif.) — because of the inclusion of a fiscal measure known as “pay as you go,” or PAYGO. That rule, echoing a provision in federal law and in the Senate’s rules, would require the House to offset any spending so as not to increase the budget deficit … Liberals such as Khanna and Ocasio-Cortez — and activists on the political left — argue that PAYGO amounts to a legislative straitjacket that could impede their efforts to pass ambitious social programs.

The PAYGO rule is substantively indefensible. It rests on the economically illiterate premise that balanced budgets are forever and always desirable. In truth, deficit spending is the only responsible means of combating severe recessions, and a perfectly sound means of financing worthwhile public investments in a context of low inflation and chronically low labor-force participation — which is to say, in our current context. As a political matter, it is true that voters generally evince a fondness for the phrases “fiscal responsibility” and “balanced budgets.” But it defies credulity to suggest that there is a significant contingent of single-issue, deficit-reduction swing voters who plan to carefully study the Democratic Party’s changes to House procedure before going to the ballot box in 2020. Therefore, even swing-district Democrats have no excuse for backing PAYGO, and their attachment to the rule is maddening.

All that said, it doesn’t really matter, in a concrete sense, whether the House adopts a PAYGO rule or not. Even if the House establishes a rule that all new spending must be paid for, it can waive that rule for any individual piece of legislation with a simple majority. Many Democratic opponents of PAYGO have signaled that they intend to vote for the package of rule changes, regardless, citing assurances that the rule will be waived if doing so is necessary for “advancing key progressive priorities.”

More crucially, PAYGO isn’t merely a House rule, but also a federal law. And waiving that law would require a 60-vote majority in the Senate (or else, the abolition of the filibuster), even if Pelosi’s caucus rejected PAYGO.

Thus, the rule doesn’t actually matter — only the principle does. If we knew that congressional Democrats universally supported using deficit financing to advance progressive goals, then the PAYGO rule would be entirely inoffensive. If House Democrats want to have a fake rule that they can point to when Republicans propose tax cuts — and instantly waive, when progressives propose expansions of the welfare state — that’s fine. The problem is that the rule reflects a genuine ideological commitment to “fiscal responsibility,” which will make it difficult to pass deficit-expanding legislation through the Senate.

Fortunately, the mere existence of a divisive, intraparty fight over PAYGO is a sign of vital progress. For decades, a belief in the necessity of long-term deficit reduction was a source of consensus within the Democratic Party. Democrats might fight about whether spending cuts were necessary — but the idea that new spending would have to be paid for with tax hikes wasn’t controversial. Now it is. And that fact is more important that the details of the House’s ultimate rules package. Khanna and Ocasio-Cortez lost a battle that didn’t matter — and, in so doing, made some tangible progress toward victory in a wider war that does.

Democrats Are Fighting About the PayGo Rule. That’s Good.