The response was as uniform as it was predictable.
When Joe Biden unveiled an audacious $1.9tn coronavirus relief package, Senator Rick Scott of Florida warned: “I think one thing the Biden administration really has to focus on is the risk of what all this debt is going to do to us.”
When the president followed up with $2tn for infrastructure, Mitch McConnell, the Senate minority leader, made clear his opposition: “If it’s going to have massive tax increases and trillions more added to the national debt, it’s not likely.”
Republicans are beating the drum of small government and fiscal responsibility. Critics say they are only doing so because Democrats control the purse strings. They argue that past Republican administrations have shown little regard for the spiralling national debt.
The charge of hypocrisy could hamper efforts to stall or pare down Biden’s ambitions. After Donald Trump’s cavalier spending, and tax cuts for the rich, the GOP faces a battle for credibility.
“Republicans spent the better part of the Obama presidency talking about ‘tax and spend liberals’ and ‘living within our means’ and balancing budgets and debt and deficits and then, as soon as they got the reins of power, all of that went out the window and they spent money like drunken sailors,” said Kurt Bardella, a former Republican aide, now a Democrat.
“…They spent it on the rich, on the wealthy, on corporate interests. The hypocrisy of the Republican party when it comes to spending and deficits is just another example of how almost every facet of traditional conservatism has been abandoned during this Trump era … if Donald Trump released the same plan Joe Biden did, they would be all for it.”
Republicans talk a good game on debt but their record tells a different story. Ronald Reagan, worshipped by many as the patron saint of “responsible” spending, left office having almost tripled the national debt and having cut taxes for the rich. George W Bush doubled the debt with military spending after 9/11 – and more tax cuts.
In 2016, Trump promised to eliminate the debt within eight years. It was then about $20tn. By October 2020 it had reached $27tn – up almost 36% – thanks in large part to more tax cuts for the rich.
This reality, combined with Biden’s plans, has stirred debate over whether the national debt actually matters. Experts disagree over how much debt is too much. Last year the debt exceeded GDP, but interest rates remain low.
Janet Yellen, the treasury secretary, is most concerned about the need to stimulate recovery. She told Congress: “Right now, short-term, I feel we can afford what it takes to get the economy back on its feet, to get us through the pandemic, and to relieve the burdens that it is placing on households and small businesses.”
Gus Faucher, chief economist at PNC Bank, agrees.
“We have been through an unprecedented crisis, it makes sense that we would spend heavily to get out of it and the interest costs are so low right now it makes sense to spend heavily now so that we can return to normal,” he said.
The debt does need to be addressed, he said, and hopefully better economic activity will bring it down: “We still need to figure out how to pay for the retirement of the baby boomers over the longer run but that’s a longer issue.”
If rates move up quickly or if financial markets grow concerned about ability to pay back the debt “that would be a big concern”, Faucher added. “But I don’t see that on the horizon. I don’t think it’s a crisis right now.”
For Maya MacGuineas, president of the non-partisan Committee for a Responsible Federal Budget, the national debt is a crisis waiting to happen.
“Our debt is the highest it has been relative to the economy since the second world war and it is about to be the highest it has been ever,” she said. “It’s growing faster than the economy, that’s the definition of unsustainable.”
That leaves the US “dangerously vulnerable” to economic and geopolitical challenges, she added, arguing that spending is not the problem so much as how borrowing is paid for. Washington has increasingly attempted to enact an agenda that is not paid for. Biden’s infrastructure plan is an exception, said MacGuineas, with a plan to pay in part by increasing corporate taxes.
But too often the politics of borrowing are “dangerously shortsighted and there is always a political justification not to deal with it because paying for your priorities is much harder than pretending they pay for themselves”.
The situation has been exacerbated by polarization that has left Washington “unable to do anything hard … the hypocrisy during the Trump era, where we massively grew the debt, massively grew spending and refused to deal with social security and Medicare challenges, was truly problematic.
“Both sides see it so differently and they need to talk to each other. Republicans keep putting in irresponsible tax cuts pretending that they will pay for themselves, which they won’t. On the Democrat side there is a denial that we have a number of programs that are growing faster than the overall economy … for seniors, retirement and healthcare. There is an unwillingness to even acknowledge that those programs have to be fixed.”
It is a situation that is unlikely to change in an era when “bipartisan” is a dirty word.
“They have completely different stories they tell themselves,” she said.
Biden has insisted he is open to talks on infrastructure and will meet Democrats and Republicans. But if Republicans attempt to play the national debt card, they are likely to be given short shrift.
Larry Sabato, director of the Center for Politics at the University of Virginia, said: “Nobody even takes it seriously. When I see it, and I think there are millions of people like me, I just laugh. Do they really think our memories are that short?”
Source: US Politics - theguardian.com
