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More on the Deficit Double-Standard

To say a few more words on the double-standards that afflict Democrats with regard to the deficit, take a look at how Bush passed his tax cuts. Since he didn't have 60 votes for the hefty package he wanted, he used the budget reconciliation process. This was, to observers, a surprise: the idea behind budget reconciliation was that it would make it easier for Congress to do the hard work of deficit reduction. As Kent Conrad told me, reconciliation "was designed solely for deficit reduction." The Senate parliamentarian, predictably, objected to the Bush administration's effort. He was fired and replaced with a parliamentarian that blessed the procedure.

Bush's 2001 tax cuts was the first time the budget reconciliation process had ever been used for a bill that increased the deficit. Ever. Democrats were appalled. When they retook the Congress, both the House and the Senate passed a rule barring reconciliation from being used for bills that increased the deficit.

The product, of course, is that Democrats can't use reconciliation for bills that increase the deficit. But it goes beyond even that: A number of powerful congressional Democrats really care about the deficit. So too do a number of powerful White House economic advisers. They've decided that balancing the bill in the 10-year window, as the House Democrats do, isn't sufficient. They want it balanced beyond the 10-year window, too.

It's all very responsible, and very good policy, but it means the Obama White House has committed itself to two incredibly stringent conditions the Bush White House avoided: finding sufficient revenues for their programs, and finding the kind of revenue that keeps pace with the spending in their programs over the long-term. That makes their job a lot harder.

By Ezra Klein  |  September 4, 2009; 5:08 PM ET
Categories:  Budget , Democrats  
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Comments

Here's the Washington Post's view of just how responsible and stringent Obama administration spending is likely to be.

http://www.washingtonpost.com/wp-dyn/content/graphic/2009/03/21/GR2009032100104.html

Posted by: tomtildrum | September 4, 2009 5:31 PM | Report abuse

It's all very responsible, and very good policy, but it means the Obama White House has committed itself to two incredibly stringent conditions the Bush White House avoided"

Well good on him, then, if he produces a bill that meets his criteria. Why do I get the distinct impreseeion you wish that the President lacked such scruples?Responsible government is what we want, not Bush, right?

Posted by: tbass1 | September 4, 2009 5:35 PM | Report abuse

Doesn't seem so responsible to me. IF Obama gets two terms in office, then the Republicans elect a President, which seems very likely, then that new President will have two years of the 10-year window to fritter away all of those Obama savings with tax cuts for the rich, etc. This will be billed as "giving the money back to the people."

If the Dems are bound to share the national credit card with the Republicans, they might as well buy something nice for the country while they have the chance.

Posted by: DannyK14 | September 4, 2009 8:05 PM | Report abuse

When I got up this morning and opened the curtains ... there were actually pigs flying.

Posted by: cautious | September 5, 2009 1:41 AM | Report abuse

A number of powerful congressional Democrats really care about the deficit. So too do a number of powerful White House economic advisers

I am sorry Ezra but that is hopelessly naive, you are mistaking a second order explanation for a first order cause.

If you examine the economic principle that underlies Fed policy through the second half of the 20th century & Reaganomics & Rubinomics & Bushonomics it is clearly that of preserving income share among the bond-holding and capital owning class. The two major risks to that income share are inflation and increases in top marginal rates. High levels of deficits threaten to trigger both and so policies which proposes to increase deficits that are not accompanied by an offsetting flow of income to that class are to be avoided.

What seems like incoherence becomes perfectly coherent when viewed from that perspective. Direct threats to upper level income in the form of tax increases are resisted because they are a first order threat. On the other hand increases in deficits have to be considered case for case, in some cases the resulting income makes it worth the risk to top rates. You have to factor in that to some degree high structural deficits are good for the capital class because they are the ones who benefit from the associated higher yields.

A little glance at British history during the Napoleanic War tells you how this works, in a country struggling along under a crippling debt burden the best way to become their equivalent of a multi-millionaire was to invest into 'The Funds' and become in effect moneylender to the government with returns at moneylender rates.

Are those top economic advisors really worried about deficits? Or pressures on top rates? As I pointed out on Matt's post citing this one you can explain a lot of the concern about the cost of HR3200 by examining row three of the following table from CBO
http://2.bp.blogspot.com/_fjW71B3WLTQ/SmHMyMZ-lqI/AAAAAAAAARc/DMc-x5-_vUs/s1600-h/CBO+Jun+17+Tri-Comm+score.jpg
$583 billion in proposed revenue, most of it to be raised by a tax on the top 1 1/2%. Cutting the cost of the bill back to $700 billion might have zero effect on future deficits, if that is it is matched dollar for dollar with reductions in this proposed revenue stream. Watch for it.

Posted by: BruceWebb | September 5, 2009 1:15 PM | Report abuse

Can you name those powerful Democrats that care about the deficit? I want to know if they voted for Iraq, Medicare D, the inheritance tax cut, or the other Bush tax cuts. Simply because I want to judge how much they really care about the deficit.

Posted by: flounder2 | September 5, 2009 8:11 PM | Report abuse

Why weren't the Democrats blocking Bush then? Tax cuts are so hard to oppose...tax cuts and new spending should both require 60% votes.

Posted by: staticvars | September 7, 2009 12:21 AM | Report abuse

The tax cuts in 2001 did not increase the deficit. Tax revenues actually increased. The out of control spending by both parties increased the deficit.

Posted by: inhk1 | September 7, 2009 9:44 PM | Report abuse

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