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The GOP’s Fake Budget Hawks

Summary:
With Donald Trump having departed the White House, many Republicans are suddenly rediscovering the dangers of budget deficits, after four years of conspicuous indifference. This was entirely predictable: for the last 45 years, the GOP has done the same thing every time a Democrat has won the presidency. CAMBRIDGE – High among US President Joe Biden’s many priorities is reinvigorating an economy that – judging by the latest employment numbers – appeared to be slowing as 2021 began. Even if COVID-19 abates during the course of the year, and pent-up consumer demand kicks in, the United States faces immediate challenges in areas such as education, infrastructure investment, state and local finances, and especially the

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With Donald Trump having departed the White House, many Republicans are suddenly rediscovering the dangers of budget deficits, after four years of conspicuous indifference. This was entirely predictable: for the last 45 years, the GOP has done the same thing every time a Democrat has won the presidency.

CAMBRIDGE – High among US President Joe Biden’s many priorities is reinvigorating an economy that – judging by the latest employment numbers – appeared to be slowing as 2021 began. Even if COVID-19 abates during the course of the year, and pent-up consumer demand kicks in, the United States faces immediate challenges in areas such as education, infrastructure investment, state and local finances, and especially the fight against the pandemic itself.

Biden has thus announced a $1.9 trillionAmerican Rescue Plan.” Moreover, he is rare among successful US presidential candidates in having stated honestly during the campaign that his spending would continue the recent trend of record budget deficits, notwithstanding his plans also to raise taxes on the wealthy. Most economists approve of this fiscal expansion, in light of America’s still-high unemployment, low inflation, and very low interest rates.

But with Donald Trump having departed the White House, many Republicans are suddenly rediscovering the dangers of budget deficits, after four years of conspicuous indifference. This was entirely predictable: for the last 45 years, the GOP has done the same thing every time a Democrat has held the presidency, and only then.

In fact, we can identify three long cycles, during each of which Republicans reversed their fierce opposition to deficits once they won the presidency: the 1980s, 1990-2008, and 2009-20.

In the late 1970s, Democratic President Jimmy Carter’s administration ran budget deficits, as most of its predecessors had done. Carter’s Republican challenger, Ronald Reagan, attacked the deficits in his 1980 presidential campaign and subsequent inaugural address. Even during a recessionary period, Reagan emphasized the urgent need to reduce the US national debt, then approaching $1 trillion, “beginning today.”

But once Reagan became president, he and the GOP-controlled Congress launched a three-year program of extensive tax cuts. And instead of offsetting the revenue loss by reducing spending, they increased the military budget. As a result, the US began to run record budget deficits.

Jeffrey Frankel
Jeffrey Frankel, a professor at Harvard University's Kennedy School of Government, previously served as a member of President Bill Clinton’s Council of Economic Advisers. He directs the Program in International Finance and Macroeconomics at the US National Bureau of Economic Research, where he is a member of the Business Cycle Dating Committee, the official US arbiter of recession and recovery.

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