Rand Paul cut a lonely figure on the floor of the Senate on Thursday evening as he accused his Republican colleagues of hypocrisy over the deficit. Running up a $1tn dollar deficit after vilifying Barack Obama for racking up huge debts was intellectually dishonest, the libertarian senator and former presidential contender said.
“If you were against President Obama’s deficits and now you are for the Republican deficits, isn’t that the very definition of hypocrisy?” he asked.
Mr Paul was correct in suggesting the Republican party’s decision to embrace a deficit-busting budget deal overnight marks a significant moment in US politics. With the GOP ditching any attempt to curb public borrowing, there is now no immediate check on a public debt burden that according to authorities, including the Federal Reserve, is headed on a hazardous long-term trajectory.
“This is the absolute breaking of the fiscal dam,” said Maya MacGuineas of the Committee for a Responsible Federal Budget. “There are very few political leaders left who have real credibility on helping to control the debt. This is bipartisanship at its worst.”
The agreement to lift the caps on discretionary public spending by $300bn over two years comes hard on the heels of a $1.5tn tax-cutting package voted through against Democratic opposition in December. The result will be a short-term boost to economic activity at the expense of a swelling public debt load over the longer term. Estimates from the Committee for a Responsible Federal Budget show that the US is now on track to record annual deficits exceeding $1tn indefinitely.
If the temporary policies in the deal are made permanent, deficits will reach $1.7tn by 2027, according to its analysis. Assuming the tax cuts enacted in December are also made permanent, along with delays to certain healthcare taxes, the deficit will rise to $2.1tn in 2027, pushing public debt above 100 per cent of gross domestic product.
All this comes at a time when financial markets are fretting about the potential for higher inflation and interest rates, which could add to fiscal costs. And while they haggle over discretionary spending, neither party’s leadership appears eager to tackle the key drivers of America’s rising debt burden — age-related spending on healthcare and retirement benefits. “We are on an unsustainable path,” said Michael Strain of the conservative American Enterprise Institute.
The GOP leadership’s decision to abandon fiscal rectitude is by no means without precedent: Dick Cheney, vice-president under George W Bush, was said to have declared that the Ronald Reagan years proved “deficits don’t matter” when he advocated deficit-boosting tax cuts in 2003.
Yet the Republican volte-face is nevertheless striking given the US is now set to receive a fiscal boost larger than stimulus enacted in the teeth of recession under former President Obama. During the 2016 election, the deficit was one of the top issues that most of the 17 Republican contenders stressed they would address if they won the White House. John Kasich, the Ohio governor, even brought an electronic board to his campaign events that showed the deficit rising in real time.
Months before his election, Donald Trump claimed, implausibly, that he would pay off the US national debt in eight years. One of the champions for the budget deal struck in the early hours of Friday morning was Paul Ryan, the Republican speaker of the House, who ran for vice-president on the Romney ticket in 2012 on a platform that stressed the need for fiscal discipline.
“This is a stunning reversal,” said Brian Riedl, a former GOP Senate aide who is now at the Manhattan Institute. “The GOP spent its last eight years . . . pushing for spending restraint very successfully. Immediately once they get full power they flip.”
The U-turn reflects in part a calculation that voter appetite for tough choices to rein in borrowing is diminishing. Polling last month from the Pew Research Center shows that just 48 per cent of voters think deficit reduction should be a top policy priority for the president and Congress, down from 63 per cent in 2014.
For their part, Republicans have repeatedly defended their willingness to raise the deficit by claiming that the biggest culprit are social welfare programmes that are spiralling out of control. But they have been willing to add to the deficit in the knowledge that Mr Trump has pledged not to cut back health programmes such as Medicare and Medicaid, which help the old and poor.
Douglas Holtz-Eakin, president of the American Action Forum, said Republicans were also relying on the fact that the strongest part of the Democratic party is the progressive wing, which wants significant spending increases. “For the Republicans to look budget conscious it isn’t going to take much.”
He added that the Republicans were also benefiting from the fact that there was no figure like Bill Clinton at the helm of the Democratic party pushing for balanced budgets. “If there was a Clintonesque figure they would get killed,” said Mr Holtz-Eakin.
Even self-declared conservative deficit hawks are far from blameless. Despite Mr Paul’s expressions of outrage, the senator from Kentucky was among the Republican Party politicians who voted en masse just two months ago for the tax cuts.
“The GOP proved it deeply cares about the deficit — when a Democrat is in the White House,” said Brendan Boyle, a Democratic congressman from Philadelphia. “But when Republicans control the White House and Congress, they couldn’t care less.”
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