On Deficits and Debt, the Voters Get a Say

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I wish our Democratic leaders would make their fiscal case as clearly and fearlessly as Michael Grunwald does.

To recap: Democrats are in favor of short-term deficit spending because they believe it will stimulate desperately needed growth. And they believe that growth, plus higher taxes (plus the one thing Mike doesn’t mention: inflation) will take care of the long-term deficit — except for health care spending. And they believe that their Affordable Care Act already contains the necessary cuts in Medicare. In sum, they don’t believe annual deficits or long-term debt pose much of a problem.

I hope they are right, because I have enough problems to worry about, and would be delighted to cross a potential U.S. debt crisis off my list.

But Democratic leaders, starting with President Obama, are not making their case in Mike’s lucid way. Why not? Because of those pesky voters who, as recently as last November, strongly disagreed with these assumptions. The administration is afraid to talk about stimulus because the word “stimulus” has become an eye-roller among moderate voters in the swing states. George W. Bush signed a stimulus bill in 2008; Obama signed another one in 2009; the tax cuts of 2010 were stimulus No. 3. Meanwhile, the Federal Reserve has been jolting the economy like Rooster Cogburn driving that pony in the last reel of “True Grit.” And here we are in 2011 with less than 2 percent growth. I know, I know: that just shows what a huge hole we were in.

So “stimulus” is radioactive. And so is “inflation”—the ‘70s ruined that word for a couple of generations worth of ordinary Americans. As I noted the other day, the Democrats have decided not to talk about their extensive Medicare cuts so as to campaign as defenders of the Medicare status quo. The only pillar of their fiscal strategy left to talk about is taxes. Sure enough, that’s what Democrats are talking about.

Still, it can’t possibly come as a surprise to Grunwald that Republicans are against higher taxes. They may be wrong about this in some cases, and hypocritical sometimes, but error and hypocrisy have been part of politics since long before the GOP was founded. Where the Republicans are correct is in their belief that the Obama administration doesn’t really believe that deficits and debt pose a serious problem beyond the extensive Medicare cuts they have already passed (but don’t want to talk about). And Grunwald’s excellent post explains why this belief is correct.

Mike is outraged that the GOP is using the debt ceiling debate as an occasion to highlight their views about excessive government borrowing. But this is nothing new in Washington. The government never patches its roof when the sun shines; long term debt problems only get dealt with in the context of short-term crises. President Obama knows this. In 2006, he voted against raising the debt ceiling, and used the occasion to make his case for higher taxes. As he explained on the Senate floor:

Over the past 5 years, our federal debt has increased by $3.5 trillion to $8.6 trillion. That is “trillion” with a “T.” That is money that we have borrowed from the Social Security trust fund, borrowed from China and Japan, borrowed from American taxpayers. And over the next 5 years, between now and 2011, the President’s budget will increase the debt by almost another $3.5 trillion.

A lot of voters — them again! — would say Senator Obama was right to be horrified by those quaintly small numbers. And those voters are even more horrified now that the debt is $14.3 trillion (with a “T”), and according to the Congressional Budget Office is projected to increase by another $12 trillion over the next decade. Grunwald is free to wish those voters did not exist, but they do, and Republicans are trying to appeal to them. And that’s why I (and Moody’s) connected the issue of long-term fiscal policy to the short-term stalemate over the debt ceiling.