Blowing Up the Deficit Is Part of the Plan
President Trump’s corporate tax cuts will likely generate enormous deficits, even if the administration’s rosiest economic forecasts come true, setting Republicans up to claim that the time has come to cut Social Security, Medicare, and welfare to reduce the expected $1 trillion deficit, created by those very tax cuts, over the next 10 years.
Speaker of the House Paul Ryan has already announced that the GOP plans to cut federal health care and anti-poverty programs because of a deficit that his party is about to balloon. “We’re going to have to get back next year at entitlement reform,” he said on a talk-radio show, “which is how you tackle the debt and the deficit.”
This is exactly how what President Ronald Reagan’s budget director, David Stockman, called “starving the beast” works. By creating a fiscal straitjacket through lower taxes, conservatives leave Washington with less money and raise the specter of deficits damaging the economy as a rationale to take away the benefits that millions of Americans depend on. If they are not fiscally conservative right now, they can be when it comes time to talk about spending on the poor and disadvantaged. While the right usually encounters a fierce backlash whenever they try to retrench specific federal benefits, as the GOP recently discovered with their failed attempt to repeal and replace the Affordable Care Act, cutting budgets in the name of deficit reduction has traditionally offered a less toxic mechanism for achieving the same goal.
Yet the unintended consequence of tax cuts of this scale and scope might be to create a political space for Democrats to push for higher taxes in the future. When the government fails to balance the books, it creates the conditions that give Democrats leeway to take the unpopular step of asking Americans to pay more to finance their obligations. Raising taxes has never been easy in American politics, even in the so-called heyday of New Deal and Great Society liberalism, but large deficits have repeatedly bolstered Democratic efforts like almost nothing else, much more than the appeal of political ideology or mass-movement pressure.
The creation of the mass income-tax system during World War II was in large part an effort to ensure that the federal government could finance the war against fascism without creating permanent, debilitating deficits. Secretary of the Treasury Henry Morgenthau, a fiscally conservative Democrat, insisted that the federal government would find responsible ways to pay for wartime mobilization, as well as the New Deal programs enacted in the previous decade. The Treasury moved through Congress measures that expanded the base of taxpayers from 4 million to 44 million and instituted withholding at the source, permanently transforming the fiscal capacity of government. “I paid my income tax today!,” Irving Berlin sang in a popular wartime jingle he wrote for the Treasury’s propaganda effort. “A thousand planes to bomb Berlin, they are all paid for and I chipped in. That certainly makes me feel okay!” Unlike in previous wars, the federal government did not dismantle the mass tax system when the war ended. While progressive politics was part of the mix, more important was the need to keep financing the national-security system in the Cold War. ...