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In Defense Of Democratic Starve-the-beast

Ross Douthat charges President Obama with doing George W. Bush's budget strategy in reverse:

what you see in his budgeting proposals, I think, is the liberal equivalent of the conservative attempt to "starve the beast." In both the Reagan and Bush eras, Republicans passed tax cuts and ran up large deficits while hoping that by starving the federal government of revenue they would curb its long-run growth. Obama's spending proposals would effectively reverse that dynamic - they would create new spending commitments and run up large deficits, in the hopes that the dollars poured into health care and education will create a new baseline for government's obligations, which in turn will create the political space for tax increases on the middle class. Like the starve-the-beast approach, the Obama strategy puts off the hard part till tomorrow: Give them tax cuts today, conservatives said, and they'll swallow spending cuts tomorrow; give them universal health care, universal pre-K, subsidies for green industry and all the rest of it today, liberals seem to be thinking, and they'll be willing to pay for it tomorrow.

In the most important sense, this is completely wrong. Obama's budget is not a net spender. It would reduce the deficit by some $2 trillion over the next decade (big PDF link; see page 115) compared to continuing current policy. (You can quibble about the "current policy" baseline -- some of the Iraq expenditures would probably have declined under even a Republican administration -- but the basic fact that Obama's policies reduce the deficit on the whole is hard to dispute.) By contrast, all of Bush's major deficit-increasing initiatives -- the tax cuts, the war in Iraq, the Medicare benefit -- came without any attempt at all to pay for them. And, by the way, most of the people who are complaining about Obama's fiscal irresposnsibility today uttered not a peep of complaint about Bush.

Now, I'll concede that Douthat has a point in spirit. Obama does not get the deficit all the way to where it ought to be. If the economy recovers by 2011, as he projects, and we experience continued growth through 2019, and we're still running the 3.1 percent of GDP deficit he forecasts -- well, that would be a problem. It's totally unfair to compare a president who made the problem vastly worse with one who alleviates the problem considerably. But it is interesting to ponder why Obama doesn't go further in the direction of fiscal responsibility.

And here Douthat is onto something: Obama is trying to put his imprint on federal policy. I think he's right to do so. Ronald Reagan governed the country with little worry about its fiscal health. His goal was tilt the structure of the tax code and federal outlays so that conservatives would have an advantage when the bill came due. It worked: when the Democrats recaptured the White House, they mostly played janitor, cleaning up the Republican mess. Not only did Democrats mosty fail to impose their priorities to anything like the degree Republicans had, voters penalized them in 1994 for imposing fiscal pain. And then, when Republicans regained the presidency, they returned to the Reagan strategy.

Given all this, for Obama to govern like Clinton did would be insane. Clinton's policies were a good way to govern if you assumed that Democrats would hold power forever. But if you assume that Republicans will gain power again, reducing the deficit will do anything but clear up more room for upper-income tax cuts. Given that the GOP is committed to upper-income tax cut maximalism, Democrats can't win by taking the job of fiscal responsibility entirely on their own shoulders. What's more, they can't even effectively control the federal deficit in the long run, since their self-appointed role as janitor only encourages Republians to go hog wild when they have power. What Democrats can do is take some steps in the right direction, and implicitly invite Republicans to drop their supply-side fanaticism and come to the bargaining table when they're serious about governing.

--Jonathan Chait