Charlie Brown and the GOP
By Scott Sumner
When growing up, I was frequently told that the GOP was the “small government” party. Back in the early 2000s, the GOP finally gained simultaneous hold of the Presidency, the House and the Senate, for the first time in my life. Now they could finally implement their small government vision.
Instead government spending started actually accelerating, rising at a faster rate than under Clinton. And it wasn’t just the Iraq War, spending on domestic entitlement programs and Federal aid to education also rose rapidly.
After 2008, I was assured that Bush represented the old GOP, and that the new GOP really was a small government party. All the energy now resided in the Tea Party wing of the party. I remained skeptical.
Today a budget deal was reached that blows a huge hole in previous attempts to restrain government spending. While it’s true that the GOP has only a small majority in the Senate, they are in the drivers seat in terms of ability to control spending due to the 2011 budget deal, which limited spending growth without an explicit Congressional override of the caps. But the GOP does not want to limit spending, and has now agreed to a massive override:
The Senate’s top leaders announced Wednesday they have sealed agreement on a two-year budget pact that would shower both the Pentagon and domestic programs with almost $300 billion above existing limits, giving wins to both GOP defense hawks and Democrats seeking billions for infrastructure projects and combatting opioid abuse.
The agreement is likely to be added to a stopgap spending bill that passed the House on Tuesday and is aimed at averting a government shutdown Thursday at midnight.
The plan also contains almost $90 billion in overdue disaster aid for hurricane-slammed Texas, Florida and Puerto Rico.
This deal more than reverses any gains that came from the recent tax bill, which really did include some useful reforms. Don’t assume that you are going to be able to hold on to profits from a highly successful business, just because the tax rates at this moment do not look too onerous. Investors now know that the US now faces a fiscal time bomb, and dramatically higher taxes are coming down the road.
Fiscal policy in 2018 may be the most irresponsible in all of American history. Massive and growing budget deficits at a time when the US is not at war, and late in a business cycle expansion. This is unprecedented territory.
One difference between a serious country and a banana republic is whether the political establishment, the so-called “very serious people”, aka “grown-ups in the room”, has the clout to prevent these sorts of mistakes.