Deficit reduction has been Washington’s obsession for the past two years, and the main approach of both parties is austerity—any combination of policies that raises government revenue and reduces its expenditures. On one side is the Republican Party, which wants to lower the debt and, eventually, balance the budget with large cuts to existing social services, from Medicaid—a health-care program for the poor—to food stamps, unemployment insurance, and other key services for low-income Americans.
If this is full austerity, then you could call the Democratic approach austerity “light.” Like Republicans, most Democrats—including President Obama—want cuts to federal spending. But they reduce spending with cuts to Medicare—through adjusted payments to hospitals, manufacturers, and doctors—and defense spending. In addition, Democrats want higher taxes on the wealthiest Americans to “balance” these cuts and spread the burden across income groups.
New taxes are a huge point of disagreement between the two parties, but the basic point is straightforward: A wide range of political elites agree that debt is the main issue facing the American economy, and that debt reduction is a core priority for policymakers. This, despite growing evidence that fiscal consolidation has harmed economic growth both here and abroad.
But if a recent story from Politico is any indication, the political consensus around debt has begun to unravel. To wit, lawmakers like Virginia Senator Tim Kaine, a moderate Democrat representing a purple state, have all but denounced austerity as pointless and harmful:
[A]ided by a pile of recent data suggesting the deficit is already shrinking significantly and current spending cuts are slowing the economy, more Democrats such as Virginia Sen. Tim Kaine and Maryland Rep. Chris Van Hollen are coming around to the point of view that fiscal austerity, in all its forms, is more the problem than the solution.
This group got a huge boost this month with the very public demolition of a sacred text of the austerity movement, the 2010 paper by a pair of Harvard professors arguing that once debt exceeds 90 percent of a country’s gross domestic product, it crushes economic growth.
Turns out that’s not what the research really showed. The original findings were skewed by a spreadsheet error, among other mistakes, and it’s helping shift the manner in which even middle-of-the-road Democrats talk about debt and deficits.
“Trying to just land on the debt too quickly would really harm the economy; I’m convinced of that,” Kaine, hardly a wild-eyed liberal, said in an interview. “Jobs and growth should be No. 1. Economic growth is the best anti-deficit strategy.”
This should have been the Democratic message from day one. Given GOP control of the House of Representatives, odds for spending cuts in the 112th Congress were always high. But by embracing the core conceit that debt reduction was a priority, both Democrats—and the Obama administration—gave a tremendous amount of rhetorical ground to the Republican Party.
Will this change the policy environment? Not at all, nothing about new rhetoric changes the political constraints faced by anyone who wants to move the United States away from a focus on debt reduction. But, there’s nothing that hurts about a rhetorical focus on growth. And, with midterm elections just a year-and-a-half away, this kind of message could be a powerful tool against the inevitable call for more and greater spending cuts, courtesy of the GOP.