GOP isn't really the anti-deficit party
It is therefore often surprising to the public when they find out the reality is quite different from perception in these matters. For example, it has been repeatedly shown in recent years that performance of the U.S. economy — as measured by GDP growth, corporate profits, growth in the labor force and performance of the stock market — has been significantly better under Democratic than Republican administrations. The misperception is especially evident today when some forecasters are predicting that because the White House and Congress are in Republican hands, higher economic growth is assured. Many economists — notably former Treasury Secretary and Harvard President Larry Summers and Mark Zandi of Moody's Analytics — looking at history, disagree.
Similarly with regard to fiscal policy (taxation, government spending, resulting surpluses or deficits, and therefore the level of national debt) public perception and reality are very different. For the past eight years of the Obama administration, Republicans in Congress have been railing against any government spending that might add to the deficit. Numerous attempts by the Obama administration to accelerate the growth in the economy through infrastructure programs — including a highly innovative public/private infrastructure bank, which the president proposed in 2010 — were gleefully labeled “dead on arrival” by the GOP when they reached Capitol Hill. The so-called “sequester” was a device that froze government expenditures to break a budget impasse and avoid a shutdown of the federal government. Texas Sen. Ted Cruz seemed willing again to shut down the government over federal funding of Planned Parenthood, although that issue was more ideological than fiscal.
In general, Republican members of Congress, particularly those associated with the tea party or Freedom Caucus, were pleased to be called “deficit hawks.” It became a badge of honor. Indeed, the tea party came about largely as a result of conservative Republicans reacting to what they viewed as overreach by the Obama administration in dealing with the financial crisis as well as his health care initiative. Given the anti-spending, “shrink the government” mantra of the Republican Party in recent years, it will be very interesting to see how the Republican-controlled Congress reacts to President Trump's aggressive proposals to reduce taxes and increase government spending on infrastructure, the military and other areas after opposing spending in the Obama years.
The nonpartisan Tax Policy Center
Further insight into how the Republicans are likely to react can be gleaned by looking at recent history. In 2007, as the economy began to feel the effects of the impending mortgage crisis, President George W. Bush proposed the “Economic Stimulus Act of 2008,” under which every taxpayer received cash rebates of up to $300 so as to give the economy a quick boost. It passed in January 2008 by overwhelming bipartisan margins in both the House and in the Senate. By that fall, we experienced the worst financial crisis in modern times and the start of the “Great Recession.”
As President Obama assumed office in January 2009, the economy was near collapse, shrinking at an annualized rate of 8 percent and shedding 800,000 jobs per month. Right-leaning as well as left-leaning economists, generally agreed that aggressive action by the government was urgently needed. Mr. Obama's first act in office was to develop what became known as the “Economic Recovery Act of 2009.” It passed in February 2009 with virtually no Republican support.
It seems quite clear from the sharply contrasting responses to these two events only 13 months apart that the Republicans believe in Keynesian economics and the importance of government fiscal policy in the management of the economy only when it works to the benefit of a Republican administration. This would suggest that we can expect the current Republican-controlled Congress to somehow find a way to set aside their aversion to deficit spending and debt accumulation and support Mr. Trump's aggressive and risky plans.
One can only hope that at some point we can begin again to make public policy decisions of such great importance on the basis of sound long-term economic thinking rather than ideological considerations and political expediency. The public has a right to expect nothing less from both parties.