Lob any insult at a Republican politician — fascist, war hawk, religious zealot, racist ideologue, misogynist bigot — and they’re unlikely to flinch. Yet for mainstream Democrats, the slight they can’t abide is “tax-and-spend liberal.”
Democrats have a long-standing aversion to the charge that they’re willing to run higher deficits to fulfill policy objectives. Yet again, they have codified this trepidation by passing a rule that will both hamstring anything resembling a progressive agenda while also locking in austerity.
The so-called “pay-go” rule pushed by House Speaker Nancy Pelosi and Democratic leadership requires any new tax cuts or spending increases to be offset by budget cuts or tax increases elsewhere. On Thursday night, the House passed a rules package including pay-go. The implementation of such a rule will tie the hands of Democrats when trying to pass major initiatives, from Medicare for All to a Green New Deal, at the very time the party’s base is demanding just such bold proposals.
By clinging to pay-go, despite calls from leading progressives to drop the rule, Pelosi and her fellow establishment Democrats are demonstrating that they’re content to turn back to the party’s cowardly past rather than meet the demands of the moment. In doing so, Democrats are proving to be their own worst enemy, embracing both bad economics and bad politics in order to fulfill the goals of a centrist ideology that has proven time and again to be an abject failure.
Where did pay-go come from?
If you want to get a sense of how conservative the pay-go rule is, just look to its inception. Created in 1990 under Republican President George H.W. Bush, pay-go was first introduced as part of that year’s Budget Enforcement Act in order to stave off increases in the deficit.
While a number of mainstream economists, as well as former President Barack Obama, credit pay-go with helping to stabilize the economy and create a budget surplus in the 1990s, they often neglect to mention the negative effects of the austerity policies enacted during this period. President Bill Clinton’s 1996 welfare reform law, for instance, decreased federal spending but also led to a marked increase in deep poverty, especially among children.
Whereas Clinton boasted about leaving office with a balanced budget, his successor George W. Bush would show no such preoccupation with fiscal prudence. Instead, Bush the second made clear that his Republican administration had no problem expanding the deficit, so long as spending went toward policies like handouts to the wealthy and endless war rather than measures that would materially improve most people’s lives.
In 2002, during Bush’s first term, pay-go was allowed to expire and Bush proceeded to push through a number of deficit-exploding programs, including his infamous tax cuts for the rich through the Jobs and Growth Tax Relief Reconciliation Act of 2003.
After Democrats regained control of Congress in 2007, the House of Representatives reintroduced the rule which guided legislation under then-Speaker Pelosi. In 2010, President Obama, who had previously advocated pay-go when serving in the Senate and when running for president in 2008, successfully pushed both chambers to take the policy up as law.
In announcing his push for pay-go in 2009, Obama said, “Entitlement increases…need to be paid for, they’re not free. And borrowing to finance them is not a sustainable long-term policy.” He went on to refer to previous spending that had raised the deficit as “reckless.”
It’s fair to credit Obama for criticizing the economic rationale of policies such as the Bush tax cuts. Handing out tax breaks to the rich is certainly reckless, after all. But the Obama administration’s dedication to deficit hawkery led figures including Treasury Secretary Tim Geithner and Chief of Staff Rahm Emanuel to make sure the economic stimulus package passed in the throes of the Great Recession was far smaller than what plenty of progressive economists of the time — including liberal darling Paul Krugman—recommended.
In a new report, researcher Josh Bivens at the Economic Policy Institute explains that this muted stimulus helped lead to the drawn-out recovery from the financial crisis during which the rich have massively increased their wealth while low-income Americans continue to face low wages, increasing healthcare costs and a precarious job market.
The austerity policies that followed the stimulus, including the Budget Control Act of 2011, led government spending to contract rather than increase. According to Bivens, “The recovery from the Great Recession was the slowest in post-World War II history, and the degree of fiscal austerity can entirely explain its slowness.”
The legacy of pay-go
While pay-go was first introduced under a GOP president, Republicans have since resisted including the policy in House rules when they’ve held the gavel. The massive tax cuts passed under President Trump in 2017 put on full display the dishonesty of GOP figures such as House Speaker Paul Ryan and Senate leader Mitch McConnell who themselves have continually warned about the dangers of “reckless” spending.
Of course, Republicans are perfectly happy to blow the lid off of the federal deficit if it helps achieve their agenda. Trump’s nearly $2 billion tax cut, which primarily benefits the wealthy and corporations, is a case in point. Now, congressional Republicans are using the resulting deficit increases to demand cuts to programs like Medicare and Social Security — other longstanding goals of the U.S. Right.
As soon as the new Democratic House proposes any policy or program that skews the federal ledgers, the GOP is sure to resort back to the “tax-and-spend” allegations. With Pelosi’s pay-go policy, Republicans will have a new cudgel at their disposal: They can point out that such programs defy the very House rules that Democratic leadership put forward.
This ability to force Democrats to adopt the language of deficit neutrality is one of the great successes of the U.S. conservative movement. While Republicans have used the federal purse strings to ruthlessly advance their reactionary agenda, since the presidency of Bill Clinton, Democrats have embraced the role of being the party of fiscal responsibility.
This is a goal far more in line with the dictates of the National Review’s William F. Buckley than with progressive economists. And with good reason: Such deficit obsession is sure to stymie left-wing policies from gaining legislative traction.
The language of deficit neutrality will always benefit the right wing, as it presupposes that spending taxpayer money on social programs and public goods is necessarily a risky measure that should be reined in. Yet, as has been shown time and again, deficit crises are often largely manufactured. And regardless of conservative pearl-clutching over red ink, the United States has always found enough funds to keep pumping money into the most expansive military on the globe.
But spending the money generated by our society on things that will make people’s lives better — whether it’s improved healthcare, employment, education or transportation — is exactly what those who call themselves progressives should be pushing for. The fact that this is considered controversial shows just how far the mainstream political debate has skewed to the right.
Give us what we want
Voters in 2018 didn’t go to the polls to elect champions of fiscal restraint. Rather, what they said they wanted was more affordable and higher quality healthcare.
In the midterms, states such as Idaho, Nebraska and Utah passed ballot initiatives to expand Medicaid while Kansas and Wisconsin elected new Democratic governors on their promises to expand the program. And across the board, voters cited healthcare as their top concern — for the first time in at least a decade.
Many experts and clinicians, including the American Medical Association, agree that the most effective way to provide cheaper and better healthcare is through a single-payer, Medicare for All system which would expand coverage universally and eliminate the role of the private market. And the public has come around to the idea — a poll last year shows that 70 percent of Americans support Medicare for All.
Passing such an expansive program that would affect — and essentially democratize — a sixth of the U.S. economy necessarily requires upfront costs. And as a result, it likely wouldn’t be able to pass under pay-go, since the rule requires budget offsets.
Yet even a Koch Brothers-funded study shows that over a 10-year period, Medicare for All would actually save the country $2 trillion.
Other programs such as a Green New Deal, which would provide universal, living-wage employment and massively expand the renewable energy sector in order to prevent climate devastation, would also pose immediate costs. But, ultimately, such a plan would transform the economy to serve the needs of the population over the long run.
John Maynard Keynes, who influenced generations of U.S. economists, saw such social investment and universal employment as key to achieving economic health. And while he was a strong supporter of market capitalism, Keynes also famously noted in his 1936 General Theory of Employment, Wages and Interest that “The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.”
Ten years after the Great Recession, more and more Americans are now coming to see such inequities as integral to capitalism, and, for the first time, Democrats now view socialism more favorably. This growth in the popularity of socialism has coincided with swelling support for left policies, not just Medicare for All but also tuition-free college, the Green New Deal and a federal jobs guarantee.
In 1935, the leftist Hungarian economist and writer Karl Polanyi wrote of the challenge facing governments, “Basically there are two solutions. The extension of the democratic principle from politics to economics, or the abolition of the democratic ‘political sphere’ altogether.” Polanyi posed the choice as one between an economically democratic, or socialist, system and one marked by anti-democratic authoritarianism. With Trump and his cabal of right-wing sycophants in power, alongside the growing popularity of stridently left politics, the choice appears to be the same in 2019.
Democratic leaders should see the time as ripe to fully back left-wing policies that would draw a stark line in the sand between them and Republicans who would rather cut food stamps, turn Medicaid into a voucher program and eliminate the federal minimum wage.
Figures in the Democratic Party establishment, however, would apparently rather begin their term in power by handcuffing progressive legislation.
The fact that the corporate donors bankrolling many leading Democrats are fundamentally opposed to far-reaching left policies is likely one key reason. Pelosi herself has long been trepidatious about fully backing Medicare for All, while taking in more than $400,000 from the health sector over the course of the 2017 – 2018 election cycle. House Majority Leader Rep. Steny Hoyer, meanwhile, opposes Medicare For All while serving as the top Democratic recipient of donations from health insurance companies and the second highest from pharmaceutical companies from 2015 to 2016.
But that’s not the whole story. Centrist ideology has long been so dominant in Democratic circles that institutionalizing deficit neutrality and avoiding the “tax-and-spend” label is now simply the establishment’s natural inclination. And it continues to be pushed forward by neoliberal think tanks including New Democracy and Third Way.
The push for pay-go did not go unopposed, however. Some on the Democratic Party’s left-flank mounted an insurgent campaign to sink the rule, including California Rep. Ro Khanna and incoming New York Rep. Alexandria Ocasio-Cortez, who referred to pay-go in a tweet as “a dark political maneuver designed to hamstring progress on healthcare+other leg.,” continuing, “We shouldn’t hinder ourselves from the start.”
While they made a lonely duo among House Democrats, Khanna and Ocasio-Cortez helped to reveal the hypocrisy of a party leadership that claims the mantle of progressivism while simultaneously undercutting policies that would actually pose a threat to corporate interests and the casino capitalist system that keeps them at the levers of power.
The fact that Khanna and Ocasio-Cortez are willing to push back against this dominion of moderation is a heartening sign that the ascendance of left politics may open the door to challenging not just the centrist status quo, but the entire economic system on which it stands.