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The Budget and the Political Imagination Deficit

Goodbye, government shutdown

Every review of the Federal budget starts with something like this:

The Congressional Budget Office projects that over the next decade, if current laws remained generally unchanged, budget deficits would eventually follow an upward trajectory in relation to the nation’s economic output, and federal debt would rise.

It is difficult to exaggerate the ubiquity and vacuity of this statement. Current law never remains unchanged, generally or specifically. That deficits cause rising debt is a truism; the redundancy is there for rhetorical emphasis. But what’s the point? The mantra simply erects a scarecrow to frighten Congress away from new initiatives—though, in reality, this straw specter only frightens Democrats. Republicans are fearless in this respect; they never show any compunctions about inflating the national debt. Democrats, meanwhile, can always be counted on to expend political popularity for the sake of filling the holes left by their adversaries. So there is a big difference between the two parties: one is the flim-flam artist, the other is the mark.

So there is a big difference between the two parties: one is the flim-flam artist, the other is the mark.

The Republican logic is airtight. GOP lawmakers seek to roll back non-defense spending. It’s a foundational, ideological commitment. Step one is a tax cut, which everybody will love, that works by enlarging the deficit, which nobody cares about. Step two is to bemoan the resulting deficit, and to issue calls for fiscal discipline. Step three is to step aside while Democrats increase taxes and reduce spending in programs that benefit their constituents. Step four is where Republicans denounce the Democrats’ austerity measures. Rinse and repeat.

Presently we are in Step 1, Volume 2018, in the wake of a serious tax cut founded on unserious economic nostrums. But a discordant element has been introduced, since “current laws generally” never “remain unchanged.” Now there is the plight of the DACA people, and immigrants in general, undocumented and otherwise. It presented the Democrats with a terrible dilemma.

Three weeks ago, Democrats made a show of civil disobedience for the sake of some immigration justice. The federal government was briefly shut down, but the results were unsatisfying. An important health program—the Children’s Health Insurance Program (CHIP)—was shielded from harm, but immigrants remained in peril. Each party tried to blame the other for the stoppage with dueling hashtags, but Democrats did not emerge convinced that they had gotten the better of the argument.

The big question was how much political leverage was at hand to block a new budget for the sake of undocumented immigrants, adults or children. The way it looks now, Democratic leaders decided their leverage was lacking. Trump and his id, always on display, seemed to feel they had the upper hand. It’s possible they did. Democrats faced something of a Hobson’s choice: either abandon the Dreamers and disappoint allied constituencies—or block a deal, costing them general political support.

It would be a mistake to denounce the decision to make a deal out of hand. The burden on critics is to show that 1) the country would tolerate an interruption of federal government services for the sake of the immigrant minority, and 2) that Trump and the Republicans in Congress would fold. Sadly, the answer to both open questions could be no, because we suck. As a natural-born citizen, I realize it’s easy for me to say, though a shutdown wouldn’t have put my nose out of joint either.

The stakes were great. The midterms are shaping up to be a boon to Democratic hopes of retaking the Congress, promising some relief for Dreamers and their families. And continuation of the political status quo could be a Waterloo for them. The lack of a shutdown ensures that more damage—i.e., more atrocities under the aegis of U.S. Immigration and Customs Enforcement—will be wreaked in the meantime. We will see more residents of thirty years standing ripped from their families, more legal residents forced to emigrate with their deported, undocumented children.

In this context, it seems criminal to be diverted by mundane budget data, but a new budget has been approved, and that will affect everyone, too. Here, there is a silver lining, though it may be barren recompense for Dreamers.

Rising deficit projections ought to be dismissed as utterly beside the point.

In this light, traditional Beltway obsessions about the deficit are properly the least of our concerns. Rising deficit projections ought to be dismissed as utterly beside the point. The nature of public spending makes such projections automatic and inevitable. Revenues tend to rise with the economy, but spending will always be projected to rise more rapidly. The reason is that an inordinate share of spending, both for the federal government and the states, is devoted to health care. In our irrational health care system, costs will forever grow rapidly, if allowed to.

The real issue is not a projected increase in the deficit, but a more critical question: what measures are contemplated—and justified—for the sake of arresting such increases. If it were possible to tattoo one fiscal principle on every pundit and lawmaker’s forehead, it would be this: We always get remedies of one sort or another, especially in state and local government budgets.

Many people still labor under the delusion that the U.S. government is like a family balancing its checkbook at the kitchen table. In fact, deficits even now can provide some salutary stimulus to employment, and efforts to reduce them can have the opposite effect. There remains potential for employment and wages to grow.

An increase in government debt—liabilities—means an increase in assets owned by the public and by the Federal Reserve. But the Treasury bonds held by the Fed are purely an accounting fiction; the government pays interest on them, and by law the Fed returns the interest payments to the government. Debt held by the public can always be paid off with new debt held by the public.

The government can’t run out of money; it always has more checks. There are constraints on the extent of such funding and refunding, but there is no sign we are anywhere in sight of any such constraint. The tip-off would be spikes in interest rates or inflation; what we observe now are small increases.

The deal disarms the ultra-right’s determination to reduce non-defense spending, while also eliminating opportunities to attack Obamacare or other entitlements.

The deal struck includes nothing for Dreamers, pro or con. Their fate will depend on separate votes. The budget does include limited increases in spending for both defense and non-defense expenditures. The increase for non-defense in and of itself is a positive, if minor, development. There is more money for victims of last year’s hurricanes, including the ones still looking for power—literally and metaphorically speaking—in Puerto Rico.

One welcome consequence of the deal, as Stan Collender explains, is the disempowerment of the crazy-right “Freedom Caucus” in the House. This is a two-year deal. It precludes theatrics over the debt ceiling during that blessed interval, and it disarms the ultra-right’s determination to reduce non-defense spending, while also eliminating opportunities to attack Obamacare or other entitlements in budget reconciliation bills. And as a bonus, it makes government shut-downs less likely.

So that’s where we are. It sucks for many of our fellow citizens, but it’s still Trump’s world, and we have to live in it.

We have seen the shithole, and it is us.