NCPA - National Center for Policy Analysis

Deficit Politics

November 12, 2003

In the coming months, Democrats will argue repeatedly that economic expansion cannot continue unless federal budget deficits are reduced sharply, says Bruce Bartlett.

This will give them a much more politically palatable way of attacking Republican tax cuts than by calling them a give-away to the rich. Now, raising taxes can be portrayed as fiscal responsibility instead of class warfare, explains Bartlett.

Further contributing to the new Democratic line are two factors.


  • Interest rates are going to rise sharply in coming months as businesses borrow for expansion, prices begin rising from low recessionary levels, and the rate of return to capital goes up.
  • The Federal Reserve may also be forced to raise short-term rates --something liberals will strongly encourage in order to slow the economy and make deficits more politically potent.
  • Howard Dean's decision to forgo matching funds probably means that whomever gets the Democratic presidential nomination will do the same thing.
  • This means that the Democratic candidate will have to expand his fundraising base beyond Hollywood and labor unions.
  • He must appeal to Wall Street and the business community in order to raise enough campaign money; deficit reduction will be attractive to this audience.

If this plan is successful, it could lead Republicans into the trap of doing some kind of major deficit reduction before the election. But to be meaningful, such a package would have to include tax increases and cuts in Medicare, especially if defense is off the table. This will open the door for Democrats to scare seniors and demoralize the Republican base, as George H.W. Bush's 1990 budget deal did, which lead to the election of Bill Clinton in 1992, says Bartlett.

Source: Bruce Bartlett, "Deficit Politics," National Center for Policy Analysis, November 11, 2003.


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