NCPA - National Center for Policy Analysis

Deficit Politics

July 21, 2003

Last week's announcement that the federal budget deficit will reach $455 billion this fiscal year (which ends on September 30), brought predictable denunciations from the Democrats. It's not so much that Democrats care about deficits -- after all, they are the party that invented deficit spending -- they just want to score points against the Republicans, says Bruce Bartlett.

Politically, the main importance of the deficit is that it undermines the case for tax cuts, notes Bartlett. Indeed, every Democrat running for president next year would reverse already-enacted tax cuts, at least in part. They want the higher revenues to pay for increased spending, rather than deficit reduction. But higher deficits make their case easier.

One problem is that current deficits have very little to do with tax cuts. According to Barltlett:

  • If all the tax cuts over the last 3 years were magically rescinded, we would still have a deficit of almost $300 billion, due to the economic recession and higher spending for national security.
  • Moreover, economic growth would be slower and unemployment would be higher -- substantially so according to a Treasury Department study.

In the end, Bartlett says, the deficit is more of a metaphor than something real. Republicans use it as a shorthand way of saying spending should be lower, while Democrats use it to imply that taxes should be higher. One's preferences in this regard will largely determine one's perception about the importance of deficits at any given time.

Source: Bruce Bartlett, "Deficit Politics," National Center for Policy Analysis, July 21, 2003.


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