Conservatives and Deficit Spending
February 24, 2003
One of the critical differences between conservatives and liberals is that the former think the overall level of taxes and spending is important, economically, whereas the latter think only the difference between the two matters. Conservatives, however, are concerned whenever spending or taxes increase, regardless of whether one happens to be higher than the other.
In 1978, conservative intellectuals, especially the great economist Milton Friedman, argued that the conservative concern for budget deficits had simply led to higher taxes and bigger government, with no offsetting benefits whatsoever.
Friedman argued forcefully for cutting government any way possible, even if it led to budget deficits. He said, "I would far rather have total federal spending at $200 billion with a deficit of $100 billion than a balanced budget at $500 billion."
His authority helped convince many conservatives to support the burgeoning tax revolt, even though it might result in deficit spending. They also discovered that if deficits became large enough, liberals would finally be forced to cut spending.
Conservatives also learned:
- There really is no downside to deficits as long as they result from lower taxes rather than higher spending.
- No Republican candidate was ever defeated for supporting tax cuts, even if they led to large deficits.
- As long as the Federal Reserve maintained a noninflationary monetary policy, and the U.S. imposed no restrictions on international capital flows, interest rates could come down even as deficits went up.
Now the Republican Party has completely adopted the Friedman mantra, which he repeated in the Wall Street Journal on January 15: cut taxes any time, anywhere and don't worry about deficits. This has forced Democrats to become "deficit hawks" for lack of any other issue. The evidence suggests that it won't do them much good politically. (See Chart)
Source: Bruce Bartlett, "Democrats, Republicans, Surplus and Deficit," National Center for Policy Analysis, February 24, 2003.
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