Sunday, January 3, 2021

One Possible Good Thing Coming Out of the Trump Administration

He's blown a hole in austerity economics and now his party is seriously divided between supporters and opponents of such policies while Democrats are increasingly united against austerity and endorse the need for much more spending.
'Over the past four years, President Trump and his allies in Congress have all but obliterated the Republican Party’s self-professed commitment to less spending and smaller deficits, pushing policies that have bloated the federal budget deficit to record levels.
Even before the pandemic ravaged the economy, the deficit — the gap between what the United States spends and what it receives in taxes and other revenue — had ballooned, driven by a $1.5 trillion tax cut and more generous government spending. Then Congress adopted two stimulus packages totaling more than $3 trillion, which will be financed with borrowed money. U.S. debt has grown so much that in 2020 it was projected to surpass the size of the entire annual economy for the first time since World War II.
That spending — which some see as largess, but many characterize as, in part, a needed response to a dire crisis — has upended the politics of what was once a bipartisan concern, leaving Washington’s fiscal hawks in an increasingly lonely corner in the economic debate....
“I hear a lot of talking about how we can’t afford it,” Mr. Hawley said on the Senate floor on Friday. “I do notice, however, that we seem to be able to afford all kinds of other stuff. We can afford to send lots of money to other governments. We can afford to send all kinds of tax breaks and bailouts to big corporations. But we can’t seem to find the money for relief for working people that the president and the House and the Senate all support.”
The split in the party offers a hint of the landscape that awaits President-elect Joseph R. Biden Jr., whose agenda will require Congress to agree to more spending. Mr. Biden is expected to push for another stimulus package once he takes office and has listed other priorities, including investments in infrastructure, health care and climate change, all of which require government money....
Just 47 percent of U.S. adults called the deficit “a very big problem” in a Pew Research Center survey conducted this summer, down from 55 percent in the fall of 2018, a decline that came even as the annual deficit had grown by trillions. And spending money is popular: Polls have found support for larger stimulus checks, and throughout the past year, the public has gotten behind generous government relief.
“The deficit argument is often put in theoretical, high-level terms,” said Ernie Tedeschi, a policy economist at Evercore ISI. “The effects of a spending policy are tangible.”
Some Republican lawmakers, especially those said to be considering presidential runs in 2024, have in recent months positioned themselves to pick up Mr. Trump’s baton in certain areas. Senator Marco Rubio of Florida and Mr. Hawley both came out in favor of sending $2,000 stimulus checks to Americans, and Mr. Rubio championed a program that disbursed more than $500 billion in forgivable loans to small businesses affected by the pandemic.
There is also a theoretical basis to the political shift. Even before the pandemic, many economists had begun to rethink their long-held view that large public deficits and debt would bog down the economy by pushing up borrowing costs for businesses and sending consumer prices soaring. A decade of relatively low interest rates and steady economic growth had prompted many economists to suggest that the United States could, indeed, afford to run a budget deficit.....
The political rethinking about the deficit — especially in times of economic weakness — is a stark change from earlier eras. In the 1990s, President Bill Clinton highlighted his success in cutting the deficit and creating a budget surplus as a political achievement for Democrats. Concerns about excessive federal spending and the national debt also helped fuel the ascent of the Tea Party in the late 2000s, giving rise to a new breed of Republican who succeeded in ushering in austere spending caps that continued to bedevil lawmakers. But after 2014, Republicans have joined Democrats in waiving those caps, and a bipartisan, bicameral deal struck in 2019 ensures their expiration this year.'
Fiscally, we could well be moving into a much different era. And that would be a very good thing. Thanks (?) Donald Trump.

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