New endangered species: the GOP deficit hawk

Desperate for a legislative win, Republicans are preparing to push through a tax-cut package that analysts say could add considerably to the deficit. Voices on the right expressing concern about red ink have been few and far between.

Andrew Harnik/AP
Senate majority leader Mitch McConnell speaks to reporters following a lunch meeting with President Trump on his tax reform agenda on Capitol Hill.

Republicans have a storied tradition of minding the nation’s fiscal store. Calvin Coolidge pushed for tax cuts, but also for spend-less-than-you-earn budgets. After World War II, the party contributed to fiscal plans that rapidly unwound a war-related surge in debt. In ​the 1990s, ​members of the GOP supported spending restraints that helped usher in a brief era of budget surpluses​ under President Clinton​.

And as recently as 2015, as they faced off on fiscal matters against President Obama, Republicans in Congress were rallying behind fiscal plans that aimed for a balanced budget within 10 years. Yes, they wanted tax cuts, but paired with deep cuts in federal spending to reduce deficits.

Yet as the current GOP Congress takes up tax reform, there’s been a notable absence of concern about debt and red ink. Tax cuts seem to be the sum total of the Republican fiscal agenda, for now at least. The plans are accompanied by less-than-convincing assertions that the resulting economic growth will be enough to overcome any shortfall of revenues versus federal spending.

Whatever happened to the conservative deficit hawks?

In part, their decline or silence may be the latest symptom of a polarized Washington. Past instances of fiscal discipline have often involved collaboration across party lines – since tackling deficits is easiest when you have bipartisan cover.

But what’s on display is also a case of political pragmatism. Republicans know that, after failing in their efforts to “repeal and replace” Obamacare, they’re in desperate need of a legislative win heading into the next election cycle. As they seek to use their control of both the White House and Congress to pass a bill, the reality is that their ability to do that rests on a razor-thin two-vote majority in the US Senate.

Tax cuts are politically relatively easy, and a clear “win” in the eyes of conservative voters. Tax reform that addresses the nation’s long-term fiscal health is much harder – whether on a partisan basis or otherwise.

The result is that Republicans are finalizing proposals that will be scored by the Congressional Budget Office as adding to future deficits, at a time when federal tax revenue already fails to cover rising costs for entitlements including Medicare.

“Republicans are on the verge of adopting a budget that would not balance, would increase spending, and would increase the national debt, which is pretty much the polar opposite of everything they’ve been arguing for, for the years when they didn’t quite have the political power to pass their agenda,” says Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a bipartisan group advocating for controlling the national debt.

The current fiscal line from Republicans is that tax cuts will spur economic growth. With a larger tax base, plus some newly closed loopholes in the tax code, the result will be progress rather than backsliding on overall tax revenue, they say.

“I believe tax reform can move us toward a balanced budget rather than away from it,” said Rep. Kevin Brady (R ) of Texas, chairman of the House Ways and Means Committee, at a breakfast for reporters hosted by The Christian Science Monitor on Wednesday.

Still unclear is what form this tax legislation will take. Representative Brady said key proposals from his committee will emerge next week.

Michael Bonfigli /The Christian Science Monitor
House Ways and Means Committee Chairman Kevin Brady speaks about prospects for tax cuts, at breakfast for reporters hosted by The Christian Science Monitor in Washington on Oct. 25.

A lone Republican vote

Even at a time of diminished voice for deficit hawks, some in the party have raised concerns.

Sen. Rand Paul of Kentucky was a lone Republican vote against the Senate’s budget plan last week – a plan that opened a procedural door to passing tax cuts that could expand projected federal deficits by $1.5 trillion over the next decade.

“Nearly all Republican Senators just failed a litmus test on cutting spending,” he tweeted at the time. Still, he also tweeted to President Trump that “I’m all in for tax cuts @realDonaldTrump. The biggest, boldest cuts possible – and soon!”

Sen. Bob Corker (R) of Tennessee stands out as a fairly lonely conservative skeptic on the emerging tax-cut plan. He’s echoed economists, who widely reject that tax cuts will automatically pay for themselves, albeit while adding that he’s open to some assumptions that tax cuts can fuel economic growth – and thus make losses to federal revenue somewhat smaller than traditional models allow.

Senator Corker, who has recently announced he won’t be seeking reelection, could be vocalizing a concern that some of his colleagues share on the emerging tax plan. “I hope that in the end, if it’s a big deficit creator, then our caucus will not support it,” Corker told Politico recently.

“There are still a lot of moderates who I think are not comfortable with this,” adds Ms. MacGuineas.

But she and other analysts say the desire for a legislative win on tax cuts may outweigh anxiety over deficits.

In fact, White House Budget Director Mick Mulvaney, who was known as a fiscal hawk during his House career, now frames the goal of tax cuts as boosting economic growth, period.

“We need to have new deficits because of that,” Mr. Mulvaney said on Fox News recently. “If we simply look at this [legislation] as being deficit-neutral, you're never going to get the type of tax reform and tax reductions that you need to get to sustain three percent economic growth.”

At the Monitor breakfast, Representative Brady predicted the tax cuts and related growth effects would boost American paychecks broadly. He added that he’s tried engaging Democrats in discussions, and that the two parties share goals such a tax code that’s fairer and simpler, with lighter burdens on the middle class and incentives for companies to bring jobs home from overseas.

But the two parties are sharply at odds over the details.

'Tax cuts are popular'

Although tax cuts aren’t a huge priority for the general public, they have the potential to be a winner with voters, especially if pitched as benefitting the middle class.

“Tax cuts are popular. It’s as simple as that,” says Shai Akabas, director of economic policy at the Bipartisan Policy Center in Washington. Reducing deficits matters to Americans, but “almost everybody is much more concerned with how am I going to put the food on the table,” he says.

Add in a president who’s prone to making exaggerated claims and shows little appetite for hard fiscal choices, “and it’s proving very hard for his party to go against him,” MacGuineas says.

But delay in addressing chronic imbalances in the budget is an issue that could come back to bite the nation. There’s the risk of credit-rating downgrades and rising interest rates for the government, which could harm taxpayers and long-term growth.

For now, though, “fiscal hawk” is a persona being picked up mainly by Democrats as they critique Republican plans.

Staff writer Francine Kiefer contributed additional reporting from Washington. 

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