Another potential example of this is a recent Washington Examiner editorial titled “Get ready for the Biden spending binge.” The editorial is classic budget hawkery, with sentences like, “should he win, Biden will be taking office facing the largest debt in American history, and all he can think to do is add to it like there’s no tomorrow,” and “Biden seems eager to embrace [modern monetary theory’s] reckless line of reasoning and add to the already unsustainable debt. So much for the idea of running as the responsible adult in the room.”
This is not terrifically persuasive. Every president takes office facing the largest debt in history. And there are other markers for adult leadership beyond budget-balancing.
I read this editorial Wednesday on Twitter and popped off quickly about the Examiner positioning itself for a post-Trump world in which the GOP switches to make fiscal austerity great again. Upon further reflection, this is unfair to the Examiner’s editorial board. While it’s safe to say that Republicans practice the fiscal hypocrisy discussed above en masse, that is certainly not true of all conservatives. The Examiner’s editorial board has bashed Trump for fiscal profligacy repeatedly over the last three years. Individual contributors have mocked the administration’s fiscal pieties as worse than meaningless. And as Hohmann recounts in his story, Cotton’s proposal for further spending was met with Sen. Ted Cruz asking incredulously, “What in the hell are we doing?”
So let’s stipulate that even if most of the GOP is cynical about this issue — as the Examiner’s Tim Carney acknowledges — there are some genuine budget hawks in the political wild. But this gives rise to a different question: Should fiscal hawks be an endangered species in the 21st century?
Back in the Before Time, by which I mean 2006, there seemed to be valid reasons to fear budget deficits. Even Keynesian macroeconomics said that running a large budget deficit during full employment would overheat the economy, crowding out private investment and triggering inflation. Economists such as Carmen Reinhart and Kenneth Rogoff warned that excessively high deficits would lead to explosive debt dynamics. In 2010, Alan Greenspan explicitly compared the United States to Greece due to high deficits.
By 2019, distinguished economists like Olivier Blanchard had acknowledged that the common presumption within macroeconomics — “government debt levels are much too high and must urgently be decreased” — was wrong. As he wrote in the American Economic Review: “The signal sent by low rates is not only that debt may not have a substantial fiscal cost, but also that it may have limited welfare costs.” Blanchard’s pronouncements are not the equivalent of holy writ, but deficit hawks need to formulate a cogent rebuttal beyond “OMG deficits!”
The behavior of financial markets during the pandemic is another data point that cuts against deficit hawks. The Cares Act has exploded an already swollen budget deficit and, in response, interest rates fell. As Sebastian Mallaby noted in Foreign Affairs: “Since the start of the pandemic, the United States has unleashed the world’s biggest monetary stimulus and the world’s biggest budgetary stimulus. Miraculously, it has been able to do this at virtually no cost.” Last week the IMF concluded, “The U.S. has fiscal space and it should be deployed quickly to hasten the recovery from the second-quarter contraction, permanently improve the social safety net, and facilitate a broader remaking of the U.S. economy.”
Right now is a stupid time to be a deficit hawk. With the pandemic continuing unabated, continued fiscal spending will remain one of the few ways to keep the economy afloat until a vaccine or a therapeutic becomes readily available. Multiple surveys of economists show this to be a pretty strong consensus. As Jonathan Bernstein tweeted recently on the idea of another round of stimulus spending, “Democrats, some Republicans, virtually all economists, and virtually all public health experts are on one side; some Republicans and a handful of cranks are on the other.”
In a post-covid-19 world, is there a place for deficit hawks? Perhaps, but it would be nice if they acknowledged and explained why the world has not played out the way many of them have been predicting for the last decade or so.