Republicans struggle to form united front on deficits and debt

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In early February 2011, Mitch Daniels, then the Republican governor of Indiana, warned of an “implacable” threat to America’s survival: its public debt.

“It is the new Red Menace, this time consisting of ink,” Daniels told a gathering of conservative political activists. “No enterprise, small or large, public or private, can remain self-governing, let alone successful, so deeply in hock to others as we are about to be.”

A decade later, like clockwork, with a new Democratic president in the White House, calls for budgetary restraint are beginning to resurface again as Republicans try to block Joe Biden’s $1.9tn stimulus plan and his broader efforts to pump trillions of government money into the pandemic-battered economy.

“It will not serve Americans to pile another huge mountain of debt on our grandkids for policies that even liberal economists say are poorly-targeted to current needs,” Mitch McConnell, the top Republican in the Senate, said on Thursday.

Calls for fiscal restraint have been politically potent in the past. They helped Republicans stymie Barack Obama’s economic agenda and capture control of both chambers of Congress between 2010 and 2014 — even if US interest rates never came close to rising dangerously.

Yet Republicans are far less united on the political and economic merits of austerity compared to 10 years ago, which could hurt their efforts to mount a cogent opposition.

One reason is that the party’s credibility on fiscal purity was severely wounded by Donald Trump’s presidency, during which the national debt jumped from $20tn to $27tn, in part due to the passage of $1.7tn in tax cuts at the top of the economic cycle.

In addition, new spending to contain the economic fallout from the pandemic has so far proven highly popular with voters, including a significant share of Republicans, according to polls, complicating the calculation for lawmakers within the party.

“They’re just dusting off the talking points about the debt they largely shelved when they were in power,” said Ben Koltun, an analyst at Beacon Policy Advisors. “The risk for Republicans is that they are just out of touch with popular priorities and fighting the last battle,” he said.

Republican reactions to Mr Biden’s immediate stimulus plan have been wide-ranging, highlighting the extent to which they are wrangling with the issue. Some, such as Pat Toomey, the Republican senator from Pennsylvania, have said that new stimulus is not needed because Congress already passed $900bn in fiscal relief in December.

Marco Rubio, the Florida senator, dismissed Biden’s stimulus plan, but backed one of its key provisions, a direct payment to individuals worth $1,400 that Trump embraced before leaving office.

Others, including 10 moderate senators led by Susan Collins of Maine, have proposed their own limited stimulus package worth $600bn, including $1,000 cheques, earning a White House meeting with Biden for their efforts.

Bar chart of Survey respondents' opinion on stimulus, % showing Nearly 7 in 10 Americans support Biden's $1.9tn stimulus

Beyond Capitol Hill, Jim Justice, the Republican governor of West Virginia, came out about as strongly as he could against any fiscal prudence at all. “If we actually throw away some money right now, so what?” Justice told CNN this week. He warned there was no point “trying to be, per se, fiscally responsible at this point in time with what we’ve got going on in the country.”

He added: “We have really got to move and get people taken care of, and get people back on balance.”

The muddled Republican stance on fiscal prudence is partly the product of recriminations over its electoral performance, particularly in last month’s pivotal Senate races in Georgia, where two Democratic challengers won seats partly by calling for additional stimulus.

But the confusion has left traditional Republican deficit hawks aghast.

“I think the party is kind of lost on fiscal issues,” says Douglas Holtz-Eakin, a Republican economist and former head of the Congressional Budget Office now at American Action Forum. “There’s going to have to be both some public education and some internal soul searching so that conservatives can make their case again about the importance of small contained government.”

In survey data, concerns about America's deficit are falling, especially among the young.

He added: “That case has to be remade. There’s a new generation that has to be taught.”

Frank Luntz, a Republican pollster, said that Republicans have to “return to a message of responsible, accountable government, and that starts with the debt — at some point, they have to say enough is enough”.

“Neither party did such a great job of reining in the debt. But it used to be the Republicans who would say, no, we can’t spend that,” he added.

While making a strong case for budgetary restraint now may be awkward for some Republicans, that could change over time if Biden is successful in implementing his stimulus plans and it leads to an overheating of the economy and sudden price increases.

“If everything goes according to plan we may see a massive spending spree in the summer . . . I think that does create inflationary pressure,” said Michael Strain, the director of economic policy studies at the conservative American Enterprise Institute think-tank.

He added: “There is genuine concern about the deficit and the debt and I think there is genuine aversion to spending hundreds of billions or trillions of dollars if it’s not needed. I don’t think its reasonable to be completely cynical about those arguments.”

Additional reporting by Lauren Fedor

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