In 2003, I was a Republican and yet the idea of the Republicans controlling both houses of Congress and the Presidency made my blood run cold. At that time, George W. Bush had inherited a budget surplus. Liberals are fond of pointing this out claiming it as proof of the efficacy of Bill Clinton’s Presidency, but it was mostly due to the dot-com bubble revving up the economy. When the bubble burst in 2001, two things happened. First, expenses for things like unemployment payments rose suddenly. Second, tax revenue dropped as business started generating less revenue. But George W. had been elected on the promise of a tax cut to give Americans back the surplus. Would the Bush administration and the Republican Congress change course when facing budget deficits? In the midst of this debate, the Heritage Foundation published this gem of a rationalization for the deficit spending planned by Republicans. Their argument opposes completely the position of today’s conservatives: Deficit spending by governments has a very small effect on inflation.
Republicans bought this easy idea and spend they did. Not only did the GOP significantly cut taxes, but they began spending at an impressive pace by any standards. Bush pushed through the expansion of Medicare called Medicare Part D at an annual cost of $50 billion. They started two wars and dramatically increased spending for national security, creating the brand new Department of Homeland Security. That was all deficit spending.
Reagan is another fine example of a big spending Republican. Although Reagan is heralded as a champion of small government, the fact is that, during his tenure, the size of the federal budget expanded by more than a third, the number of government employees increased by the same amount and the deficit doubled. In the early 90s, the effects of a TRILLION DOLLAR deficit kept voters up nights. Further, even as the federal government expanded, less of that spending was transfers to states. Federal money for state education and health care programs was reduced. States increased their contribution to those programs, boosting spending even more.
What’s worse, Reagan, consistent critic of the stifling effects of government bureaucracy, actually (and dramatically) boosted government payrolls. In the Republican universe, this is the worst kind of government spending.
Now, I don’t fault Reagan. He followed exactly the path I (or Paul Krugman) would have in pulling the country out of a recession–borrow and spend. I, myself, would have spent less on big bombs and more on education, but I have the benefit of hindsight. Who knew the USSR would be kaput before his Vice President left office?
As an aside, many on the Right will lay the blame for this increase under Reagan at the feet of Democratic Congress at the time. I think that’s fine as long as they don’t simultaneously give Reagan credit for the recovery.
So, don’t buy it. Recent history demonstrates that Republicans are only critical of spending by Democrats. They know, just like you do, that spending during a recession is the right idea. They just wish they got to do it.