It may have slipped by you, but last week Donald Trump suggested that he may be about to give U.S. farmers — who have yet to see any benefits from his much-touted trade deal with China — another round of government aid. This would be on top of the billions in farm aid that Trump has already delivered, costing taxpayers several times as much as Barack Obama’s auto bailout — a bailout Republicans fiercely denounced as “welfare” and “crony capitalism” at the time.
If this sounds to you like a double standard — Democratic bailouts bad, Republican bailouts good — that’s because it is. But it should be seen as part of a broader pattern of breathtaking fiscal hypocrisy, in which the GOP went from insisting that federal debt posed an existential threat under Obama to complete indifference to budget deficits under Trump. This 180-degree turn is, as far as I can tell, the most cynical policy reversal of modern times.
And this cynicism may win Trump the election.
If Trump does win, there will be many recriminations among Democrats, especially about the vanity candidates who continue to fragment the field despite having no realistic chance of becoming the nominee. But while these recriminations will have much truth to them, the biggest factor working in Trump’s favor is a strong economy — not as strong as he claims, but good enough to provide a significant political lift (unless growth is derailed by the coronavirus).
And what’s driving the U.S. economy now is the very deficit spending Republicans pretended to be horrified by during the Obama years.
Trump likes to bad-mouth the Obama economy. In reality, from 2010 onward, America experienced steady growth in both GDP and employment — and there was no upward break in the trend after 2016. But recovery from the 2007-09 recession could and should have been faster.
What slowed recovery? Unprecedented fiscal austerity. In particular, government spending grew far more slowly during the Obama recovery than it did under either George W. Bush or Ronald Reagan.
Does fiscal austerity hurt growth? Yes. We’ve seen this fact demonstrated again and again over the past decade, most recently in Japan, where an ill-advised effort by Prime Minister Shinzo Abe to reduce the budget deficit sent the economy plunging at a 6% annual rate. And the austerity of the Obama years definitely slowed recovery; without those spending cuts, unemployment might well have fallen to 4% as early as 2014.
So who was responsible for all this austerity? The answer, overwhelmingly, is Republicans in Congress. Remember, they threatened to create a financial crisis by refusing to raise the debt limit unless Obama cut spending.
Again, they insisted that austerity was essential because government debt was an enormous threat to America. But they lost all interest in deficits as soon as one of their own occupied the White House. Trump inherited a $600 billion deficit; he’s blown that up to $1 trillion — and hardly a single Republican in Congress has expressed dismay.
How much have Trump’s deficits boosted the economy? Well, they’re poorly designed stimulus; the biggest item was tax cuts for corporations, which corporations used to buy back stock rather than to expand their businesses or raise wages. But while the Trump stimulus probably didn’t deliver much bang per buck, it involved a heck of a lot of bucks.
And Trump’s economy also gets a lift from the fact that Republicans have ended the de facto economic sabotage that prevailed throughout the Obama years.
Incidentally, the experience of the past three years also refutes two of the main arguments used to justify the disastrous turn to austerity after the financial crisis — claims that deficits would hurt confidence and lead to a sharp rise in interest rates. None of this has happened.
So how can Democrats run against Republican fiscal hypocrisy? Not by warning about the dangers of deficits — that’s both wrong on the substance and politically ineffective, because nobody cares.
They might do better by pointing out that while Trump has rushed to cut taxes for corporations and the wealthy, he has been shortchanging the future. Ignoring his campaign promises, he has done nothing to raise much-needed spending on infrastructure. And despite its obvious indifference to budget deficits, his administration seems determined to deprive children of the adequate health care and nutrition they will need to become productive adults.
And there’s an important lesson for Democrats going beyond this election — namely, how to deal with what I’ve called the Very Serious People, centrists who spent years insisting that government debt was the most important issue of our time (and also believing, or pretending to believe, that Republicans were sincere in their supposed concern about debt).
The VSPs have gone oddly silent under Trump — funny how that works — but they’ll surely be back if Democrats retake the White House. But they have no idea what they’re talking about, and never did. If and when they reemerge, Democrats should ignore them.
Paul Krugman
Paul Krugman, Ph.D., winner of the Nobel Memorial Prize in Economics, is an Op-Ed columnist for The New York Times.