The Tea Party won
The Tea Party has finally achieved its objective. The GOP is in control of all branches of government and Tea Party favorite Donald Trump was elected President. They won.
But what exactly did they win? Their big issue was the budget deficit, which as of 2015 was rapidly shrinking (as is generally the case during economic recoveries.)
The recovery has since picked up speed, so the deficit should be falling especially fast right now. Unfortunately, the FRED data site does not have updated figures, but the deficit is no longer falling. Indeed it’s exploding, expected to reach $1.1 trillion in 2019. Nothing like this has ever happened in America during a period of peace and prosperity. There is such a firehose of spending that Washington is hardly able to shovel dollars out the door as fast as they are being appropriated:
The federal government is primed to spend as much as $300 billion in the final quarter of fiscal 2018 as agencies rush to obligate money appropriated by Congress before Sept. 30 or return it to the Treasury Department.
The spending spree is the product of the omnibus budget agreement signed six months late in March coupled with funding increases of $80 billion for defense and $63 billion for civilian agencies. The shortened time frame left procurement officials scrambling to find ways to spend the money.
Through August, defense and civilian agencies obligated some $300 billion in contracts. But to spend all the money appropriated to them by Congress, they may have to obligate well over $200 billion more in the final quarter of fiscal 2018, which ends in two weeks.
“It is not impossible for this to happen, but it is unprecedented for that high of a percentage to be obligated to contracts for a fiscal quarter,” David Berteau, president of the Professional Services Council, told Nextgov. “You’d have to spend almost 50 percent of the yearly total in three months.”
And yet the federal government may do just that.
This is what happens when you give the GOP full control over the government.
Hardly anyone is reporting this story, even though it’s one of the most bizarre things to have happened in America during my lifetime. Perhaps this is because none of our “tribes” has an incentive to acknowledge these facts. The GOP wants to tell voters that it’s a responsible, small government, conservative party, pushing back against the deficit spending of the Obama years. The Dems want to tell voters that the GOP is a mean-spirited, small government, conservative party. Both are lying. The press plays along with this framing, because it lets the two tribes set the terms of the debate. The GOP is actually a big government party. Neither the NYT nor Fox News will tell you that.
To get a sense of the weirdness of this state of affairs, imagine the right-to-life movement were to get control of all branches of American government. And then assume that they immediately proceeded to make abortion mandatory for all pregnancies involving unmarried women. Because deficit spending is a dry economic issue, people don’t grasp the strangeness of what’s happened.
PS. Off topic, this FT piece made me smile:
The US and Canada have been sparring over access to the protected Canadian dairy market, American insistence on scrapping a dispute settlement mechanism in the original pact, and Ottawa’s request for cultural exceptions to be maintained in the media sector. . . .
On Tuesday, Steve Scalise, a Louisiana Republican and the House majority whip, fired off a statement attacking Ottawa, saying there was growing “frustration” that Canada was not “ready or willing” to make a deal.
“Mexico negotiated in good faith and in a timely manner, and if Canada does not co-operate in the negotiations, Congress will have no choice but to consider options about how best to move forward and stand up for American workers.”
Good to see the GOP standing up for Johnny Depp, Brad Pitt, Robert Downey Jr., Tom Cruise, and other “American workers”.
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19. September 2018 at 16:03
“Tea Party favorite Donald Trump”
That’s just a silly statement. I imagine no tea party types like Trump. Some may have preferred him to the alternative on election day, but certainly wouldn’t say he’s a “favorite”.
19. September 2018 at 17:13
BD:
“In a January 2016 CNN poll at the beginning of the 2016 Republican primary, Trump led all Republican candidates modestly among self-identified Tea Party voters with 37 percent supporting Trump and 34 percent supporting Ted Cruz.”
-Wikipedia article on the Tea Party
19. September 2018 at 18:04
I think this post is correct.
Thought: the heavy federal spending (for once the word
“runaway” may be justified), while ill-advised, may lead to a couple more good quarters of real growth.
19. September 2018 at 18:41
Scott:
While we’re on the subject of astronomical peace-time, non-recessionary deficits what’s your take on Ray Dalio’s book A Template for Understanding Big Debt Crises?
19. September 2018 at 19:47
LOL! The tea party hasn’t been politically relevant in well over 5 years. This is just tribalist bullshit.
19. September 2018 at 22:56
Scott,
1. Don’t think Donald Trump is the tea party’s favorite. Instead it’s what we got when the Democrats and the MSM trashed the tea party.
2. I think conservatives are more worried about government spending than the deficit. Reducing the deficit and promoting small government are not necessarily the same thing.
3. Discretionary spending is not up that much and doesn’t make up that much of total spending.
4. The increase in the deficit is largely the result of the tax cut… not because of spending.
5. Projected deficits are highly dependent on NGDP growth rates. You can argue that the GOP/Administration is wrong about the stimulative effect of tax cuts, but that doesn’t mean they favor increased deficits.
6. The huge increase in national debt is Bernanke’s fault…. not the Democrat’s or the Republican’s fault.
20. September 2018 at 01:26
Scott – why don’t you frame the deficit as a share of GDP? Or as a share of tax revenue, or whatever.
American commentators love to throw around references to billions and trillions without anything to scale it against.
I am more economically literate than 999 people in a thousand, but I don’t carry around current-price quarterly US GDP in my head.
Without that, I can’t really make sense of any of the numbers cited in your chart and text.
20. September 2018 at 02:18
Scott’s conclusions are correct. The is the second time Republicans have controlled all branches of the federal government since 2001, and each time, they cut taxes and increased spending.
There has always been a small core of Republicans that favored cuts or elimination of entitlement programs like Social Security and Medicare, but the base and most Republican politicians have never held this view.
As Democrats have long said, Republicans never cared about deficits or reduced spending. They only favor reduced spending on, what in their minds, are “those people” .
The base wants more socialism/protectionism for white Protestants, and they want to punish everyone else. Hence, voting for a malicious narcissist like Trump, who starts fights for their own sake, as a bully.
20. September 2018 at 05:33
It’s almost as if it makes no difference at all who gets elected.
Long live the Uniparty!
20. September 2018 at 06:58
It is being reported, but its significance is not really being appreciated. This actually started when the GOP took the Senate in 2015, a couple years before Trump came into office.
Similarly, the GOP is the anti-Russia, pro-American-imperialism party. Almost nobody is reporting that (though maybe Tucker Carlson and ONLY Tucker Carlson will tell you that), because this time, no side has an incentive to acknowledge any of the facts. Similarly, since foreign policy is a dry non-domestic issue, almost noone can seem to grasp the strangeness of what happened.
Interestingly, since you seem to be blind to all non-economic issues and suffer from a severe case of Gell-Mann amnesia, you recognize the nonsensical deficit framing, but not the nonsensical Russia framing.
20. September 2018 at 06:59
‘The base wants more socialism/protectionism for white Protestants, and they want to punish everyone else. Hence, voting for a malicious narcissist like Trump, who starts fights for their own sake, as a bully.’
Well, we couldn’t have a better example of bullying than what is happening to Judge Kavanaugh right now. What kind of despicable person pulls what DiFi did?
Which is why Trump is President now. Whatever flaws Tea Partiers have, they at least have the decency to be revolted by Democrats who have ‘defined deviancy down’ to this level.
20. September 2018 at 07:14
@BD @dtoh Wrong, please stop revising history. Trump and Cruz were the two Tea Party favorites, with Trump usually holding a narrow lead:
https://s3.documentcloud.org/documents/2698240/rel3b-Republicans-6a.pdf
Republicans as a whole rated Trump as by far the best GOP candidate to combat the deficit, and that was when he was getting 35% of the primary vote.
http://www.gallup.com/poll/189731/economic-issues-trump-strong-suit-among-republicans.aspx
He also led among Tea Party supporters in 2011:
https://www.washingtonpost.com/blogs/the-fix/post/donald-trump-seriously/2011/04/06/AF0481rC_blog.html
https://fred.stlouisfed.org/graph/?g=lin8
Since the GOP took the Senate, government spending as a percentage of GDP has been flat.
Yes, they do.
Mostly false, and especially false since Republicans took the Senate.
They are more dependent upon the unemployment rate.
@S D
Look it up; stop being an idiot.
@Rob
Bingo.
@Michael Sandifer
The GOP has INCREASED spending on “those people”. And it should reduce spending on them down to the bone.
The vast majority of them don’t (unless you call Social Security socialism/protectionism).
20. September 2018 at 07:15
Sumner, please remove the three links rule here. Thanks.
20. September 2018 at 08:11
Rob,
Deficits fell under the last two Democratic administrations. Also, the last two Democratic Presidents were far brighter than the last two Republican Presidents.
Republican voters like voting for idiots, especially if they’re openly fascist.
20. September 2018 at 08:44
Patrick,
Your comments are laughable, as usual. Yes, people like Harris and Booker didn’t conduct themselves professionally during the Kavanaugh hearings. They did bully for the sake of angry base voters. But, while their behavior is inexcusable and stupid, it is not without context. The Republlicans violated norms by not even allowing an Obama nominee to have a hearing. They have no right to complain now about not fighting fair.
That said, these new allegations against Kavanaugh are disturbing and warrant investigation.
Democrats should pack as many courts as possible, given the opportunity, until they can reach a bargain with Republicans over respecting the old norms in the future.
This should be war, but people like Pelosi and Schumer are too out-of-touch and cowardly to wage one.
On the rare occasions Trump isn’t trying to bully Democrats, he’s sucking up to them and offering them deals he won’t keep. Trump supporters have no right or basis to complain about anything, ever.
20. September 2018 at 08:54
Because 80% of those Democratic administrations had a Republican House.
No, they don’t. They’re obvious fakery.
20. September 2018 at 09:28
On the plus side, everyone can celebrate that the budgets (the spending side) are bipartisan! The military budget, passed this week, was 93-7, with the most Tea Party Senators (Paul, Lee, Flake, Toomey, and Sasse) again, and then also Purdue for another R and Bernie Sanders being the seven against.
Trump explicitly ran on increasing spending, on ignoring and reversing the Republican/Tea Party dogma of limiting it, and plenty of various centrist and D-leaning outlets celebrated him for it (and called him much better than Cruz, Rubio, Jeb, etc. as a primary choice for Republicans for it.)
He has, of course, succeeded in transforming the Republican Party, partly by finishing the job of bringing old Democrats to the Republican Party (especially in the Midwest, such as in MN’s Iron Range.) The possibility was always there; Democracy for Realists by Achen and Bartels even celebrated the possibility of a Trump like candidate until they got one.
20. September 2018 at 09:57
Michael Sandifer,
Are you aware you are an NPC ?
20. September 2018 at 11:00
Why did you cut the graph off in 2015? Obama’s last two years saw an alarming increase in the deficit. Sure, the tax bill made things worse, but most of the problem was there already, they are driven by entitlement demographics we’ve known about forever, and playing politics on what is clearly a national failure over the course of a generation is lame.
I have disagreed with you before, but this is the first time I’ve seen you dishonestly clip data to slant a point. Tsk tsk.
20. September 2018 at 15:46
BD, Trump is very popular with the Tea Party. In many countries, small government movements have morphed to big government anti-immigrant movements over the past 5 years.
SD, Just remember that NGDP is $20 trillion. The deficit is expected to surpass 5% of GDP in 2019.
John, You said:
“Trump explicitly ran on increasing spending,”
Trump promised to pay off the entire national debt within 8 years. Whenever someone tells me “what Trump ran on” I just laugh. He took both sides of almost every single issue. He even ran promising free trade, in at least one speech.
He also ran on a 25% top rate, then as president tried to actually raise the top rate. The idea was dropped because his advisors said the GOP would never pass it.
His entire platform was nonsense.
Brian, Fair point, But entitlement spending also rose during 2010-15, as the deficit fell sharply. This really is a dramatic turnaround, something we’ve never seen before during peace and prosperity.
Everyone, Yes, the deficit rose during the end of the Obama years, but now it’s just exploding upwards. (Contrary to predictions of supply siders.) Unfortunately I can’t show that with Fred, so I cut it off at 2015 to give a sense of how deficits normally move during recoveries. If Hillary had won then the deficit would have increased, but not as fast. Also recall that GDP growth was slow in 2016 and then faster over the past 6 quarters. If you adjust for the cycle, the turnaround has been even more shocking.
In the future, the US will have to pay the price for this recklessness with higher taxes. That’s not to say this is entirely Trump’s fault; the entire GOP is on board with this deficit spending. (As are many Dems).
20. September 2018 at 17:57
Precisely correct.
Yeah; you can, they have monthly data.
Not the entire GOP, but the entire GOP establishment. You know, the kind you favor over those conservative “extremists”.
20. September 2018 at 21:48
Scott, why do you think that it’s been harder to reach a trade deal with Canada than with Mexico? Traditionally, trade protectionists in developed countries most oppose trading with low-wage countries in the name of protecting workers against “cheap” foreign labor. NAFTA opponents warned of the “giant sucking sound” of jobs going to Mexico, not Canada. Trading with the 51st state shouldn’t even count as foreign trade. The trade gains with low-wage countries may be larger because labor diversity yields more opportunities for comparative advantage. However, historically the politics have been harder.
21. September 2018 at 01:29
https://fred.stlouisfed.org/graph/?g=lj2M
That data is not seasonally adjusted, but comparing e.g. Q1 to Q1, Trump’s fiscal policy looks like a continuation of the (spendthrift) final years of the Obama administration. That does not count in his favour, since we’re even deeper into the recovery period than in Q1 2016 to Q1 2017.
21. September 2018 at 01:30
(And by “we”, I mean “you”. And by “you”, I mean the US economy.)
21. September 2018 at 03:42
Scott,
The GOP cut taxes. They believe that this will increase growth, increase overall tax revenue, and over the long term reduce the deficit. Of course over the short run, tax cuts will result in a higher deficit (recovery or not.) The GOP did not take any action to significantly increase government spending (increases are already baked into the system.)
You may not believe that reducing taxes significantly increases growth but I would not conflate that with a presumption that the GOP has abandoned its principles.
21. September 2018 at 05:42
‘Your comments are laughable, as usual. Yes, people like Harris and Booker didn’t conduct themselves professionally during the Kavanaugh hearings.’
To the contrary, they acted EXACTLY as professional politicians do. They took advantage of the ignorance and emotionalism of people like you. They play you like you were a violin.
21. September 2018 at 07:50
dtoh,
Tax revenue is actually up 1%. That’s still down in GDP percent terms. Corporate tax revenue went down.
Spending is up 7%.
21. September 2018 at 09:39
Patrick,
Since I recognize the Harris and Booker behavior as ridiculous grand standing, it certainly doesn’t influence me.
21. September 2018 at 10:03
“Trump promised to pay off the entire national debt within 8 years. Whenever someone tells me “what Trump ran on” I just laugh. He took both sides of almost every single issue. He even ran promising free trade, in at least one speech. ”
Correct. He ran on simultaneously promising to pay off the debt while promising to increase spending on every major program, explicitly and loudly rejecting all the actual places where Republicans had previously promised to cut spending. So it was obvious that he was going to increase the debt, despite his lies.
But they are, of course, lies that people want to hear. Not just Tea Party people or conservatives, but all the large number of Obama-Trump swing voters, “moderates,” and even the people who the Obama Administration pandered to by pretending that we could pay for lots of new spending without taxing people below the top 2%.
It was very apparent that Trump was going to lead to higher spending, and equally apparent that there’s no way to stop the spending by electing Democrats to Congress.
A Democratic President and a Republican Congress can work to control spending; a Republican President and a Democratic Congress will not. It will, however, at least investigate some of his illegality.
21. September 2018 at 10:07
The most “Tea Party” wing of the GOP isn’t on board with the spending (and have voted against), but they’ve found that the vast majority of their party’s voters don’t care about that ideology. In that sense, they were building on a foundation of sand, and Trump came along to steer our politics towards the bipartisan spending binge that the swing voters wants, not the spending restriction that folks like Sasse, Lee, Paul, or Flakse want.
“the entire GOP is on board with this deficit spending. (As are many Dems).” – The “entire Dems” are on board with the spending, and most of the GOP. What the entire GOP is on board with are the tax cuts. Combined, they make for deficits, and it’s wonderfully bipartisan. GOP gets the tax cuts, Dems get the spending, it’s all moderate compromise, what people and political scientists say that they want.
The current tax and spending machine is very moderate and a full compromise. Just there’s lots of possible moderations, and lots of possible compromises.
21. September 2018 at 10:13
And when the Senate did try to cut a small amount of spending (https://www.cnn.com/2018/06/20/politics/senate-vote-rescissions-package/index.html) the vote was 48 Republicans for cutting spending, a couple Republicans joining with all the Democrats to preserve it.
The spending increase is 100% bipartisan. The biggest reason why the spending discipline failed is Trump’s wall plus enough Republicans (and Trump) want military spending increases, and they’re willing to trade that for domestic spending increase, and all the Democrats are willing to take that deal.
All the spending bills this session have had opposition from only Republicans plus Sanders, including the various “minibuses.”
https://thehill.com/homenews/senate/403360-senate-passes-massive-spending-bill-on-defense-health-education
I do think that it’s quite likely that this would happen under most if not all Republican Presidents, especially because military spending swallows all. But I don’t see how even a Democratic Congress will fix it.
21. September 2018 at 11:45
Trump Supporters,
I don’t usually address you, since you don’t apply reason at all, as further evidenced by your responses to me. I’ll end here by saying there’s no reason for anyone to listen to you about anything. That’s the kindest thing I can say.
21. September 2018 at 12:37
Oh look, the NPC experiences negative emotions.
So cute.
21. September 2018 at 14:22
BC, Trump wants to pick a fight. Also, there was a government transition in Mexico which made things easier.
dtoh, The GOP most certainly did take actions to boost government spending. They tore up the earlier budget agreements that controlled spending.
Again, nothing like this has ever happened in all of American history, during a period of peace and prosperity. It will not end well.
21. September 2018 at 14:40
There were 90 Republicans in the House who voted against the omnibus appropriations bill. So there were Republicans who at least nominally stuck to not increasing spending.
But here’s the thing about the “Tea Party.” All Republicans are petrified of being insufficiently deferential to Trump. On immigration especially, Republicans cannot seem too soft. All Republicans fear a MAGA primary challenger.
For these spending votes though, there is zero fear of a fiscally responsible primary challenger. Most Republicans voted for higher spending.
Koch brothers and other libertarians may have hoped Tea Party was about libertarian ideals. The actual GOP base overwhelmingly cared about immigration and government assistance allegedly going mainly to non-white people.
21. September 2018 at 17:47
Scott,
you sound hysterical and alarmist. Cutting spending is very hard in modern day politics worldwide, and you know this.
In some way big government is about getting (or stealing) a big chunk of your money through taxes. If you see it that way, they have actually pushed back big government. No matter what happens in the future: The lost revenue of today is gone, remaining in the pockets of the citizens.
Much higher taxes in the future you say? At first glance that sounds true but if you think about it we actually don’t know that. There are many open questions. Will the taxes be significantly higher than before the tax cut? I don’t think so. Won’t there be other measures as well? Of course. Future politicians will have to cut spending as well.
And wouldn’t it be more reliable if you were to state government spending as a percentage of gdp?
According to the following graphic, average outlays between 1968 to 2017 were about 20% of gdp. And what are the numbers for 2017 and 2018? About 20% of gdp. So where is your alarmist tone coming from?
https://upload.wikimedia.org/wikipedia/commons/7/71/Total_Revenues_and_Outlays_as_Percent_GDP_2017.png
Funny side note: Trump wanted to spend a lot of money especially for one thing: The Trumpian Wall. But that seems to be the only thing Congress doesn’t want to spend money on.
Maybe he meant (partially) defaulting on the debt like FDR did?
21. September 2018 at 18:26
“No matter what happens in the future: The lost revenue of today is gone, remaining in the pockets of the citizens.”
Current deficits just crowd out private investment.
“Much higher taxes in the future you say?”
Discounted future interest payments+deficits=value of current deficits, so the only hope here is lower spending.
Unfortunately, starve the beast has failed miserably. It was one of the few things Friedman was completely wrong about. Government seems to have “scrimp and save” and “spend like drunken sailors” modes that it flips between. 92-00 and 11-15 were save/cut periods while 01-04, 16-present have been spend/cut tax modes.
And of course, defaulting on debt is just stealing from lenders.
The only reasonable hope is that Treasury rates will eventually rise enough to push voters/congress into some intelligent combination of spending/tax reform.
21. September 2018 at 19:11
@Cameron Blank
Like I said: Recent spending (2017 and 2018) seems to be 20% of gdp, and that seems to be the exact average since 1968.
That’s true but who cares? It’s simply a political dispute in which everybody feels stolen from eventually. I assume future generations will ask why the dispute and the stealing is always between the taxpayers and the benefit recipients exclusively. The lenders won’t get away forever.
The GOP had two options during the last months: Spending 20% of gdp and no tax cuts or spending 20% of gdp and tax cuts. The second option seemed to be idiotic at first glance but right now I think it was actually the better choice because more and more revenue leads to more and more desires.
21. September 2018 at 19:20
I want to meet the President and the Congress, which raises taxes so significantly that they are much higher than before the tax cut. Voters don’t want to hear that all. So until that happens, the money stays in the pockets of the citizens, and the revenue is lost.
22. September 2018 at 01:41
Trump’s irresponsible deficit shows the wisdom of barring politicians from having a say in the size of the deficit, while they retain control over clearly POLITICAL decisions, like what percentage of GDP goes to public spending and how that is split between education, infrastructure, defence and so on. As to who actually does decide the size of the deficit, that is a purely technical / economic question which should be left to economists.
That sort of set up was given the thumbs up by Bernanke. See his para starting “A possible arrangement….” Here:
http://fortune.com/2016/04/12/bernanke-helicopter-money/
22. September 2018 at 07:06
Christian, Futures cuts in spending were plausible when there was at least one political party in favor of small government. That is no longer the case. Higher taxes are on the way. Indeed, earlier this week Trump raised taxes on imports.
22. September 2018 at 09:05
Memories of when Giants strode the Senate:
https://www.finance.senate.gov/download/economic-impact-of-spending-reductions
22. September 2018 at 13:57
Scott:
“…Futures cuts in spending were plausible when there was at least one political party in favor of small government. That is no longer the case. Higher taxes are on the way. …”
I do not believe we will ever have enough fiscally conservative politicians to reduce spending since this is not now popular and is unlikely to be popular in the foreseeable future.
Would you agree that the most likely way the country will deal with runaway spending and deficits will be by an indirect tax, i.e. inflation.
23. September 2018 at 11:09
Scott, no doubt that there will be higher taxes in the future. My question was if they will be much higher than before Trump’s tax cuts? In my opinion that’s still an open question because tax increases are unpopular as well.
People are self-contradictory, they want low taxes and high government spending. So I assume the future will be moderate (direct) tax increases, moderate spending cuts, and maybe other ways like inflation and even partially defaulting on the debt.
23. September 2018 at 15:50
Scott,
You said, ” The GOP most certainly did take actions to boost government spending. They tore up the earlier budget agreements that controlled spending.”
That’s not accurate. The agreement they “tore up” was an agreement to reduce discretionary spending. The result is that discretionary spending growth as a percentage of GDP is about flat (and lower as a % than any time during the Obama administration.)
Congress tears up the 2011 Budget Control Act every year. The only difference is that this time, they’re not letting discretionary spending (as a % of GDP) rise.
The deficit is rising because of mandatory outlays and the tax cuts. Your story line that the deficit is rising because of GOP profligate spending is simply not accurate.
24. September 2018 at 19:11
Bob, No, I expect direct taxes to be raised. Indeed Trump raised taxes just last week.
dtoh, I strongly disagree. Discretionary spending has recently been rising faster, and there are worse numbers to come:
“”Earlier this year, both parties came together and decided on a massive expansion of defense spending and to not pay for it,” said Marc Goldwein, senior vice president of the Committee for a Responsible Federal Budget, a nonpartisan think tank.”
https://www.washingtonpost.com/news/wonk/wp/2018/06/19/u-s-military-budget-inches-closer-to-1-trillion-mark-as-concerns-over-federal-deficit-grow/?utm_term=.0a533a4196c7
In any case, increasing entitlement spending as a share of GDP is just as irresponsible.
24. September 2018 at 21:38
Scott,
You can look at the numbers yourself at the Congressional Budget Office.
https://www.cbo.gov/
The Committee for a Responsible Federal Budget has been peddling an ultra hawkish fiscal narrative for years. Their pronouncements are not credible. Check the actual numbers.
“In any case, increasing entitlement spending as a share of GDP is just as irresponsible.”
Agree, but neither party wants to commit political suicide. This is one case where it’s a problem with the electorate not the politicians.