When Peter Orszag first announced he was leaving the Obama Administration, I was itching to post something about Reagan’s budget director, David Stockman, and how Peter would now be free to write the latest version of Stockman’s “Triumph of Politics” book (which was one of the first books on fiscal policy I read as a budding economist, in fact). My idea was that Peter would finally be able to talk about how he really feels about the economic wisdom (or not) of the Bush tax cuts–the policy President Obama is now trying to turn into his own.
You see, Peter spent many years researching and writing about the Bush tax cuts with his Brookings colleague Bill Gale (who just wrote this nice updated summary of stubborn myths on the Bush tax cuts in the Washington Post), and most of what the two of them had to say over all those years and papers was not very flattering. I’ve assumed that Peter’s been biting his tongue a lot over the past couple years (or maybe not?) as President Obama has blamed the deficit-financed Bush tax cuts for the awful fiscal situation he inherited and yet at the same time has been insistent on keeping the very same tax cuts as part of keeping his campaign promise not to raise taxes on anyone with incomes less than $250,000 (you know, that very “fat” definition of “middle class”).
So that’s why I immediately was reminded of David Stockman’s “Triumph of Politics” book when Peter announced he was leaving. But it turns out I didn’t have to build any bridge to make that connection between Peter Orszag and the Bush/Obama tax cuts and David Stockman (and the Reagan tax cuts). Stockman himself built it for me, in his opening paragraph of his recent op-ed in the New York Times:
IF there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation’s public debt — if honestly reckoned to include municipal bonds and the $7 trillion of new deficits baked into the cake through 2015 — will soon reach $18 trillion. That’s a Greece-scale 120 percent of gross domestic product, and fairly screams out for austerity and sacrifice. It is therefore unseemly for the Senate minority leader, Mitch McConnell, to insist that the nation’s wealthiest taxpayers be spared even a three-percentage-point rate increase.
And later, Stockman bemoans the fact that whether tax cuts fail and are undone (in his Reagan era), or tax cuts fail and are continued (in the Bush-int0-Obama era), tax cuts continue to earn praise and deflect criticism by the “free lunch” fiscal policy types:
Through the 1984 election, the old guard earnestly tried to control the deficit, rolling back about 40 percent of the original Reagan tax cuts. But when, in the following years, the Federal Reserve chairman, Paul Volcker, finally crushed inflation, enabling a solid economic rebound, the new tax-cutters not only claimed victory for their supply-side strategy but hooked Republicans for good on the delusion that the economy will outgrow the deficit if plied with enough tax cuts.
By fiscal year 2009, the tax-cutters had reduced federal revenues to 15 percent of gross domestic product, lower than they had been since the 1940s. Then, after rarely vetoing a budget bill and engaging in two unfinanced foreign military adventures, George W. Bush surrendered on domestic spending cuts, too — signing into law $420 billion in non-defense appropriations, a 65 percent gain from the $260 billion he had inherited eight years earlier. Republicans thus joined the Democrats in a shameless embrace of a free-lunch fiscal policy.
I think it’s funny how history repeats itself, how fashions come back in style, and how old budget directors sound new again.