The infrastructure in the US is in sad shape and requires massive expenditure to upgrade it. The Obama administration, like pretty much everyone else, knew that and tried to push for such spending but the Republican majority in Congress thwarted it at every step for three reasons. One is that they had made it their policy to oppose Obama on anything that did not benefit the oligarchy. The second was to deny Obama the opportunity to point to any kind of success anywhere. And the third was because such spending would stimulate the economy and create jobs and make people think the economy was improving.
The weapon the Republicans used to thwart these plans was the deficit, arguing that this was a great burden that was being placed on future generations and that any new expenditure had to be met with budget cuts elsewhere, especially on programs that benefit the poor. The fact that the absolute value of the deficit is not the relevant measure but one should instead look at the deficit as a percentage of GNP was ignored. That percentage is not that large by historical standards.
It is illustrative to look at the deficit as a percentage of the GDP over time. For 2016 it is 3.2% of GDP. During the Obama administration it reached a high of 9.8% in 2009 following the financial crash but has come down since then. During the Reagan years it went as high 5.6% in 1983. George W. Bush inherited a surplus but his wars took the deficit to a high of 3.3% in 2004. It was 26.9% in 1943 during World War II. Another factor to consider is that with interest rates having been so low at almost zero, the past decade would have been a good time for the government to borrow money to pay for infrastructure improvements.
Even for those genuinely concerned about the deficit, the logical solution of raising taxes was out of the question, especially income taxes that are progressive in their impact, though they are open to regressive consumption taxes on everyday items that hurt lower income groups more.
But now that the Republican will control the presidency and both houses of Congress, those pious statements about the evils of budget deficits will go out the window and we can expect to see a spending spree. How will they justify this reversal? Easy, the way they have always done. They will use the same Laffer-curve magical thinking that they have done for such a long time. They will say what they said about tax cuts for the wealthy, that this would spur such immense growth that it would generate new tax revenues despite lower rates that would more than compensate for the increased spending. A win-win! Then when the predicted revenue increases don’t happen, they will again raise the specter for deficits and call for cuts in services provided to lower income people and to Social Security and Medicare and Medicaid
We are seeing this play out in Ohio. During the first part of John Kasich’s tenure as governor, the economy was doing well, tax revenues were high, and there were budget surpluses. So he and the Republican legislature handed out big tax cuts to the wealthy. Now the economy is doing poorly, tax revenues are down, budget deficits are looming, and he warns that the state is on the verge of a recession. So what does he propose? Reversing the tax cuts? Don’t be silly. He is proposing cuts to services.
This is the perpetual bait-and-switch, anti-Robin Hood con game that results in diverting money from the poor to the rich.
Donald Trump has nominated South Carolina congressman Rick Mulvaney to be his director of the Office of Management and Budget. He is supposed to be a deficit hawk but that is just window dressing. He will be used to sell this magical thinking to the rubes who think that the deficit is a big problem when it is not.