Monday, October 12, 2020

Republicans are about to rediscover fiscal religion

In Republicans are about to rediscover fiscal religion, FT's Ed Luce summarizes how the GOP's fiscal conservatism depends largely on which party is in power. He predicts that if Joe Biden is America's next president, we will soon start hearing much more about America's dangerously growing debt.

"Republican fiscal conservatism is a curious type of passion, which blows hot or cold depending on which party controls the purse strings. The US national debt exploded during the Reagan years because of tax cuts and high defence spending. It went down considerably (as a share of GDP) during the 1990s when Bill Clinton had to deal with a mostly Republican Congress that had rediscovered its fiscal zeal. They quickly lost their ardour when George W Bush came to office, regaining it only under Obama, once more dropping it under Trump and now waking up again to America's impending bankruptcy in the expectation of a Joe Biden victory. In other words, you can set your clock by it. But this clock has nothing to do with the national debt and everything to do with who benefits from the rising debt."

Rana Forohoohar agrees with Ed's prediction and responds

"It irks me to no end that Republicans will try to make fiscal prudence their issue, because they are so much better at cutting taxes than shrinking the budget. But the truth is that we should all be concerned about debt because our creditors are; many of them (most notably China) have been shifting into gold and euro because they believe that unproductive debt will ultimately erode the value of the dollar."

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