Phenomenal World

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September 7, 2024

The Triumph of David

DEFICIT HAWKS

A recent brief by the Penn Wharton Budget Model estimates that the Harris Campaign’s tax and spending proposals would increase primary deficits by $1.2–2 trillion over the next ten years. While Vice President Harris’s cost-of-living platform remains ambiguous, and Trump’s disruptive policy proposals fall outside the scope of basic budget models, both are expected to contribute to a bigger fiscal deficit. 

In a September 2024 brief from the Roosevelt Center, David Stein traces the history of deficit politics and argues for a deeper shift in fiscal and monetary policy away from the deficit-hawk paradigm:

“While the New Deal’s social compact had imagined—if never fully realized—employing deficit spending to ensure economic stability, the commitment to balanced-budget orthodoxy heralded a retreat from these aspirations and techniques. The official platforms of the Democratic Party track this transformation in policy priorities and prevailing ideologies, from the rise of full employment in the 1940s to the dominance of balanced budgets after the 1980s. The 1972 Democratic Party platform, reflecting the power of the full-employment agenda, emphasized that “full employment—a guaranteed job for all—is the primary economic objective of the Democratic Party” (The American Presidency Project 1976). Such a view was echoed again in 1976 and 1980, as it had been in prior decades. But by 1984, full employment barely warranted a mention in the platform—the federal budget deficit, meanwhile, drew 37 references (The American Presidency Project 1984; see Figure 2). That shift in focus would persist during the Clinton years and beyond. This was not just an effort to score political points in election years. At a core level, deficit-hawk politics were about reordering governmental priorities, constraining the ambitions and achievements of the public sector. These policies would eventually undermine efforts to ameliorate the harms of the 2008 recession, and they continue to curtail the prospect for adequately addressing climate change, or making other necessary investments in the care sector that are needed to make the 21st century livable. In short, Democrats need to slough off the shackled imagination of deficit-hawk politics to meaningfully confront the clear challenges ahead.”

+  “If all the people who worry and spend sleepless nights—all for fear of the debt—could forget about it and spend their efforts toward achieving a growing national income, their contribution to the solution of the debt problem would be far greater.” By Evsey Domar. Link. And in PW, see JW Mason on the implications of Keynes’s alternate vision of monetary production for the politics of sovereign debt and monetary policy in the US. Link.

+  “There’s little evidence of a link between deficits and inflation for the US economy where monetary policymakers are free to pursue low inflation. But developing countries, requiring seigniorage revenue, show a strong link between fiscal deficits and inflation.” By Keith Sill. Link. 

+  “As long as the Fed believes that deficit spending is inflationary, government deficits are likely to lead to tight monetary policy and rising interest rates.” By L. Randall Wray. Link. “An increase in the deficit reduces national saving and hence future national income, regardless of its effects on interest rates.” By William G. Gale and
Peter R. Orszag. Link.

NEW RESEARCHERS

Shale Shock

ALEXANDER F. GAZMARARIAN is a PhD candidate in the Department of Politics at Princeton University. In a 2024 working paper, he analyzes presidential elections from 1972 to 2020 with a difference-in-differences design to find that the shale gas shock increased the Republican vote share by 4.9 percentage points.

From the paper:

“This historical advantage for the Democrats in coal country was due partly to union ties (Dark 1999). Other issues also drew voters to the Democratic Party since rates of unionization vary (Gaventa 1982), and there are also some regional differences in baseline support. This average Democratic advantage created the conditions for a partisan reversal. Democratic voters in these areas were cross-pressured. The Democratic Party, in addition to defending labor, also backed environmental regulations that threatened coal (Mildenberger 2020). The Democratic Party has long “owned” environmental issues, being seen as more competent and consistent, while the Republican Party has been more pro-business and antiregulatory (Egan 2013). As early as 1988, the Democratic platform included a call to address climate change, while the Republican platform promised to defend the coal industry. To the extent that Democratic voters were aware, they faced a dilemma: supporting a party that protects workers’ rights could jeopardize their industry’s viability. I argue that the decline of coal due to the shale shock increased Republican support through two mechanisms. First, the decline of coal raised the salience of the Democratic Party’s environmental issue ownership since voters increasingly saw a conflict between their economic self-interest and partisan preference. Second, the Republican Party also sought to politicize the issue by blaming environmental regulations, which mobilized new voters.”

+ + +

+  Join JFI and our affiliate initiative the Center for Active Stewardship for several events during NYC Climate Week later this month:

+  “Unions have become quite good at winning large-unit elections. From 2014–2021, 63 percent of large-unit certification elections were successful.” New on PW, Benjamin Fong focuses on the role of large-unit NLRB elections in labor’s resurgence. Link.

+  “Preference convergence between centre-left and centre-right workers is only visible in export-oriented Germany, while significant differences remain in consumption-led Britain.” By Erik Neimanns and Lucio Baccaro. Link.

+  “China and Africa account for one-third of the world population. Without our modernization, there will be no global modernization.” See the full text of the keynote address by Chinese President Xi Jinping at the opening ceremony of the 2024 FOCAC Summit. Link.

+  Suresh Naidu’s 2022 essay on the future of the US labor movement. Link.

+  “Israeli soldiers shot and killed American activist Aysenur Ezgi Eygi on Friday. Earlier this year, two 17-year-old Palestinian Americans were killed in the West Bank. The US government decried the killings but have yet to launch investigations.” By Jonah Valdez. Link.

+  “For a generation of Northeast Valley residents, community revitalization meant leaving, not staying, in their community to find jobs that might proffer the relative stability their parents enjoyed as workers at GM Van Nuys.” By Julia Brown-Bernstein. Link.

+  “By early 2016, Lava Jato had helped create the conditions for Rousseff’s impeachment, and it was working publicly toward the arrest of likely 2018 presidential candidate Lula—while also sparing members of the Partido da Democracia Social Brasileira (Party of Brazilian Social Democracy—PSDB), the PT’s main center-right rival. Even as the U.S. press was reporting on US collaboration with Lava Jato, most outside Brazil saw the operation as a legitimate, even heroic, investigation. Thus, that collaboration might have seemed morally justified. By 2017, Lava Jato’s neutrality was coming under scrutiny, with critiques of the operation finding their way into publications such as Foreign Affairs (Robertson, 2017) and reporting on the economic devastation wrought by Lava Jato appearing in the Washington Post (Lopes and Miroff, 2017). It is noteworthy that as US consensus about Lava Jato’s benevolence faded, so did reporting on US involvement. By Brian Mier, Bryan Pitts, Kathy Swart, Rafael R. Ioris, and Sean T. Mitchell. Link.

Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations: editorial@jainfamilyinstitute.org

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