Deficit Politics in the United States: Taxes, Spending and Fiscal Disconnect

Partisan battles over taxing, spending, and public debt have shaped American political development, with fiscal norms constraining them until the 1980s. Tax cuts and spending increases created large structural deficits and higher debt levels, leading to deficit politics. Republicans have passed large tax cuts but failed to retrench entitlement programs, while Democrats have expanded the domestic role of government but abandoned broad-based taxation. This stalemate of Republican tax policy, Democratic spending policy, and soaring deficits and debt poses serious economic risks, but an end to the era of deficit politics is nowhere in sight.

Format: Hardback
Length: 224 pages
Publication date: 23 February 2022
Publisher: Taylor & Francis Ltd

From the fiery clashes between Federalists and Republicans in the 1790s to the present day, partisan battles over taxation, spending, and public debt have been the driving force behind American political development. These battles, once constrained by fiscal norms that mandated balanced budgets and low debt, have evolved into a complex tapestry of ideologies and strategies. In his Farewell Address, President George Washington implored the nation to cherish public credit, using it sparingly and judiciously. However, the winds of change blew in the 1980s, with tax cuts and spending increases leading to massive structural deficits and soaring debt levels. Deficit politics has become a steadfast feature of American politics, with only a brief interruption in the late 1990s.

During this period, the Republican Party has championed large tax cuts, aiming to reduce government spending and promote economic growth. However, they have failed to address the significant entitlement programs that continue to drive up spending, perpetuating a cycle of unsustainable deficits. On the other hand, the Democratic Party has expanded the domestic role of government, advocating for social welfare programs and increased government intervention. While this approach has garnered support among certain constituencies, it has also abandoned the broad-based taxation that was once a hallmark of their platform.

Funding their domestic agenda with matching revenues has become increasingly unappealing for both parties, as entitlement cutbacks are equally unpopular for Republicans as tax increases are for Democrats. This stalemate has contributed to the current state of affairs, where Republican tax policy is mired in uncertainty, Democratic spending policy is under scrutiny, and soaring deficits and debt threaten the nation's economic stability. The economic risks associated with this era of deficit politics are profound, yet an end to the status quo remains elusive.

As the political landscape continues to evolve, it is clear that the challenges facing America are complex and multifaceted. The need for bipartisan cooperation and compromise is more urgent than ever before, as the nation grapples with pressing issues such as healthcare reform, climate change, and economic inequality. It is time for leaders from both parties to rise above their partisan interests and work towards a common goal of creating a more prosperous and sustainable future for all Americans.

Dimension: 234 x 156 (mm)
ISBN-13: 9780367765064