Dick Cheney famously told Treasury Secretary Paul O’Neill that Ronald Reagan proved that deficits don’t matter, which helps explain why the Bush administration cut taxes on the rich even more than the president thought was justified.
When the Treasury secretary went to the Oval Office for weekly discussions, he found he did all the talking. “I wondered from the first, if the president didn’t know the questions to ask,” he tells Mr Suskind, “or if he did know and just did not want to know the answers?”
The one time the president does become engaged in economic policy discussion in Mr Suskind’s book, it is to question the orthodoxy of his own administration’s policy during a White House discussion of a second round of tax cuts in November 2002, following triumphal midterm election results.
According to Mr Suskind, who says he has a transcript of the meeting, the president asks: “Haven’t we already given money to rich people? This second tax cut’s gonna do it again.”
The president suggests instead: “Shouldn’t we be giving money to the middle?” But Mr Rove, who has masterminded Mr Bush’s election campaigns since his days in Texas, jumps in at this point in the transcript to urge the president: “Stick to principle. Stick to principle.”
“He says it over and over again,” Mr Suskind said. “Don’t waver.”
In his own account, Mr O’Neill discovers the hard line on tax cuts is coming from Mr Cheney. Not knowing he was in his last weeks as Treasury secretary, he went to see the vice president expecting to get a sympathetic hearing for his concerns over the deficit. Instead he is told: “You know, Paul, Reagan proved that deficits don’t matter. We won the mid-term elections, this is our due.”
Commentators on both the right and the left have sometimes defended Cheney’s assertion (at least, partially), each for their own reasons. In February 2005, Irwin M. Stelzer wrote in the Weekly Standard:
The housing market remains strong; the unemployment rate is a low 5.2 percent; over two million new jobs have been created in the past year; the service sector is growing; inflation is low, as are long-term interest rates; and U.S. companies are increasingly optimistic, “bolstered by unprecedented cash flows,” according to Goldman Sachs. The budget deficit may be larger than we would like, and Dick Cheney may have been overstating things a bit, but so far it hard to say that his view of budget deficits is clearly wrong.
In March 2009, Joe Conason wrote the following in Salon:
Dick Cheney once observed that “deficits don’t matter,” which may well have been the most honest phrase he ever uttered. His words were at least partly true, which is more than can be said for the great majority of the vice president’s remarks — and they certainly expressed the candid attitude of Republicans whenever they attain power. His pithy fiscal slogan should remind us that much of the current political furor over deficit spending in the Obama budget is wrong, hypocritical, and worthy of the deepest skepticism.
The truth is that deficits do matter, but Republicans no longer care about them except as a tool to bash Democrats when they take over for them. Writing in BusinessWeek in December 2004 (after the reelection of George W. Bush), Robert Kuttner observed (emphasis mine):
…Republican deficit hawks have all but vanished…
HOW DID THIS SHIFT HAPPEN? Conversations with more than a dozen senior business leaders, including board members of the Concord Coalition, point to this progression: Since Ronald Reagan, a majority of Republican politicians have gradually come to conclude, as Vice-President Dick Cheney famously told former Treasury Secretary Paul H. O’Neill, that “deficits don’t matter.” What’s interesting and alarming, however, is that different Republican factions believe deficits don’t matter for opposite and incompatible reasons.
Supply-siders believe deficits don’t matter because tax cuts so boost investment and productivity that the economy grows its way out of debt. The opposite, “starve the beast” faction, epitomized by tax tactician Grover Norquist, hope tax cuts will indeed create deep deficits that will then force spending cuts. But both things can’t be true.
Under George W. Bush, the merry ideology calls for tax cuts in all seasons for all reasons. Spending has increased faster than under Clinton, and deficits have ballooned, yet tax cutting marches on. This privately scares many Republican business leaders. But very few are speaking out, either because they don’t want to burn bridges to the White House or because they are too pleased with their tax cuts.
Actually, Norquist said he wanted to shrink the government to the point that it could be drowned in a bathtub. He doesn’t believe that massive tax cuts will grow the economy sufficiently to provide the tax revenue needed to keep the government humming. He believes the exact opposite. The other side is a mixture of stupid people who believe whatever they hear on their radio and smart people who spout the nonsense those stupid people consume. There’s a debate, I guess, but mostly these ideologues just want to pay less in taxes without any regard for the consequences.
Yet, now that President Obama is in power and threatening to increase tax rates on the extremely wealthy, they’re screaming mad about the budget deficits that Ronald Reagan proved don’t matter. And all those members of the base who stood mute as Bush and Cheney set records for deficit spending are now parading around with tea bags hanging off their tricorn hats.
Anyone who actually believes that the Republicans think deficits matter and will lower them if restored to power is a fool.
