Mulvaney: You're darned right we need "new deficits"

Back in the day, Mick Mulvaney made his reputation as a deficit hawk in Congress the hard way. He twice ran afoul of John McCain by demanding troop drawdowns in Afghanistan in 2011, and supporting defense cuts in 2013. McCain held that grudge all the way to this year, when he threatened to vote against Mulvaney’s confirmation as budget director over those votes and Mulvaney’s participation in the ill-fated 2013 government shutdown, fought over ObamaCare and deficit spending.


McCain shouldn’t have worried. Mulvaney has become a fan of deficits, as long as they’re “new deficits,” which apparently means deficits run up by Republicans:

The White House is showing “softness” on ending a $1.3 trillion federal tax deduction filers get for their state and local taxes, Senator Bob Corker said Monday, warning that it raises questions about the GOP’s “intestinal fortitude” and could imperil a tax overhaul.

The framework that President Donald Trump and Republican leaders released Wednesday calls for deep rate cuts and would abolish existing tax breaks to help pay for them. Without such “pay-fors,” Congress might have to settle for only temporary tax cuts. …

White House Budget Director Mick Mulvaney is signaling similar flexibility, saying on CNN Sunday that decisions about deductions remain up in the air as “the bill is not finished yet.” He took it a step further, by adding that a tax plan that doesn’t add to the deficit won’t spur growth.

“I’ve been very candid about this. We need to have new deficits because of that. We need to have the growth,” Mulvaney said. “If we simply look at this as being deficit-neutral, you’re never going to get the type of tax reform and tax reductions that you need to get to sustain 3 percent economic growth.”

As Richard Nixon reportedly once said, “We’re all Keynesians now.” This was the same logic that went into Barack Obama’s stimulus spending, some of which came in the form of targeted tax breaks, and none of which produced lasting growth (or arguably any growth). It’s a favorite argument for the Perpetual Keynesians, a position that even Keynes himself didn’t favor.


Besides the obvious conflict with Donald Trump’s campaign rhetoric on deficits and national debt, this presents another problem for Republicans. They want to use a reconciliation vehicle for tax reform, which would allow them to pass a bill with only 50 votes in the Senate. If their bill creates “new deficits,” it will have to go through regular order and get 60 votes. The chances of that happening approach nil, with Democrats already pouncing on the proposal as a wet kiss to the wealthy at the expense of the middle class.

Orrin Hatch says that he believes the bill in its current form qualifies for reconciliation and is worth pursuing. The math may be tough to support, however:

Senate Finance Committee Chairman Orrin G. Hatch (R-Utah) said plans to finance tax cuts by adding to the deficit could be a problem for some Republicans but he is confident that economic growth will more than compensate for short-term losses.

“We’re not going to ever get this place turned around without being willing to make some difficult decisions,” Hatch said Monday. “Sometimes it means we might have to have a deficit to create the economy that will explode.”

Hatch said that he stands by Senate GOP budget projections that the plan will balance in 10 years, assuming average economic growth of 2.6 percent. That growth far outpaces the 1.9 percent estimated by the nonpartisan Congressional Budget Office.

“We have to go forward no matter what,” Hatch said. “I’m going to do my best to get a system here that will pay for itself and pay for a lot of other things in the future.”


We need both tax cuts and spending reductions. In fact, we really need a balanced-budget amendment to force Congress to spend within its means. Mick Mulvaney used to be a strong voice for that kind of fiscal discipline, but … we’re all Keynesians now.

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