Blue State Blues: We Have Tax Cuts, But Where Are the Spending Cuts?

Congressional Republicans passed a “continuing resolution” Thursday to keep the governing funded into next year. And with it, they passed a waiver that allows Congress to avoid automatic spending cuts under the “pay as you go” (PAYGO) law that Democrats passed in 2010 (while running a massive deficit).

That kicks spending cuts down the road again, somewhat to the chagrin of the conservative House Freedom Caucus, and the Tea Party that preceded it.

The Tea Party movement was launched in February 2009, as President Barack Obama and the Democrats passed a massive “stimulus” bill that was little more than a giveaway for public sector unions and well-connected cronies. It powered the Republican takeover of the House in 2010, and made the annual deficit and the national debt important priorities — so much so that Republicans began to discuss entitlement reform, the “third rail” of American politics.

Now that the Republican Congress has passed a $1.5 trillion tax cut, potentially raising the deficit — at least in the short term — the Tea Party (what remains of it) has to ask itself whether this is really the outcome it envisioned, and what to do going forward.

Put bluntly: how can a movement that campaigned on balancing the budget and paying down the debt tolerate a massive tax cut that is only going to be followed by demands for more federal spending?

If the Tea Party movement was not, as its critics suggested, merely the tool of billionaire right-wing donors, the question must be taken seriously. And Republicans must be challenged to tackle the deficit and the debt before the Democrats seize those issues.

It is, of course, laughable that Democrats who cheered President Barack Obama as he doubled the national debt now purport to criticize Republicans over deficits. But people have short memories.

One answer is that the Tea Party always supported tax cuts — particularly those tax cuts that might, in fact, create new revenues for the federal government.

I can say this on the basis of personal experience, when I ran as a Tea Party-backed Republican for Congress in Illinois in 2010. Our campaign specifically supported lowering the U.S. corporate tax rate, precisely on the argument that doing so would create more investment and hence more revenue.

But the missing piece, thus far, of the Republican agenda is spending cuts. Practically speaking, the only cuts the Tea Party managed to achieve were the sequesters in the Budget Control Act of 2011. The sequester cuts were successful in reducing government spending for two consecutive years for the first time since the Korean War. But the sequester caps were broken in 2015, and President Trump wants to eliminate the defense sequester entirely.

That may be entirely appropriate, given the urgent need to build up our military again. And the White House wants Congress to pass an infrastructure spending bill — one that will actually fund the “shovel-ready” projects that the Obama administration had promised, but failed, to provide. Defense and infrastructure are the two things on which the federal government should be spending money.

The problem is that there is no plan to cut spending elsewhere.

Add to that the fact that President Trump promised voters not to touch Social Security and Medicare, sending Paul Ryan’s carefully calculated reform proposals to the bottom of the pile.

The only option left is to cut discretionary domestic spending, which no government — not even Ronald Reagan’s — has succeeded in doing, because each item in the discretionary budget is defended by an army of activists and lobbyists ready to cause major political damage.

Without spending cuts, there are only three ways to deal with persistent national debt, as economic historian Niall Ferguson has warned. One is inflation, through printing money, which reduces the value of the debt — but also cuts the value of workers’ paychecks. Another is default — simply refusing to pay, which is something that has arguably already happened in Puerto Rico.

The other, and hardest, option is growth — rapid, sustained economic growth.

So all the Tea Party can do is hope that the tax cuts deliver the kind of economic growth that President Trump has promised — and which, in fairness, many economists now believe is possible. With faster economic growth comes greater tax revenues. Once those arrive, fiscal conservatives can push for spending restraint.

But the time to lay the political foundations for fiscal restraint is now, not several years from now, when Congress may be in other hands.

Joel B. Pollak is Senior Editor-at-Large at Breitbart News. He was named one of the “most influential” people in news media in 2016. He is the co-author of How Trump Won: The Inside Story of a Revolution, is available from Regnery. Follow him on Twitter at @joelpollak.