"Fiscally Conservative"

"Fiscally Conservative"

At an annual family get-together, in Baltimore, a "conservative" 2nd cousin, one who typically votes Republican (including voting for Bush in 2004, but to his credit, for Gore in 2000), said to me "I’m fiscally conservative," and then added something like "on social issues I’m a moderate" or perhaps he even said "a liberal."

I don’t know what social issues he’s moderate on--perhaps a woman’s right to choose, perhaps the environment, perhaps Social Security and medicaid (for the poor) or medicare (for older people). Perhaps others.

But it is the first part of his statement I want to address–being "fiscally moderate." This can, of course, mean a number of things, but I think the most obvious is that you don’t like a government that runs deficits. If this is what people mean when they say this, then they should be voting Democratic. After World War II, there were only two major increases in the National Debt. There was the Reagan surge, causes by the skewed tax cut (justified by the increase in GDP, and therefore in government revenues, that would result in a balanced budget by 2004). This argument was absurd on the face of it. The economy would have had to increase at a pace it absolutely could not realize, over the next three years, to achieve the balanced budget the (thoroughly and near-universally rejected) theory of supply side economics predicted. The deficits of course kept rising through the Reagan years and Bush 1's term as well.

The second surge–obviously I like this word of manipulation, at least concerning Iraq–occurred under Bush 2 and primarily happened because of his even more skewed tax cut. (By skewed, I am referring to the disproportionate share of the cut given to the upper 5% or upper 1%.) Both of these unprecedented increases in the national debt sandwiched the Clinton years, where at first the deficits were reduced, and for the last three years or so, a huge surplus was achieved. The reduced deficits were initially caused by Clinton’s tax increase, designed to appease Robert Rubin who said businesses will only invest if the deficit is reduced. The taxes, with two very minor exceptions, were levied on the well-to-do. (Republicans in both houses of Congress voted unanimously against the increase and Republican leaders wrongly predicted a disastrous recession.) After a slow start, the economy soon boomed--and the endless and huge Federal deficit turned into an unprecedented surplus--partly perhaps for the Rubin reason or maybe, independent of his argument, because the dot-com boom "happened" and brought full employment (and therefore greater government tax receipts) as well as short term capital gains from the bubble (which were taxed normally).

Perhaps being fiscally conservative means you don’t overspend, say, on armaments. In this case, both parties have much to answer for–Kennedy in 1961 and Reagan in 1981. Or perhaps it means, more simply, the federal government simply doesn’t spend very much on anything. But, but, and one more, but. Eisenhower, who courageously reduced military spending by about 30% after the Korean War ended, nonetheless felt that America, if it was to be economically viable, had to have an Interstate Highway System. So he offers one, but then to cover his conservative ass, says it was needed for NATIONAL DEFENSE, the all-purpose excuse.

And today, even conservatives, or many of them, starting with Ben Stein, who writes regularly for the Times (someone who is usually hard to take) and Harvard economists, Martin Feldstein and Gregory Mankiw, (the former was chairman of Reagan’s Council of Economic Advisers while the latter held the same position for W) are in favor of a huge fiscal stimulus, the deficit be damned.

Add to the various arguments the fact that both the stock market has done better under Democrats and average family income, adjusted for inflation, has done better under Democrats, why would conservatives go on and on and on about being fiscally conservative?

Here is my answer. They are not really interested in this issue at all. It’s a cover up. What they are interested in is that government shouldn’t hurt them economically with taxes or hurt them with regulations that are in the public interest, such as on the environment or the health of workers. But you can’t argue this so easily (and sound humane). So they use the nice-sounding "I am a fiscal conservative" for selfish personal reasons, which have nothing to do with appropriate fiscal policies. (2nd cousin, if you or your wife reads this, please don’t take it personally. You did vote for Gore and that shows you’re an exception, of sorts.)