The Delicate Deficit Dance That Will Define Biden’s Presidency

It was fascinating to watch Treasury-secretary designate Janet Yellenand several Republican members of the Senate Finance Committee dance their delicate deficit dance at Yellen’s confirmation hearing yesterday.

For her part, Yellen had to pitch President Biden’s willingness to “act big” with substantial new spending programs that would add trillions of dollars to the $20 trillion national debt. But, at the same time, the former chair of the Federal Reserve Board acknowledged the importance of long-term fiscal sustainability. As she told one senator, she’d be a “voice of fiscal sanity” for the Biden presidency.

A two-step

GOP senators had to manage their own two-step. As Republicans often do when they are not in power, they warned about the effects of high deficits on future generations. With Biden about to become president, they were sending an unsubtle message about their reluctance to support his big dollar spending programs.

Yet, they supported the 2017 Tax Cuts and Jobs Act that added nearly $2 trillion to the deficit over 10 years, mostly by cutting taxes for high-income households and corporations at a time when the economy was relatively robust. And yesterday, even as they expressed grave concern for high deficits, they fiercely defended the TCJA, especially its corporate tax cuts.

Thus, they were left with two arguments:

The first was to renew their long-standing calls for scaling back Social Security and Medicare for a growing population of older adults. Yet, such cries sound hollow for a party that was unwilling to pursue that agenda even when it controlled Congress and the White House in 2017-2018.