Moynihan was right: The GOP tax giveaway will lead to safety net cuts

When Congress passed a massive tax giveaway to the richest that will add at least $1 trillion to America’s debt late last year, GOP lawmakers were remarkably candid about the next step: cutting the safety net for hundreds of millions of Americans by going after Social Security, Medicare and Medicaid benefits.

As Sen. Marco Rubio (R-Fla.) noted recently when asked about the huge debt the tax bill creates, he said Republicans plan on “instituting structural changes to Social Security and Medicare for the future” to pay for their tax cuts. House Speaker Paul Ryan (R-Wis.) agreed: “We’re going to have to get back next year at entitlement reform, which is how you tackle the debt and the deficit,” he said in December.

This unusual candor may owe something to history.

{mosads}In many quarters of Washington, the connection between the GOP’s history of reckless tax cuts to the rich and desire to slash the social safety net has been an open secret for almost three decades, thanks largely to former New York Sen. Daniel Patrick Moynihan (D).

In the 1980s, as U.S. debt ballooned because of President Reagan’s tax cuts and defense spending increases. Moynihan maintained that piling up debt to unsustainable levels was part of a deliberate strategy by Republicans, providing them an excuse to then cut the social safety net. 

By many accounts, Moynihan developed the theory after private conversations with David Stockman, Reagan’s powerful first budget director and a former Moynihan student at Harvard, during which Stockman told Moynihan that accumulating large deficits “gives you an argument for cutting back programs that really weren’t desired.”

The Reagan-era debt and subsequent responses to it have powerfully shaped the politics and economic policy of America ever since. Reagan’s successor, President G.H.W. Bush, was so concerned about the debt that he broke his own “read my lips” no-new-tax pledge, making a 1990 debt-cutting deal with congressional Democrats, actions that many believe helped cost Bush reelection in 1992.

The lesson for Republicans was clear: run up debt recklessly with tax cuts for the wealthy, but never attempt to pay for them. And Republicans haven’t since, becoming a party that votes only to tax cuts, never to increase them.

Ross Perot’s candidacy in 1992, premised entirely on debt reduction, split Republican voters and helped elect Bill Clinton. President Clinton further cut the Reagan red ink through major debt reduction legislation in the 1993, with Moynihan himself playing a key role as chairman of the tax-writing Finance Committee. Not a single Republican voted for that deficit-cutting bill at any stage of its consideration, even though it was supported by Federal Reserve Chair Alan Greenspan. Yet that Democratic 1993 bill eliminated the Reagan debt, created the best economy in decades in terms of employment and wealth creation for Americans of all income levels, and led to first U.S. budget surpluses in more than 50 years.

This pattern of GOP tax giveaways to the rich accruing massive debt, and then Democrats cutting the deficits, has continued ever since. President George W. Bush’s two deep tax cuts in 2001 and 2003 — mostly to the richest Americans — wiped out the Clinton surplus and brought large new debt.

Not surprisingly, deficit reduction became a major theme in the Obama presidency, forcing expiration of the Bush tax cuts in 2013. More systemic attempts at long-term debt reduction dominated economic policy debates under Barack Obama. Two leading efforts, one by former Sen. Alan Simpson and ex-Clinton chief of staff Erskine Bowles, and another (with whom I worked) by former Sen. Pete Domenici and ex-OMB Director Alice Rivlin proposed widely-hailed plans to cut long-term debt responsibly. Obama indicated willingness to back such proposals, but Republicans in Congress refused to support them.

Yet for all this history, no tax bill has been as reckless in terms of exacerbating U.S. economic inequality and growing the debt and as the one Republicans passed late last year. The bill vastly benefits America’s richest 1 percent, who already control 40 percent of all wealth, and actually raises taxes on many middle- and lower-income Americans. No wonder it is widely unpopular with the public. A recent Quinnipiac poll finds that only 29 percent of Americans support it. 

Now, as Democrats prepare for the 2018 election, they should not fall into trap of focusing solely on debt reduction. Instead, Democrats must warn American voters that the trillions Republicans will give away to the super rich will be made up by cutting Social Security and Medicare for the elderly, and Medicaid and other funding for the working class and middle class.

In 2018, Democrats should run on a specific plan to repeal the Republicans tax- and social benefit-cutting nightmare, replacing it with fiscally responsible tax reductions for the middle class and small businesses. That’s how Democrats can take back the House, and end 30 years of Republican tax tyranny that Pat Moynihan so accurately predicted.

Paul Bledsoe is a strategic adviser at the Progressive Policy Institute. He served on the staff of the Senate Finance Committee under the Chairmanship of Sen. Daniel Patrick Moynihan. Follow him on Twitter @paulbledsoe