Former Vice President Dick Cheney lurks in the Old Senate Chamber on Capitol Hill. (AP Photo/Charles Dharapak)
After the Republicans gained control of the US Senate in the 2002 election, giving them across-the-board dominance of the legislative and executive branches of the federal government, the key players in the administration of President George W. Bush gathered to discuss fiscal policy.
Vice President Dick Cheney wanted to cut taxes for the rich.
Treasury Secretary Paul O’Neill was skeptical. According to his recounting of the incident in Ron Suskind’s brilliant book, The Price of Loyalty, O’Neill expressed concern that a trillion dollars worth of tax cuts had already been enacted. O’Neill was no liberal. He liked tax cuts. But with the country rebuilding from the economic slowdown after the 9/11 attacks, and with a war being fought in Afghanistan and another on the horizon in Iraq, O’Neill noted that the budget deficit was increasing. And he argued against Cheney’s position, suggesting that another tax cut was unnecessary and unwise.
“You know, Paul, Reagan proved that deficits don’t matter,” said the vice president. “We won the mid-term elections, this is our due.”
O’Neill was, according to Suskind, left speechless.
But Cheney wasn’t done. He and the Bush-Cheney administration that he served as CEO piled up deficits and debts. Indeed, as The New York Times has well noted, “Under Mr. Bush, tax cuts and war spending were the biggest policy drivers of the swing from projected surpluses to deficits from 2002 to 2009. Budget estimates that didn’t foresee the recessions in 2001 and in 2008 and 2009 also contributed to deficits. Mr. Obama’s policies, taken out to 2017, add to deficits, but not by nearly as much.”
Now, a decade later, Cheney’s party is arguing that deficits matter. A lot. House Republicans are so fretful that they are willing to steer the country toward chaos by refusing the compromises that would avert across-the-board sequester cuts. Other Republicans uncomfortable with sequestration are pushing an austerity agenda that’s better organized than the sequester, but potentially even more painful.
The fact is that deficits are relevant.
So are debts.
Nations must treat them seriously.
But nations do not have to fear deficits, any more than Dick Cheney did on that day in the fall of 2002. And in that sense Cheney was right: deficits don’t matter if they are employed for a purpose. Cheney’s purpose—cutting taxes for the rich—was dubious. But stimulating the economy, expanding access to healthcare, funding state and local governments and protecting seniors on Social Security… these are good, and necessary, purposes.