The Reagan-Era Roots of Democratic Budget Appeasement

The Reagan-Era Roots of Democratic Budget Appeasement

The Reagan-Era Roots of Democratic Budget Appeasement

How the Center on Budget Policy and Priorities has conducted budget negotiations in a defensive crouch 


Congress’s ongoing debt ceiling standoff has left the Democratic base asking a familiar question: Why are the party’s leaders such absolute cowards?

Republican House Speaker Kevin McCarthy is clearly not a good-faith negotiator, so President Joe Biden, Senate majority leader Chuck Schumer, and others shouldn’t be expecting to get all that much out of the protracted process of haggling with him over the House GOP’s budget-cutting demands. But haggling is not their only viable tactic. Congressional progressives have strongly endorsed invoking the 14th Amendment, which requires that federal debts “shall not be questioned,” to argue that the debt ceiling itself (a relic from World War I with no equivalent in any other democratic country) is unconstitutional. Other options include the famous trillion-dollar platinum coin and the “trilemma” position, which argues that without a deal that prevents the White House from neglecting the core constitutional requirement of maintaining the government in working order, breaching the debt ceiling is the president’s least illegal option.

All these responses boil down to one simple dictum: If one isn’t negotiating with a good-faith partner, one shouldn’t play the game. And yet Biden has refused to go around McCarthy. He already offered a devastating two-year freeze on federal spending which—surprise!—McCarthy rejected in the effort to press for still more draconian spending cuts.

For Democrats of Biden’s generation, cowardice like this always comes back to the traumas of the Reagan revolution. In 1980, Ronald Reagan—the most extreme conservative candidate of his time—won a landslide presidential victory, taking down a net total of 12 Democratic senators in the process. This demolished Congress’s core votes for big-government liberalism. The next year, Federal Reserve Chair Paul Volcker, a Democratic appointee, began a series of punishing rate hikes that would ultimately destroy American organized labor.

These traumatic political shifts convinced then-up-and-comers like Biden and Schumer that the United States was, essentially and immutably, a center-right country. Any efforts at expanding social democracy would have to be gradual, limited, and structured around the moral assumptions of capitalism and conservatism, for fear of stoking another backlash on the scale of the 1980 debacle. It didn’t hurt that these New Democrats, as they came to call themselves, were Cold War babies, already inclined to associate markets with freedom and socialism with tyranny.

Policy intellectuals were also thinking along these lines. In 1981, the new Reagan administration cut $35 billion of federal spending, nearly 70 percent of which came out of programs for the poor. Liberals were mortified, but the electorate had just refuted everything they stood for, and polling showedthe public broadly supported Reagan’s plan. How were they supposed to fight back when they had no influence in Congress or the public?

One answer came later that year, when the liberal Field Foundation funded Bob Greenstein, a former bureaucrat who administered anti-hunger programs, to try to prevent Reagan’s cuts to food stamps. Greenstein called Republican Senator Bob Dole, a conservative, but one who cared about fighting hunger. Greenstein gave Dole a breezy two-page briefing on the food stamp proposal, and within days, Dole got the Reagan administration to reduce its proposed cuts.

Greenstein hadn’t saved food stamps, much less expanded the program. But he had stanched some of the bleeding, and in the early Reagan days, that was a big win for liberals. The Field Foundation buffed up its funding, allowing Greenstein to develop what would become the Center on Budget and Policy Priorities (CBPP).

Ever since, the CBPP has been the go-to think tank for congressional liberals during budget negotiations. Greenstein, who retired in 2021, earned rapturous praise from elected officials and policy wonks as one of Washington’s best lobbyists. In 2004, at the peak of its power, Greenstein’s rivals at the libertarian Cato Institute said, “All the Democratic candidates [for president] were attacking the Bush tax cuts, and they have to get their data and viewpoints from somewhere. They get it from the Center. It’s a very effective group.”

In a 2015 paper, historian Suzanne Kahn attributed the CBPP’s success to a few core factors: its rigorous, timely, and readable briefings on economic data; its bipartisan approach to lobbying; its self-reflective culture; and its deep knowledge of the details of the budget process.

These factors reflect much of Democratic strategy on economic policy for the last 40 years: If you’re trying to pass a bill, focus on the data and the minutiae, not the message to the voters. Always work with Republicans, and always compromise in pursuit of Republican votes. It’s all about the inside game.

The implicit assumption behind this strategy is that when it comes to economics, public support is a lost cause. Voters are allegedly too unsophisticated and reactionary to understand how the government could help them. On the economy, the best one can hope for is to essentially trick the voters into passively endorsing your agenda: working behind closed doors with fellow elites to tinker at the margins in ways people won’t consciously notice. Don’t write welfare checks; instead, offer a refundable tax credit. Don’t try for universal healthcare; just add more options to existing health insurance markets. Save what programs you can. Don’t get cocky. Never risk a backlash.

For the liberals traumatized by the Reagan revolution, this outlook makes sense: No cost is too great to prevent another 1980. But 1980 was more than four decades ago. It’s a different country now, with a different electorate, facing different problems, and demanding different solutions. Does the CBPP’s constant defensive crouch still make sense?

When it comes to the budget, Democrats have cut the same core deal for four decades: Republicans get to hollow out the federal government, if in exchange, Democrats get to keep and expand a patchwork social safety net.

This outcome follows naturally from the CBPP’s starting assumptions. If Democrats assume that the median voter agrees with Reagan that “government is the problem,” then agency capacity and civil service resources are the dictionary definition of hills not worth dying upon.

Moreover, the CBPP is exclusively focused on safety net programs and tax policy. There’s nothing wrong with having those as institutional priorities; the safety net and taxes are both crucial issues, and the CBPP has admirable knowledge of both.

But other budgetary issues matter too. Indeed, four decades of evidence has demonstrated the obvious: Safety net programs aren’t very effective if there’s no one left in the government to administer them.

Take the Department of Housing and Urban Development, which lost half of its full-time staff between 1991 and 2019. In 2019, a congressional report found that only 2 percent of housing discrimination reports to HUD result in charges being filed. In fact, 57 percent of reports aren’t even investigated within 100 days, contrary to Fair Housing Act requirements. HUD vouchers, flawed as they are, offer a crucial service for the ever-growing number of housing-insecure Americans. But there’s simply not enough staff to maintain necessary standards. This is how you get cases like Serenity Towers Apartments, a HUD-subsidized retirement home in Memphis, Tenn., which had no hot water, no air-conditioning, bedbugs, mold, broken elevators, unfair evictions … and still passed its HUD inspection last year.

Failures like these feed the death loop for federal Programs: People feel betrayed by government ineffectiveness, conservatives channel that anger into slashing federal spending, those cuts make government even less effective, and the cycle repeats.

Contrast this with the Internal Revenue Service’s overdue funding bump in the Inflation Reduction Act after last year’s tax filing disaster. Customer service and the volume of completed IRS work have improved dramatically. The IRS is also piloting an online free-file system which could let Earned Income Tax Credit recipients enjoy their whole benefit without tax preparers taking a 13—22 percent cut. The tax credit–ization of American welfare, itself a New Democrat effort to make social programs less visible to voters, has made the IRS one of the most important agencies for aid to the poor.

All of this sorely needed agency reform serves to underline the essential point: Social safety net programs and government capacity are inextricably linked. You need both if you want to meaningfully protect vulnerable Americans.

Greenstein, and the Democrats he’s advised, would likely respond that they’ve had to take the deals they could by working with the Congresses they had over the past four decades of neoliberal consensus in Washington.

Indeed, Greenstein is often noted for his strong negotiating skills with moderate Republicans. In 2001, when other anti-poverty organizations wanted to push for a fully refundable child tax credit, Greenstein secured partial refundability by cutting a deal with Senators Olympia Snowe of Maine and Jim Jeffords of Vermont.

How was he so good at negotiating? To begin with, Greenstein’s own views weren’t far off from those of these moderate Republicans. Greenstein told Commonwealth in 2004, “I’m a fiscal conservative, but I remain a liberal on the role of the federal government. To me, the two fit together very well. If you’re not a fiscal conservative, then there’s not going to be any money to do the things we need to do to be a just and fair society.”

Even more crucial was Greenstein’s strictly utilitarian theory of politics. In a 2022 feature, he told Vox that “if you have the ability to win advances that make the lives of millions of poor people and poor children better, then it’s verboten to leave them on the table, unless leaving them on the table means that in not-too-long order you come back and get something bigger.“

But what if you don’t have the ability to win those advances? What if this centrist-utilitarian outlook is actually naive, and easy to exploit?

The CBPP’s political strategies reflected Greenstein’s beliefs. The group argued against many of George W. Bush’s budgets not on their economic merits but because they’d add to the federal deficit. Greenstein supported some benefit cuts to Social Security, if the program’s core components could be saved via tax hikes. And he said he’d support switching Social Security calculations to a “chained” Consumer Price Index, if in exchange, Congress passed a comprehensive deficit-curbing plan—a switch that deeply harmed fixed-income seniors.

In none of these cases did Republicans uphold their end of the bargain. Playing the deficit hawk was anathema to the tax-loathing Bush administration—Vice President Dick Cheney famously said, “Reagan proved deficits don’t matter.” Republicans have never endorsed tax increases to protect any part of Social Security. And centrist hopes of a “grand bargain” on the deficit, for which Greenstein was willing to trade the old CPI calculations, doomed much of Barack Obama’s fiscal policy.

Today, the chief Republican budget negotiator is McCarthy, an egomaniac with no mind for policy. He has conceded nothing and is desperate to protect his speakership from the hard-core Trumpists in the Freedom Caucus, who are even more spiteful toward the poor and disinterested in lawmaking than himself. Any deal which he would accept all but requires making life catastrophically worse for the worst-off Americans. By contrast, using tools like the 14th Amendment rebalances the bargaining table significantly. Even hard-line Republican Senator Josh Hawley has conceded that the 14th Amendment all but neutralizes his party’s negotiating strategy. If the CBPP’s primary goal is to protect the poor, then these kinds of tools don’t merely represent a good tactical opportunity. They’re the only current path to success.

Yet the CBPP refuses to even acknowledge that these are options. Instead, the think tank has pleaded for Republicans to “stop using [the] debt ceiling as a bargaining chip” because it’s “irresponsible” and “doesn’t need to be a partisan issue.” To the best of my knowledge, they have written nothing acknowledging the 14th Amendment, the trillion-dollar coin, the trilemma, or any other option besides negotiation.

This suggests the existence of another, unstated goal that the CBPP prioritizes—the maintenance of elite political decorum.

If one never tries to build popular support for a coherent vision of social democracy, then decorum and norms are one’s only forms of credibility. But once Republicans stop caring about that, Democrats have nothing left. The problem is not, as CBPP and Biden imply, that McCarthy simply does not realize that he is being irresponsible and partisan. He is perfectly aware, and indeed proud, of both facts. Moreover, if he refused to be irresponsible and partisan, he’d immediately lose his speakership.

The only viable counterplays for Democrats are to surrender, or to change the terms of the negotiation. Only one of those options protects the most vulnerable.

Since 2016, Democratic political operatives have screamed at one another nonstop, debating how far left the median voter has moved. It’s clear to me that Democrats could win on policies and messaging that unabashedly comfort the afflicted and afflict the comfortable. Yet, as Greenstein and the New Democrats counsel, if such a project failed, the political costs could be another 1980.

But if gradualism, compromise, and trusting the insiders was supposed to head off a reactionary right-wing backlash, then what do you call the election of Donald Trump?

Hillary Clinton ran in 2016 as the consummate centrist insider. She lost badly, bringing both houses of Congress down with her. Four years later, Biden won the Democratic primary through key endorsements and appeals to “electability,” and won the general election mainly by emphasizing that he was not Trump. Neither of these strategies tell us much about voter appetite for big social-democratic policies.

But Biden’s most popular economic policies are not the macroeconomic behemoths of the Inflation Reduction Act and Bipartisan Infrastructure Law. What the public likes are universal stimulus checks, student debt forgiveness, and banning non-compete clauses. These are all simple, universalist big-government measures aimed at stepping up for the little guy. Moreover, Biden’s message in the shockingly successful 2022 midterms—and, for what it’s worth, the whole point of the White House–endorsed “Dark Brandon” meme—was simple: Republicans are extremists, and Democrats will stand up to them.

Biden, and the rest of the post-Reagan Democratic establishment, want badly to restore the norms of the Washington they knew. But they cannot will right-wing extremism out of existence. The post-Trump “epiphany” Biden predicted in 2019 has not happened, and will not happen. Backroom deals will not save us. If Biden, the CBPP, and others genuinely want to protect the country from Trumpism, then it’s time to change the norms that permitted Trump’s rise in the first place.

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