海角大神

Do big budget deficits matter anymore?

That鈥檚 a big question lurking beneath the surface as President Trump鈥檚 new tax-cut proposals are rolling into public view.

Mr. Trump鈥檚 election campaign included both pitches for tax cuts and pledges to tame federal debt. As he has settled into the White House, however, the talk has increasingly shifted toward tax cuts and away from tax reform that holds revenues steady (as would be needed to make tax changes permanent by a majority vote in Congress).聽

It鈥檚 not yet a detailed plan, but Treasury Secretary Steven Mnuchin set goals and principles Wednesday that include slashing corporate tax rates from 35 percent of profits to 15 percent, and cutting individual taxes as well.

This isn鈥檛 just a pivot for the Trump team. Many fiscal-policy experts say it rests within a larger pattern: Politicians, and to some extent the economists who advise them, aren鈥檛 as focused as they used to be on restraining government debt and deficits.

That doesn鈥檛 mean Secretary Mnuchin paid no lip service to the goal of fiscal discipline, or that Congress will ignore that value in its deliberations. But at a time when polls suggest the public still sees deficits as an important problem, lawmakers face a test of whether they鈥檒l put the goal of short-term fiscal stimulus ahead of long-term fiscal discipline.

鈥淭he economy is doing reasonably well,鈥� says Roberton Williams, an expert at the nonpartisan Tax Policy Center in Washington. America got a boost from spending 鈥渓ike crazy when the economy was bad,鈥� he says, but in recent times 鈥渨e've never quite figured out that second step鈥� of getting back on a balanced track during good times.

鈥淲e don鈥檛 fill back up that rainy day fund,鈥� he says, drawing a metaphor from reserves that many states have created as cushions against recession. 鈥淪tates are much better at that.鈥�

It may be a false sense of security. Although federal deficits surged during and after the Great Recession of 2007 to 2009, they have actually fallen sharply since then and are now as a share of the US economy.

But even without tax cuts, that annual gap between revenue and spending appears poised to rise again 鈥� and to drive a parallel from this decade into the future, as obligations for both health-care entitlements and interest on the debt soar.

A key shift

It鈥檚 not that politicians aren鈥檛 aware of the problem. And some are actively seeking to address it.

But fiscal discipline isn鈥檛 viewed as an imperative the way it once more generally was.

Bill White, a former Houston mayor who researched and wrote a , says a key shift happened in the early 2000s under George W. Bush. President Bush pushed for big tax cuts in 2003 even though the nation was at war, the economy wasn鈥檛 in recession, and nonpartisan forecasts showed widening deficits as a result.

Republican strategists had taken note: Bush鈥檚 father had been voted out of the White House in 1992 after raising taxes despite a 鈥渘o new taxes鈥� pledge.

And Mr. White says Democrats have shared the blame of Washington鈥檚 shifting fiscal mores. One bipartisan move under Bush was the funding of a new entitlement 鈥� prescription-drug benefits under Medicare 鈥� without paying for it.

It鈥檚 not just politics behind the shift, either. In the wake of the Great Recession, liberal economists have argued the case that fiscal stimulus (jargon for federal spending or tax cuts that can give a short-term boost to the economy) in some nonrecession times. (But for the record: Those economists generally are skeptical that Trump鈥檚 tax cuts would raise growth meaningfully.)

A streak of prudence

All this is different from the past, says White.

鈥淭he fiscal tradition [of America] recognized the link between decisions on spending and decisions on taxes,鈥� he says.

Conservatives believed that having a visible price tag (taxes) would help put a check on public spending, while progressives saw the need for sustainable funding for a social safety net.

And if Americans aren鈥檛 fans of tax hikes, some polls suggest the public has a streak of fiscal prudence that has held pretty steady.

Looking at government, they鈥檝e strongly in polls spanning from 1940 to the early 2000s, according to the Roper Center for Public Opinion Research. And in their personal lives, Americans increasingly see to spending (at least as an ideal), Gallup surveys find.

Although economists often aren鈥檛 fans of strict budgetary balance, they agree on the dangers that too much debt can bring 鈥� potentially higher interest rates or a financial panic over default risks.

At the same time, many economists and ordinary Americans say the time is ripe for simplifying the tax system and seeking to make it promote greater economic growth and fairness.

Trump's tax cuts

Those goals took center stage as Mnuchin and Gary Cohn, director of the National Economic Council,聽announced Trump鈥檚 proposals Wednesday.

鈥淢aking the economy work better for all the American people鈥� is the president鈥檚 goal, Mr. Cohn said at a White House briefing.

The proposal includes paring the number of individual tax brackets to just three, giving businesses a 鈥渕assive鈥� tax cut, and eliminating the estate tax.

Voters rarely complain about a cut in their taxes. In April Gallup polling, 51 percent of respondents called their taxes 鈥渢oo high.鈥� Yet people aren鈥檛 necessarily crying out for tax cuts: Some 61 percent in the same poll call what they owe 鈥渇air.鈥� And two-thirds say businesses pay too little in taxes, not too much.

US stock prices were trading at or near record highs Wednesday afternoon as details of the Trump proposal for business taxes were coming into focus.

Regarding impacts on the budget deficit, Mnuchin said, 鈥渨e are working with the House and Senate on all the details鈥� to get the legislation passed. In recent days he has also suggested that economic growth would allow a tax cut to pay for itself 鈥� a notion disputed by economists.

Republicans in Congress range from some focused on reining in deficits (notably House Speaker Paul Ryan) to others more open to tax cuts that aren鈥檛 paid for with reductions in spending.

鈥婽he legislative outlook is uncertain, but longer term White says he's hopeful that forces of fiscal restraint 鈥� which he thinks have served the nation well in the past 鈥� can revive.

鈥淚 think there could be a聽backlash among small-government聽conservatives to the Trump programs," he says. "And I聽think that many people聽who are聽Democrats understand that rising interest聽costs ...聽are crowding out the possibility for investing more" in things like聽education and infrastructure.