As some deficit hawks go around in circles, the new debt policy is exposed

And while large deficits may have once fueled fears about inflation – because too many dollars chased too few commodities – the price gains have been too small for comfort for years. Add to that the emergency needs brought on by the pandemic, and even the Fed chief, who had long warned about the country’s indebtedness, said it was a reasonable time to spend the money.

“As a general rule, it’s important to be on a sustainable fiscal path,” Fed Chairman Jerome H. Powell, a Republican, said at a press conference last month. “In my way of thinking and that of many others, the time to focus on this is when the economy is strong and unemployment is low and taxes, you know, are pouring in. “

The political overhaul of the deficit – especially in times of economic weakness – is a radical departure from previous eras. In the 1990s, President Bill Clinton highlighted his success in reducing the deficit and creating a budget surplus as a political achievement for Democrats. Concerns about excessive federal spending and the national debt also helped fuel the rise of the Tea Party in the late 2000s, spawning a new breed of Republicans who succeeded in putting in place austere spending caps that continued. to torment lawmakers. But after 2014, Republicans joined with Democrats in waiving those caps, and a bipartisan, bicameral agreement reached in 2019 guarantees their expiration this year.

But even as some economists and politicians become more comfortable with high levels of public debt, others warn that they could create vulnerabilities in the future. If interest rates rise, it could cost the government more to keep up with those payments each year – either leaving less for other types of spending, or forcing Congress to rack up ever-growing debt to keep pace.

Republicans have often voiced loud concerns about the deficit, adopting policies that will make it bigger. For example, the tax cuts that authorized Congress earlier in Mr. Trump’s administration are expected to increase the deficit by $ 1.9 trillion over the decade through 2028, according to Congressional Budget analysis Office.

But the party has generally used fiscal responsibility to block larger spending programs.

“Republicans are happy to run the deficit to cut taxes, but are not happy to build the deficit to spend more,” said Michael Strain, director of economic policy studies at the American Enterprise Institute.