The Daily - Wednesday, Feb. 14, 2018

Episode Date: February 14, 2018

As a candidate, Donald J. Trump was very critical of the size of the national debt. As president, he has proposed a budget that would add $7 trillion to the federal deficit over the next decade. Republicans are saying nothing. Guest: Jim Tankersley, who covers taxes and the economy for The New York Times. For more information on today’s episode, visit nytimes.com/thedaily.

From The New York Times, I'm Michael Barbaro. This is The Daily. Today, President Trump's new budget proposal would add trillions of dollars to the federal deficit, and Republicans aren't talking about it. Why no one should be surprised. It's Wednesday, February 14th. We're a country that has $19 trillion in debt.

We're in trouble. As a candidate, Donald Trump was very critical of the size of the national debt. Jim Tankersley covers taxes and the economy for The Times. But the fact is, we're at 19 trillion. We owe 19 trillion. So we have 19 trillion in debt. We have to get rid of it. We have to start at least knocking the heck out of it. 20 trillion dollars. 20 trillion. We owe 20 trillion dollars. Nobody even knows what it means. 20 trillion. We're a poor country. We're a debtor nation.

And very much cast it as sort of a symbol of the decline of America. We just can't go on like this. We've been mismanaged, we've been misrun. We don't know what the hell we're doing. By the way, when you owe 20 trillion, wouldn't it be really nice if you did have somebody that understood debt? And Donald Trump was going to be well positioned to take care of it. Boy, am I good at solving debt problems. Nobody can solve it like me. One moment he even promised in an interview with the Washington Post that he would pay it off entirely if he was president for eight years. And then what happens when Trump takes office? Donald Trump takes office and it doesn't sound like President Trump is remotely concerned about deficit spending.

Surprise, surprise, the United States keeps adding to the debt. In his first year in office, Donald Trump is going to increase the national debt. He spends money, just like every president before him, and in this case, more than he is bringing in. And then the president pushes a tax bill through the Congress, which he signs in December. Many economists are challenging this as a magic wand of growth, saying the cuts could increase the national debt by trillions. Which will add at least a trillion dollars to deficits, depending on which outside estimate you believe. The president's 2019 budget was delivered to the House Budget Committee today. And beyond all that, after he's already done a lot in his first year to add to the debt, he proposes a budget which foresees next year a trillion dollar deficit almost,

which is way higher than the end of the Obama years. In all, it would add a trillion dollars to the deficit. Seeking huge spending increases without even a pretense to balance the books. Seeking huge spending increases without even a pretense to balance the books. And an additional $7 trillion added to the debt over the next 10 years. And that is based on incredibly optimistic economic assumptions, which probably won't come true. Meaning that the debt could be even bigger. Yeah, that means that we'll probably get even more debt than he is forecasting.

And Jim, I have a sense of what these words we're using refer to, the national debt and the deficit. But what exactly do these two words mean? And what are Trump's proposals doing to both of them? So the deficit is the difference between the amount of money that the government lays out every year and the amount of money it takes in for taxes. And that deficit needs to be filled some way. You have to be able to pay your bills.

So the government borrows the money to pay that deficit. And over time, the amount of money that the government has borrowed piles up. And voila, that's the debt. So just to be clear, deficits lead to debt. Absolutely. And there's really two ways you can bring down a deficit. One is you can raise taxes. You can bring in more money, which will cover the cost of all your spending.

The other is you can cut spending. The big things we spend money on are the military or social safety net programs like Medicare and Social Security. President Trump is actually spending more than President Obama was at the end of his second term, and he's cut taxes. So he's not really doing either. So to summarize this, this new president who had campaigned so outspokenly against both deficits and what deficits create, national debt, is making both of those bigger, which feels surprising given that he is a Republican. It feels surprising, but it maybe shouldn't be,

given the history over the last couple of decades of Republican presidents. The federal deficit is outrageous. The federal deficit is outrageous. For example, Ronald Reagan, 1980, takes office after having campaigned on a promise to balance the budget. And what does he do? This represents $750 billion in tax cuts over the next five years. And this is only the beginning. He cuts taxes, and deficits start to go up. And then...

The surest way to make American products more competitive is to spur innovation, enterprise, and productivity by cutting tax rates again. And he spends more in the military, and deficits go up further. And you end up with not a big paragon of fiscal responsibility, but in fact, with much more debt than when he took office. Is there any political cost to Ronald Reagan for campaigning on a message of tackling deficits and actually making those deficits bigger? There certainly was criticism of President Reagan for that. But you have to remember the way Republicans in particular think about the Reagan experience

was cutting taxes and delivering strong economic growth, which he did, and achieving a big military win, if you can call it that, over the Soviet Union at the end of the Cold War, sort of justified the borrowing in the eyes of the American public. And he didn't really get criticized for it or pay as large of a political price as you would have expected, perhaps, given the degree to which it was central to his campaign for the White House in the first place. With the Democrats now in the control of the United States Congress, both houses were facing government by gridlock in Washington Washington with spending skyrocketing out of control. So Ronald Reagan leaves office still popular and he is replaced by his vice president,

George H.W. Bush. Good legislation thrown aside for pork barrel programs and a budget deficit looming over our children's children. Who wins a fairly convincing victory and comes into office and ends up having to take a bit of a different approach on the deficit. Two years into his term, the deficit has reached what then seemed like an astounding figure of $200 billion. And Bush decides something must be done, and so he endorses a plan and eventually signs it that pairs some spending cuts with a tax increase in the name of deficit reduction. And he ends up paying a big price for this because he has broken a pledge he made to the American people. Read my lips. No new taxes.

Read his lips. No new taxes. The price that he paid was that he lost. He lost re-election. Now, it's not the only reason he lost to a surprisingly strong young upstart named Bill Clinton, but it is part of the reason is that many conservatives were demoralized with George H.W. Bush for raising taxes. Many conservatives were demoralized with George H.W. Bush for raising taxes. And this ends up being, I think, a very important lesson for future Republican candidates and presidents. And what is the lesson that Republicans take from the George H.W. Bush experience with deficits? Republicans can look at the difference between Reagan and George H.W. Bush and conclude that there is very little price to pay for deficit increases if you're a Republican president compared to tax increases, which you do absolutely pay a price for.

So George H.W. Bush loses his reelection in part because he prioritized lowering the debt, being fiscally responsible, which turns out people don't really care that much about. And so what happens to the next Republican president that comes into power? The country has prospered mightily over the past 20 years. Well, the irony is that the next Republican president who comes in, George W. Bush, doesn't really have to worry about the debt. But a lot of people feel as if they have been looking through the window at somebody else's party. In fact, he has the opposite problem.

He's inherited a budget surplus because growth has been so strong at the end of the 1990s that the government's actually taking in more tax revenue than it is spending. So this was a big fight in the 2000 campaign. The Democrat, Al Gore, wanted to take that money and put it in a lockbox for Social Security. But Bush wanted to give it back to taxpayers, as he called it, and do a big tax cut. It is time to fling those doors and windows open and invite everybody in. It is time to reward the work of people trying to enter the middle class and put some more money in their pockets at a time when they need it.

My tax reduction plan does all these things, and I hope you'll support it. He cuts taxes, and then the economy stalls out for a little bit. There's a brief recession. 9-11 happens. He ramps up spending on national security. And then finally, when President Bush does leave office after eight years, at the time, in the midst of a recession, what we're seeing is skyrocketing deficits as far as the eye can see. Jim, after everything that you've just told us, why do we keep talking about Republicans as the party of fiscal responsibility if it's not actually a central component of how Republican presidents govern? central component of how Republican presidents govern. We do it because Republicans are so vocal in talking about deficits when they're not in the White House. We're about to spend a trillion dollars of money that we don't have for the vast majority of

things in this bill that we don't need. And let me just explain. And what they've gotten very good at doing over this last few decades is using deficits defensively against possible spending expansions by Democratic presidents. I'm here to tell you tonight that our new majority will prepare to do things differently, to take a new approach that hasn't been tried in Washington before. It starts with cutting spending instead of increasing it. And in particular, in the Obama years. spending instead of increasing it. And in particular, in the Obama years. We know that since this president has been in office, well over $2 trillion of additional debt has been amassed.

Republicans found a very strong political argument in saying, Obamacare adds trillions to our deficits and to our national debt and pushes those obligations on to coming generations. Spending was too high, deficits were too high, and they used that argument to restrain the spending ambitions of the president, almost from the very beginning of his presidency. Is what you're saying that when Republicans

talk about deficits and the debt, it's really a way of saying no to spending that they just don't like. Yes, in part because what then has happened is that when they get into power in the White House, they don't follow through. seen as just a continuation of this historical trend that you've been describing, where Republicans have learned that it's good to campaign against the deficit and the debt. But once they get into power, they almost immediately shy away from doing the hard work required to actually solve the deficit and the debt. I see President Trump as a reversion to the fiscal policies of past Republican presidents such as Reagan and George W. Bush, where Republicans are, once they have the White House, willing to borrow money to cut taxes and willing to borrow money to fund more military spending.

They're willing to increase deficits for the programs they like. But there's a big difference right now between either of those presidents or President Obama and what President Trump is doing with deficits. And that difference is in each of those presidents' cases, there was a recession. And in President Trump's case, he's got a red hot, so to speak, economy, an economy that is growing faster than it has in several years since the Great Recession and where unemployment is very low. And this is the time when most economists would say you don't want to be running deficits. You want to be using that economic good fortune to be paying down the debt or paying down your deficit at least. And instead, they're hitting the accelerator on deficits in a way that we have not seen for a while in America. So if President Trump isn't under economic pressure to increase the debts, if there isn't a financial reason to do it or a war that requires lots of spending that would explain it, why is he running up the debt so much?

If you look at what it actually would take to bring down the debt or even just bring down the deficit, balance the budget, that means tax hikes or big spending cuts for programs people like. There's just no incentive to do that. then it gets very, very hard to imagine a scenario in which deficit reduction becomes a real priority of the White House and therefore of Congress because it's hard and people don't like the choices that result from it a lot of the time. Don't you remember when Republicans howled to high heaven that President Obama was spending us into the gutter, spending us into oblivion? And now Republicans are doing the same thing. And Jim, what about the rest of the Republican Party? What are they doing now that Republican President Donald Trump is increasing the national debt? A few of them are howling, like Rand Paul of Kentucky.

If you were against President Obama's deficits and now you're for the Republican deficits. Isn't that the very definition of hypocrisy? But most of them are just kind of being quiet about it. Madam President, I'm pleased to announce that our bipartisan, bicameral negotiations on defense spending and other priorities have yielded a significant agreement. We're doing this one. Why? Because we don't want to see the sequester hit the military. We have an opioids crisis in America.

Let's get on with fixing it. We think we can get pretty darn close on cancer research and getting some cures, so let's keep that going. If a Martian came to Earth in the year 2018 and heard some of these speeches from Senate Republicans, that Martian would have a hard time realizing

that the Republicans traditionally were the party of the balanced budget. Jim, at the start of our conversation, we talked about this enduring reputation that the Republican Party has for fiscal responsibility, for budget restraint. Does that still exist? That still exists. Republicans have a self-professed reputation as the party that cares about fiscal restraint. But if they still believe that deficits are bad and spending is bad, they are not acting like it right now in Washington. And it sounds from everything we've just discussed

that they haven't really acted that way for decades. With the exception of President George H.W. Bush, Republican presidents have not made a serious effort to keep the budget deficit in check for a really long time. This may sound like a very simple, maybe even stupid question, but why does it matter if a country like the United States has a lot of debt?

What's the inherent problem or is there an inherent problem with running a deficit and having debt? There are two big reasons. One is political. Americans, in general, want government to act more or less a bit like themselves or their business. That's how, want government to act more or less a bit like themselves or

their business. That's how people expect government to work. They want it to live within its means. And when we get too far out of whack of that, there tend to be political consequences. The other reason why people worry about deficits, politicians do, is a concern that high debt eventually will hold back economic growth. And it can do that in a couple of ways. It can crowd out private investment because money that would be going to private businesses is instead being lent to the government. Or over time, if the debt piles up too high, creditors begin to worry about your ability to repay. And in that case, they charge you higher costs to borrow money from them. And then it gets into a cycle. And then you're in for a rude jolt when you have to someday just raise taxes a bunch or

cut spending a bunch or both just to keep the lights on in the government. So in the meantime, Republicans can use the deficit as a potent political tool, it sounds like you're saying, without really being concerned about the economic consequences of the deficit. We are not seeing any real indication right now that markets or anybody sees the United States as about to default or in a big economic risk zone due to the amount of money that it's borrowing. The question is how close are we to that? I would argue we're not that close to the danger point as Republicans were telling us that we were. Now, that could change. But at this point, those economic reasons aren't the things being

debated. It's political reasons. Thank you, Jim. Really appreciate it. Thank you. We'll be right back. Here's what else you need to know today. On Tuesday, in testimony before the Senate, the Director of National Intelligence, Dan Coats, warned that Russia is likely to try to meddle in this fall's congressional elections. Frankly, the United States is under attack. Under attack by entities that are using cyber

to penetrate virtually every major action that takes place in the United States. As with Russia's interference in the presidential race, Coats said that the Kremlin's goal in this year's elections would be to create political confusion and undermine America's democratic values. There should be no doubt that Russia perceived that its past efforts as successful and views the 2018 U.S. midterm elections as a potential target for Russian influence operations. And after a year-long investigation into corruption, police in Israel have recommended that the country's prime minister, Benjamin Netanyahu, be charged with bribery, fraud, and breach of trust. Netanyahu is accused of accepting hundreds of thousands of dollars in gifts from political allies, including jewelry, cigars, and champagne,

and of striking a secret deal to ensure positive coverage from one of Israel's largest newspapers. Charges he denies. I feel a great responsibility to continue to lead Israel in a way that will secure its future. In a speech to Israelis on Tuesday night, Netanyahu made clear he would not resign. One thing is clear to me. The good of the country. Israelis on Tuesday night, Netanyahu made clear he would not resign. That the only thing that interests me is the good of the country, not for cigars, not for press coverage, not for anything. I'm Michael Barbaro. See you tomorrow.