In 2009, the last time Washington aimed a trillion-dollar firehose at the distressed U.S. economy, the president, a Democrat, repeatedly coupled that act of temporary profligacy with the rhetorical aim of long-term budgetary sobriety.
“One of the central goals of this administration is restoring fiscal responsibility,” Barack Obama asserted back then. “Even as we have had to spend our way out of this recession in the near term, we’ve begun to make the hard choices necessary to get our country on a more stable fiscal footing in the long run.”
There were plenty of reasons for contemporaneous skepticism about Obama’s claims, but even insincere nods toward a presumed virtue can contribute to a mild braking on vice. Policy battles over deficits, debt ceilings, and old-age entitlements dominated national politics through the end of 2013, and not merely because of then-ornery, now-quiescent Tea Party Republicans. Erskine Bowles, after all, was a Democrat.
But the twin rise of President Donald Trump and Sen. Bernie Sanders (I–Vt.), along with the strains of populism they channeled, chased deficit hawks to the despised corners of polite society by 2015. After that, the main questions left were how many zeroes would end up on the federal check when the next crisis inevitably hit.
George W. Bush’s Emergency Economic Stabilization Act of October 2008 came with a $700 billion price tag. Add in Obama’s $833 billion American Recovery and Reinvestmenty Act in February 2009, and we’re talking a bailout/stimulus combo of $1.53 trillion, or $1.84 trillion in 2020 dollars.
By comparison, the bipartisan stimulus that was very temporarily held up by the near-universally despised Rep. Thomas Massie (R–Ky.), totals around $2.3 trillion, according to the bean-counters at the Committee for a Responsible Federal Budget. Even accounting for population increase (the U.S. had 307 million residents in 2009, around 331 million today), that’s an inflation-adjusted per capita increase from around $6,000 11 years ago to $6,950 today.
How much is $2.3 trillion? In nominal terms, it’s the same as the entire federal budget for Fiscal Year 2004. Adjusting for inflation gets you back to the federal government’s $1 trillion outlay for 1987. Inflation and population together take you back to 1974. In short, Congress just approved a bailout/stimulus of $6,950 per person, which is more than the $6,600 per person in constant dollars that the entire federal government spent in Richard Nixon’s final year in office.
The accumulated national debt in 1974 was $475 billion, or around $2.5 trillion in today’s money ($11,700 per U.S. resident). George W. Bush inherited we-owe-yous of $5.67 trillion (which adjusts to $8.52 trillion and $30,200 per capita), and left for Obama a present of $10 trillion ($12 trillion/$39,600). As Trump readies his black sharpie for the rescue package, the debt clock stands at $23.6 trillion ($71,300 per person)—and it was being goosed by trillion-dollar annual deficits even before COVID-19 hit the fan.
And unlike Obama in 2009, Trump doesn’t currently feel the need to even rhetorically hint at future tradeoffs. The president reportedly said in late 2018 about any future fiscal crisis: “Yeah, but I won’t be here.” Add in the likelihood of future bailouts and stimuli, and basically we’re all Modern Monetary Theorists now.
The annual budget deficit, which snapped an entire generation of conservatives into attention when it crossed the $1 trillion threshold a decade ago, is likely to top $2 trillion before the fiscal year is out. The Government Accountability Office and Congressional Budget Office were calling the country’s long-term fiscal outlook “unsustainable” back when the good times were still rolling. Now revenues are taking a massive hit, demand for government service is going through the roof, and the U.S. Mint’s going brrrrr.
Libertarians back in 2008-09 tended to make four types of predictions about the bailout/stimulus. One—that the unpredented swooshing of cash and Federal Reserve intrusion into the economy would trigger long-dormant inflation—did not come to pass, and so many policy enthusiasts have taken that as a cue to ignore libertarians.
But there were three other forward-looking objections to socializing the failures of deep-pocketed losers during the financial crisis: that the ensuing debt load would unduly dampen the eventual recovery, that failing to fix the underlying government distortions that caused malinvestments in the first place would make bailouts an eternally recurring phenomenon, and that papering over problems with money would create new, even more dangerous bubbles.
With today’s Coronavirus Aid, Relief, and Economic Security (CARES) Act, Congress has cemented what we already suspected: that the federal government does not care about learning from directly relevant mistakes it made in the recent past.
There is no more politics of fiscal prudence in America, just a competition to see who can wag the biggest firehose. While the bodies begin to pile up in New York City and elsewhere, Washington has responded with a massive course of experimental economics. May we respond better than rats in a cage.
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