http://www.guardian.co.uk/usa/story/0,12271,1140115,00.htmlBack to the future
Bush's willingness to run up a mammoth deficit may hide - as it did for Reagan - a rightwing agenda to cut welfare, writes William Keegan
Tuesday February 3, 2004
<snip> ...under the presidency of Ronald Reagan, the US seemed perfectly happy to run large budget deficits whether or not the economy was in recession. The reason was that they were determined to introduce their "supply side" tax cuts, and to raise defence spending in the name of finally seeing off the Soviets and their "evil empire." In this last regard, Reagan and his colleagues were spectacularly successful.
The Kremlin realised the game was up. It simply could not compete with US levels of defence spending, especially when it was becoming increasingly obvious that Soviet-style communism had failed to bring economic nirvana to the people. But the supply side theory that tax cuts would somehow create their own budget balancing revenue proved not to be worth the paper napkin on which Arthur Laffer reportedly tried to demonstrate the thesis.
What some supply side theorists did have in mind however - and it is all there in the memoirs of the Reagan administration, most notably those of one time budget director David Stockman - was that a budget deficit swollen by defence spending and tax cuts would assist a rightwing agenda aimed at cutting down on welfare spending. It looks as though we may be experiencing a similar phenomenon again. When the US treasury secretary, John Snow, reportedly said last week that the president was "serious about the deficit" he was being wonderfully Delphic. <snip>
Unfortunately, I fear the US will probably experience a repetition of the l980s, and that the budget deficit will be used as an excuse to cut back on all sorts of vital public assistance to the poor. Anecdotal reports indicate that this process has already begun.