Congress, the White House, and maybe even the country at large have come a long way since House Minority Leader Nancy Pelosi (D-CA) -- of all people -- told reporters, "It's clear we must enter an era of austerity. To reduce the deficit through shared sacrifice."
Read More →
That was July 2011, days before she, other congressional leaders, and President Obama struck a debt limit deal to cut $2 trillion in federal spending over 10 years. It was perhaps Democrats' darkest moment since Obama was first elected in 2008. But it was ironically consistent with Obama's broader goals: $4 trillion in total deficit reduction, split roughly two parts to one between spending cuts and higher taxes.
A lot's changed since then. The economy has slowly but steadily improved over the past two years -- enough that the country re-elected Obama. With that victory under his belt he was able to pocket a decent chunk of the revenue he'd hoped to raise by allowing the Bush tax cuts for top earners to expire. These developments combined to send the deficit into a rapid tumble.
But that's when the real wrangling in Congress over dollars spent and dollars collected stopped dead in its tracks. Republicans turned off the revenue spigot; Democrats refused to cut more spending absent further tax increases on wealthy Americans; sequestration was passively allowed to take effect; and the budget took a backseat on Capitol Hill to issues like immigration reform, gun control and investigations of the Obama administration.
So for the last several months, Democrats have been grappling with two challenges, at times at odds with one another: Dragging Republicans back into the budget fight; and attempting to resume that fight absent a false consensus that the final piece of the budget deal is only possible if it includes immediate and austere spending cuts and no revenue.
During that time, they've received two gifts -- one academic, and one all-too real -- that deeply damaged the intellectual foundations for the austerity movement.
Several weeks ago, economists discovered that a wildly influential paper by Harvard scholars Ken Rogoff and Carmen Reinhart, which implied U.S. debt might be approaching an economically perilous tipping point, contained critical errors. Indeed, it's likely that no such tipping point exists. At the same time, austerity policies in Europe continued (and still continue) to prove economically disastrous.
None of this has increased Democrats' appetite for stimulus. But at last it has them publicly questioning the wisdom of belt-tightening in general, and indiscriminate spending cuts in particular, during a fragile recovery.
Their challenge now is to amplify the fact that their broad approach (if not its particulars) has been vindicated, so that when the budget debate inevitably resumes this summer ahead of debt limit and government funding fights, the public is prepared to question GOP resistance.