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By: Proud Navy Veteran

CHAPTER 2: THE FISCAL CON (1980-Present)

"Republicans want small government for the same reason that burglars want you to
go on vacation." — Unknown

Introduction: The Deliberate Deficit Strategy

In August 1981, President Ronald Reagan signed the Economic Recovery Tax Act,
implementing the largest tax cut in American history. That same year, Reagan delivered a
speech declaring, The problem is that government spends too much. He railed against
deficits, calling them "one of the worst legacies of mismanagement in Washington". Yet by the
time he left office, Reagan had nearly tripled the national debt, from $994 billion to $2.9 trillion.

his is not a story of accident or coincidence. It is the opening act in a four-decade fiscal
deception that continues today—a strategy where Republican leaders publicly condemn the
very deficits their policies deliberately create. The pattern has repeated with remarkable
consistency: slash taxes primarily for the wealthy, watch deficits explode, express shock and
horror at the growing debt, then demand cuts to social programs and services that benefit
everyday Americans. Cut, borrow, blame, repeat.

This chapter examines this calculated cycle of fiscal contradiction, explaining how it serves as
both a wealth transfer mechanism and as a strategic tool to undermine democratic governance
by forcing the slow dismantling of government services. We will trace this strategy from its
codification under Reagan through its evolution under subsequent Republican administrations,
culminating in the Trump-era tax cuts that have set the stage for the next assault on the social
safety net.

The Theoretical Foundation: Starving the Beast


The intellectual origins of this fiscal strategy can be traced to a 1978 testimony before the
Senate Finance Committee, where future Federal Reserve Chairman Alan Greenspan
articulated its core principle: "Let us remember that the basic purpose of any tax cut program in
today's environment is to reduce the momentum of expenditure growth by restraining the
amount of revenue available and trust that there is a political limit to deficit spending". This
approach, later termed "starve the beast," became the cornerstone of Republican fiscal policy.
Rather than directly attacking popular government programs, which would invite political
backlash, the strategy involves first depriving the government of revenue through tax cuts, then
using the resulting deficits to justify cutting those programs on fiscal responsibility grounds.

The Wall Street Journal's Jude Wanniski expanded this concept in 1976 with what he called the
"Two Santa Claus Theory". Wanniski argued that if Democrats were the Santa of government
spending, Republicans needed to be the Santa of tax cuts. As he put it: "If the Democrats are
going to play Santa Claus by promoting more spending, the Republicans can never beat them
by promoting less spending. They have to promise tax cuts".

What makes this strategy particularly insidious is its cynical exploitation of the American public's
fiscal confusion. Most voters support both tax cuts and balanced budgets as abstract concepts,
rarely connecting one to the other. This allows Republican politicians to claim the mantle of
"fiscal responsibility" while pursuing policies that guarantee fiscal recklessness.

Reagan's Revolution: The Strategy's First Success

Upon taking office in 1981, Reagan immediately implemented the supply-side economics
agenda championed by figures like Arthur Laffer. Reagan's rhetoric skillfully positioned tax cuts
as an economic cure-all, promising they would stimulate enough growth to increase tax
revenues despite lower rates. "A few critics say our tax cut is too big, that it will result in inflation
and budget deficits," Reagan declared. "Well, let me say right now... we've had budget deficits
50 of the last 59 years... Our tax program is not going to cause inflation. Our tax program, by
creating incentive and stimulating investment, will help us fight inflation".

Reagan's Economic Recovery Tax Act slashed the top marginal tax rate from 70% to 50%, with
further reductions to 28% in the 1986 Tax Reform Act. The corporate tax rate was lowered,
along with estate taxes and capital gains taxes—all measures disproportionately benefiting the
wealthy. The results directly contradicted Reagan's promises. Federal revenues fell sharply as a
percentage of GDP, while spending increased—particularly military expenditures, which rose by
35%. The annual deficit ballooned from $79 billion in 1981 to $221 billion by 1986. As a
Treasury Department study later concluded, Reagan's 1981 tax cuts resulted in "a significant
decline in revenue relative to a baseline without the cuts, approximately $111 billion on average
during the first four years after implementation or nearly 3% of GDP annually".

Most telling was the administration's response to these deficits. While publicly expressing
concern, behind closed doors, they recognized the strategic value. Budget Director David
Stockman later admitted in his 1986 book "The Triumph of Politics" that the administration had
deliberately used deficits as leverage to force spending cuts. Reagan's rhetoric remained
focused on government as the problem while his policies created the fiscal crisis used to justify
dismantling the very government he criticized. In his second term, Reagan began calling for cuts
to social programs like Medicare and Social Security to address the deficits his own policies had
worsened. The human cost became evident as homelessness surged, mental health institutions
were shuttered without adequate community alternatives, and wealth inequality began its four-
decade climb. Meanwhile, the stock market boomed and the wealthy enjoyed unprecedented
tax windfalls.

Bush I: The Fiscal Reality Check

George H.W. Bush had been skeptical of supply-side economics during the 1980 Republican
primary, famously dismissing Reagan's economic plan as "voodoo economics". Yet by 1988,
Bush had fully embraced the GOP's anti-tax orthodoxy, making his memorable pledge: "Read
my lips: no new taxes". Economic reality, however, forced Bush to confront the consequences of
Reagan's fiscal policies. Facing mounting deficits, Bush ultimately agreed to the 1990 Budget
Enforcement Act, which included both spending controls and modest tax increases.

This compromise, necessary for fiscal stability, proved politically fatal. Conservative
Republicans, led by Newt Gingrich, revolted against Bush's pragmatism. Bush's experience
revealed a crucial evolution in the Republican fiscal strategy: the anti-tax position had
transcended mere policy preference to become an ideological litmus test. Republican politicians
learned that acknowledging the fiscal reality—that tax cuts increase deficits and may require
eventual tax increases—was political suicide within their party. The lesson was clear: better to
maintain the fiction that tax cuts pay for themselves than to acknowledge the mathematical
reality. This cemented the cycle of fiscal irresponsibility that continues to this day.

Clinton and the Republican Response: Revealing the Strategy

When Bill Clinton took office in 1993, he inherited substantial deficits from the Reagan-Bush
years. His approach—raising taxes on top earners while implementing moderate spending
restraint—ran directly counter to Republican fiscal orthodoxy. Despite universal Republican
opposition, Clinton's 1993 budget passed by a single vote. The results were stunning: By 1998,
the budget was in surplus for the first time in nearly 30 years. By 2001, the national debt was on
track to be fully paid off by 2010. This success directly contradicted the Republican claim that
tax increases harm economic growth—the economy boomed, creating 23 million new jobs
during Clinton's tenure.

The Republican response to Clinton's success is particularly revealing. Rather than
acknowledging that raising taxes on the wealthy could successfully reduce deficits without
harming the economy, they pivoted to arguing that surpluses represented "overtaxation" that
should be returned through tax cuts. As President George W. Bush would later put it: "The
surplus is not the government's money. The surplus is the people's money". This remarkable
reversal—from decrying deficits under Democratic administrations to dismissing surpluses as
problematic—further exposes the cynical nature of Republican fiscal messaging. The true goal
was not deficit reduction but tax reduction for the wealthy, regardless of the fiscal situation.

The Bush Tax Cuts: Deliberate Deficit Creation

When George W. Bush took office in 2001, he inherited budget surpluses projected at $5.6
trillion over the next decade. His administration quickly implemented two massive tax cuts in
2001 and 2003, disproportionately benefiting the wealthiest Americans. The top income tax rate
was reduced from 39.6% to 35%, while capital gains and dividend taxes were cut to 15%. These
tax cuts were brazenly deceptive in their design. To mask their true long-term cost, many
provisions were set to "sunset" after 10 years, creating an artificial appearance of fiscal
responsibility while establishing political pressure for permanent extensions. Additionally, the
cuts were passed through budget reconciliation, allowing Republicans to bypass the Senate's
60-vote threshold and pass them on party-line votes.

The fiscal impact was immediate and severe. The projected surpluses vanished, replaced by
mounting deficits. Vice President Dick Cheney revealed the administration's true thinking when
he told Treasury Secretary Paul O'Neill that "Reagan proved deficits don't matter" and
dismissed deficit concerns as irrelevant. As O'Neill later recounted, "The vice president said to
me, 'You know, Paul, Reagan proved deficits don't matter. We won the midterms. This is our
due'". This blasé attitude toward deficits, coming from a party that had spent years warning
about their catastrophic effects, represented the height of fiscal hypocrisy. By 2009, the national
debt had nearly doubled under Bush's watch, from $5.8 trillion to $11.9 trillion.

Yet the most revealing aspect came in how the Bush administration used these self-created
deficits. Even as they implemented tax cuts that primarily benefited the wealthy, they began
warning that Social Security and Medicare faced funding shortfalls and needed to be
"reformed"—code for privatization and benefit reductions. Bush's 2005 push to partially privatize
Social Security, though ultimately unsuccessful, clearly demonstrated the strategic connection
between tax cuts and attacks on the social safety net.

The Obama Years: Selective Deficit Hawkery

The Republican fiscal strategy entered a new phase during Barack Obama's presidency. After
largely ignoring deficits during the Bush years, Republicans suddenly rediscovered their
concern for fiscal responsibility the moment a Democrat entered the White House. Senate
Minority Leader Mitch McConnell, who had voted for the deficit-exploding Bush tax cuts, now
declared: "The single most important thing we want to achieve is for President Obama to be a
one-term president". His primary weapon: obstructing economic recovery measures by stoking
deficit fears.

As the economy struggled to recover from the 2008 financial crisis, Republicans formed the
"Tea Party" movement, ostensibly motivated by concerns about government spending and debt.
Yet the timing of this newfound deficit concern—absent during the Bush years but vociferous
under Obama—revealed its political nature. Republicans used debt limit showdowns to force
spending cuts through the 2011 Budget Control Act, which implemented across-the-board
sequestration cuts primarily affecting domestic programs. They repeatedly blocked
infrastructure spending and jobs bills, citing deficit concerns, even as economic experts argued
that such investments were needed for recovery. Most tellingly, when Obama proposed deficit
reduction packages that included both spending cuts and modest tax increases on the wealthy,
Republicans rejected them outright. Their position was clear: deficits could only be addressed
through spending cuts, never through revenue increases—revealing that deficit reduction was
not their true priority.

The Trump Tax Cuts: The Strategy Laid Bare

The Trump administration's approach to fiscal policy stripped away any remaining pretense
about Republican deficit concerns. In 2017, with unified control of government, Republicans
passed the Tax Cuts and Jobs Act, a $1.9 trillion tax cut primarily benefiting corporations and
the wealthy. The legislation reduced the corporate tax rate from 35% to 21%, cut individual rates
with the largest benefits going to top earners, and doubled the estate tax exemption to $11
million—while once again using sunset provisions for individual cuts to mask the long-term cost.

Republicans claimed, as they had with every tax cut since Reagan, that the bill would pay for
itself through economic growth. Treasury Secretary Steven Mnuchin insisted: "Not only will this
tax plan pay for itself, but it will pay down debt". Economic adviser Kevin Hassett promised GDP
growth of "4, 5, or even 6 percent".

Reality quickly disproved these claims. The Congressional Budget Office found that the tax cuts
would increase deficits by $1.9 trillion over a decade, even accounting for economic growth
effects. Corporate tax revenues fell by nearly a third in the first year after implementation. And
rather than the promised 4-6% growth, the economy grew at roughly the same rate as before
the tax cuts.

Even more revealing was what happened next. Just months after passing these deficit-
increasing tax cuts, Republican leaders began calling for cuts to Medicare, Medicaid, and Social
Security. House Speaker Paul Ryan declared, "We're going to have to get back next year at
entitlement reform, which is how you tackle the debt and the deficit". Senate Majority Leader
Mitch McConnell blamed the rising deficit on "entitlements" rather than tax cuts, stating: "It's
disappointing, but it's not a Republican problem". This whiplash-inducing pivot—from
implementing massive tax cuts to immediately citing resulting deficits as justification for cutting
social programs—perfectly illustrates the deliberate nature of the Republican fiscal strategy. The
tax cuts weren't intended to reduce deficits or boost economic growth for all Americans; they
were designed to transfer wealth upward while creating the fiscal pressure to force cuts to
programs that benefit the middle class and poor. By the end of Trump's term, the national debt
had increased by $7.8 trillion, rising at a faster rate than under any previous president. Yet
Republican concerns about deficits remained muted—until Biden took office.

The Ongoing Strategy: Current Applications and Future Plans

The Republican fiscal pattern continues unabated today. After largely ignoring deficits under
Trump, Republicans immediately pivoted to deficit fearmongering under Biden, opposing
investments in infrastructure, climate, and childcare on fiscal grounds—despite supporting far
larger deficit-increasing tax cuts just years earlier. Republican lawmakers continue demanding
extension of the Trump tax cuts set to expire in 2025, with House Speaker Mike Johnson
declaring them "the most important economic policy we've had in the last half century". Yet they
simultaneously express alarm about deficits, with Senate Republicans using debt concerns to
block Biden's proposals for paid family leave, universal pre-K, and expanded healthcare
coverage.

Most revealing are the current proposals from conservative think tanks and Republican
politicians for additional tax cuts that would primarily benefit the wealthy. The Heritage
Foundation's Project 2025, widely viewed as a blueprint for a potential second Trump
administration, calls for dramatic tax reductions for corporations and high-income Americans,
alongside deep cuts to government agencies and social programs. President Donald Trump has
pledged that tax cuts would be his top priority in a second term, including eliminating taxes on
Social Security benefits, further reducing corporate taxes, and extending his 2017 individual tax
cuts. Yet, as always, these proposals come with no credible plan to offset the trillions in lost
revenue.

The Real Victims: Democracy and Average Americans

The consequences of this 40-year fiscal deception extend far beyond budget numbers. By
deliberately creating deficits through tax cuts, then using those deficits to force cuts to
government services, this strategy has:

  • Accelerated wealth inequality: The top 1% of Americans now own more wealth than
    the entire middle class. The share of income going to the top 1% has more than doubled
    since 1980, while middle-class incomes have stagnated.
  • Undermined critical services: Government investments in infrastructure, education,
    scientific research, and public health have declined as a percentage of GDP, weakening
    America's competitiveness and quality of life.
  • Threatened the social safety net: Programs like Social Security, Medicare, and
    Medicaid face mounting political pressure for cuts, despite their popularity and
    effectiveness in reducing poverty.
  • Eroded democratic governance: By creating artificial fiscal crises, this strategy forces
    policy choices that the majority of Americans oppose, circumventing democratic
    preferences.

As conservative strategist Grover Norquist, founder of Americans for Tax Reform, explicitly
stated: "My goal is to cut government in half in twenty-five years, to get it down to the size where
we can drown it in the bathtub". This reveals the ultimate aim of the fiscal strategy—not to
balance budgets or promote growth, but to systematically dismantle government's capacity to
serve the public interest.

Conclusion: The Strategic Pattern Exposed


For four decades, Republican fiscal policy has followed a consistent pattern that can only be
described as deliberate: