‘I can’t in all good honesty, in all good faith, just look the other way because my party is now complicit in the deficits,’ Senator Rand Paul announced last night. Never were truer words spoken. The Republican party, once the standard-bearer of fiscal probity, has now become signed onto massive deficit spending. It first began to consume the deficit elixir during the Reagan years. But now it has become a full-fledged addiction.
Today, Trump signed a half-trillion dollar spending deal that will ensure that America runs trillion dollar deficits in coming years. The self-described ‘King of Debt’ is on his way to becoming the emperor of it. The dangers are obvious: a rapid increase in inflation and the debauching of America’s currency.
The contrast with what Republicans declared during the Obama years is stark. As Paul put it, ‘I ran for office because I was very critical of [Barack] Obama’s trillion-dollar deficits. Now we have Republicans hand-in-hand with Democrats offering us trillion-dollar deficits.’ Paul is frequently dismissed as a libertarian crank, an eccentric follower of Ludwig von Mises, the dean of anti-inflation economists. The truth is that he is something of a gadfly. But spending in Washington has lurched out of control, thereby ensuring that Paul’s apocalyptic warnings are starting to look more sensible than they would have even a year ago. Who knew that it would take a Republican president to revive the Austrian school of economics?
No, America is not Weimar. At least not yet. During the Obama presidency, a slowly recovering economy meant that America’s deficits ended up being large but not colossal—slightly under £360bn ($500bn) a year. But America’s economy has already recovered. The massive spending on the military and domestic programs—about a 10 per cent increase—means that when a recession hits, there won’t be any realistic way to create a stimulus. The economy is already overstimulated.
Why military spending needs to be ramped up is another mystery. Trump entered office promising to prod America’s allies to pony up for their own defense and to reassess America’s commitments abroad. Neither has occurred. Instead, when it comes to foreign policy, it’s essentially business as usual.
For now, Paul is a prophet without honor. But as he put it last night, ‘Somebody had to do it. I didn’t come here to be a part of someone’s club. I didn’t come up here to be liked. I didn’t come here to just say, ‘Hey guys, I’m going to be part of the club, so I’m going to do what you tell me to do.”
Paul only briefly impeded the progress of the spending bill. The main thing he achieved was to irritate his colleagues who had to stay up to vote in the morning and were deprived of their shut-eye. But if the economy sputters, or even crashes, they will be losing a lot more sleep in coming years.