During his time as chairman of the Federal Reserve, William McChesney Martin said his job was “to take away the punch bowl just as the party gets going.” Amid the rollicking fiscal Mardi Gras being enjoyed by both political parties in Washington, former Starbucks CEO Howard Schultz may volunteer to perform that unpopular task.
Central to his potential presidential candidacy is his view that the federal government shouldn’t continue running up vast budget deficits. Schultz argued in June that “the greatest threat domestically to the country is this $21 trillion debt hanging over the cloud of America and future generations.” He opposed the 2017 corporate tax cut passed by the Republican Congress, despite the $425 million windfall it yielded for Starbucks last year. But he is not enamored of Democrats who favor a top personal income tax rate of 70 percent and “Medicare for all.”
Schultz is right that both parties have contributed to irresponsible budgets — Republicans by cutting taxes without cutting spending, Democrats by dreaming up new tasks for an underfunded federal government. But he still has to prove that he has the stomach for solutions. When asked whether he would raise corporate tax rates, Schultz took a dive worthy of the most weaselly politician: “I don’t want to talk in the hypothetical about what I would do if I was president.”
Maybe he will realize there is no point in running unless he is prepared to tell Americans that unpleasant sacrifices are in order. In that case, he might play a role in returning the nation to some semblance of fiscal restraint.
There is a precedent for that sort of venture. In the 1980s and early ’90s, under Presidents Ronald Reagan and George H.W. Bush, federal budget deficits soared, and the federal debt as a share of the economy doubled in size. That raised the hackles of Ross Perot, a Texas billionaire who ran for president as a third-party candidate in 1992 pledging to balance the budget. His plan involved a massacre of sacred cows: raising taxes on Social Security benefits and gasoline, curbing the mortgage interest deduction, and slashing outlays for defense, Medicare and farm subsidies.
With his blunt style and business credentials, Perot briefly led both Bush and Bill Clinton in the polls. Despite abruptly withdrawing from the race in July, before re-entering in October, he got 19 percent of the popular vote, the most of any third-party candidate since 1912.
It was enough to reframe the national debate. A combination of tax increases, spending curbs and economic growth led to four consecutive surpluses beginning in 1998. Perot, by running for president and pushing the issue to the fore, did much to create the conditions that brought it about.
Back then, both parties felt obligated to practice fiscal responsibility. But George W. Bush and Barack Obama helped them overcome that wholesome habit, and it has not returned.
Republicans passed a package of tax cuts in December 2017 despite projections that over 10 years, it would add $1 trillion to a federal debt that was already ballooning. They claimed to believe that the measure would reduce the deficit. But it grew by 17 percent in 2018, to $779 billion, and that seems to be fine with them.
Bigger deficits don’t trouble the sleep of Democrats, either. Rep. Alexandria Ocasio-Cortez of New York drew Republican fire with her proposal to raise the marginal tax rate on incomes above $10 million to 70 percent from the current 37 percent. What was overlooked is that the revenue would be used to pay for a “Green New Deal,” to move the economy away from fossil fuels and create clean-energy jobs.
But when you are on track to run trillion-dollar deficits every year, you should not be thinking of new programs to finance with borrowed funds. The Congressional Budget Office already projects the federal debt to double as a share of gross domestic product over the next 30 years. New revenues should go to arrest or reduce that growth, not to expand it. Spending reductions should take priority over spending increases.
The politicians who prosper by habitually spending money they don’t have are happy to pretend they can do so forever without destructive consequences. Schultz may not be the right person to lead an effort to restore fiscal sobriety. But it would be nice if someone did.