Comments On“What’s The Matter With Congress?” By Thomas B. Edsall

Part One: The decline of fiscal democracy

In a New York Times Opinion piece, two of my favorite journalists and thinkers, Thomas B. Edsall and George Washington University Professor Steven Pearlstein, debated whether Congress’s weakness stemmed from members’ lack of bravery or from its affective partisanship. Drawing on the views of many other experts, they largely concluded that the fault lies with both camps.

I want to expand that discussion and delve more into the historical causes of this Congressional weakness. That history reveals two reforms essential for strengthening Congress. The first involves restoring fiscal democracy and loosening the straitjacket that past Congresses have laced tightly on current and future ones. The second requires strengthening the office of the presidency, which cannot be done without addressing how successful White House efforts to control information, largely for partisan purposes, have wrapped huge chains around the Executive Branch’s ability to speak truth to both power and the public. The first of these multi-decade developments defies the Constitutional framers’ intent to empower each new Congress to adapt to the needs of its own time. The second saps, rather than strengthens, the ability of the president, the only person elected nationwide, to represent the nation, rather than partisan or regional interests.

I will address the first issue in this note and the second in a follow-up note.

The decline of fiscal democracy

By the end of the Great Depression and World War II, all developed nations had built up large governments. In the United States, taxes as a share of national income rose to a level that has essentially been maintained since. Then defense spending declined, gradually but significantly, for approximately three decades, like a roller coaster on its downhill journey, with lower peaks for Korea, Vietnam, and some Cold War spending. For instance, defense spending declined from 14 percent of GDP at the end of the Korean conflict to a range of 3-5 percent in the years since 1990. A 10-percentage-point drop in defense spending as a share of GDP would allow roughly $3 trillion this year alone to be shifted toward domestic spending without raising taxes.

Other fortuitous circumstances in the early decades after World War II gave members of Congress even more money to allocate—or give away, as if costless—as new domestic spending increases or tax cuts. Both high economic growth and significant automatic income tax increases due to inflation and real growth, known as “bracket creep,” added to revenues that could be spent or returned to taxpayers as tax reductions. Perhaps most importantly, most spending needed to be appropriated; past Congresses had not yet mandated by law what are sometimes called entitlements that set out how future Congresses should allocate spending.

In those years, labeled by the French “Les Trente Glorieuses” (or the “glorious thirty years”) and by what historian Elliot Brownlee and I have labeled the “Era of Easy Finance,” domestic spending expanded in leaps and bounds, even as Congressional tax legislation almost exclusively focused on tax cuts, not increases. Congress could appear to give away huge swaths of money without legislating that the public pay more through tax increases or benefit cuts. Even modest increases in the Social Security and Medicare Hospital Insurance taxes for early generations of taxpayers were far exceeded by the benefits promised them; only their children and grandchildren would pay any newly legislated higher tax rate over their entire lifetimes.

You cannot understand what has happened to Congress since the mid-1970s without recognizing the impact, even to this day, of the unsustainable expectations and habits that built up during the Easy-Financing Era of Les Trente Glorieuses.

Not only did money appear to grow in Fort Knox vaults, but these older Congresses increasingly created permanent spending and tax-subsidy programs that “mandated” future payments, even if those future Congresses never assembled. These past Congresses scheduled the largest of these mandatory programs, in healthcare and Social Security, to grow forever at rates faster than either national income or revenues, making a day of reckoning inevitable.

From roughly the late 1970s to the mid-1990s, Republicans, noting their long-term lack of control of the House of Representatives—they held it only four years between 1933 and 1975 and none for the following forty years—increasingly decided they were being played as stooges who lost elections by being deficit hawks who raised taxes to pay for both new and built-in spending increases. Reinforced by extreme supply-side theory, which suggested that tax cuts largely paid for themselves through higher economic growth, they decided they, too, wanted to be Santa and become the preeminent party of tax cuts.

They also adopted a “No New Tax Pledge” and, through efforts by groups like the Club for Growth, threatened to “primary” anyone who agreed to any tax increase, even if it was in the form of a reduction in a tax subsidy. (The Club for Growth continued this divide-and-conquer technique by targeting Indiana Republicans who recently voted against partisan gerrymandering.) In 1995, Republicans began their own reign of control over the House, holding it for 24 of the 32 following years until 2027. Overcoming decades of lax party control by both parties, Newt Gingrich (R-GA) demanded that Republicans running for Congress in 1994 take a pledge to support his “Contract With America” platform and, as Speaker of the House in 1995, consolidated power in his own office and away from House committees. This began a long line of efforts by both parties to insist on party unanimity in voting.

Of course, no history is entirely linear. One exception to this bipartisan agreement to continue to “give away” money came between about 1982 and 1993, when Congress enacted several significant deficit-reduction packages. These arose partly in reaction to large deficits following the Reagan tax cuts of 1981, the impending inability of Social Security by 1983 to pay current benefits without legislative action, and, at the time, some fear of lower government bond ratings. Also, the 1981 tax cuts had created the first massive peacetime deficit increase that wouldn’t be covered by the sources formerly available during the Era of Easy Financing. That is, with mandated spending compounding faster than national income on an ever-larger base, revenue growth from an expanding economy could no longer easily pay for any new spending or tax giveaways.

Still, the pressures then were a mere shadow of what they are now. In addition to the reduction in deficit spending due to legislative efforts during 1982-97, there was additional economic growth as baby boomers entered their productive earning years, and increased capital gains realizations swelled revenues. To top it off, this was a period of much legislative stalemate, with little in the way of major new spending increases or tax cuts. Not surprisingly, much of the improvement in the fiscal situation came from reductions in appropriations as a share of GDP. Appropriations, unlike the big mandated programs, had no built-in increase, so Congress didn’t even need to “cut” them from a zero growth path to reduce the share of national income and revenues devoted to them.

In the 21^st century, those gains quickly evaporated. Early on, President George W. Bush enacted significant tax cuts, while defense spending increased due to 9-11. By the end of the first decade, Baby Boomers began moving from their peak earning years into retirement, swelling the ranks of Social Security and Medicare recipients. Then, during the major crises of The Great Recession and COVID-19, Congress enacted huge increases in the deficit unlike any seen in prior domestic crises. While the Federal Reserve lowered and kept interest rates low for much of this century, especially during crises, the swelling debt has now led to much higher interest costs as rates have rebounded toward a more historical normal level. And I know I am being repetitive, but the growth rates of the major entitlements kept compounding on ever higher bases.

A “Fiscal Democracy Index” I developed with Tim Roeper measures the share of revenues remaining after accounting for the mandatory spending and interest costs imposed by past Congresses on current ones. In the early to mid-1960s, the index stood at over 60 percent. Today, the fiscal democracy index has fallen to zero and is headed well below zero. In effect, more than all revenues today, tomorrow, and forevermore, is scheduled to go to mandated programs and interest on the debt. Social Security and Medicare, along with many elected officials, effectively tell future retirees that they are entitled to these ever-higher scheduled benefits. Of course, staying on that schedule means that the trust funds that cover Social Security and one part of Medicare will soon run out of money.

Consider what this means for Congress. Throughout most of the nation’s history, when economic growth generated additional revenue that hadn’t been pre-committed, the job of the president and Congress was to give away money through spending increases and tax cuts. Only then could they ensure that budget surpluses did not stagnate the economy. Bipartisan legislation was easy; there was money that literally had to be given away, and members often didn’t mind compromising and taking credit for increasing spending and cutting taxes.

Today, Congress’s budget job is just the opposite: to renege on these past promises and reduce the deficits, not surpluses, that would otherwise occur. Yet any member of Congress who tries to lead the way toward raising taxes and cutting spending, especially in the absence of presidential leadership, faces a significant risk of losing the next election. In many ways, members of Congress are trapped in a classic prisoner’s dilemma. Simply put, if you lead, you lose, whether in a primary or general election.

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This history makes clear that restoring a functional Congress requires restoring fiscal democracy. To achieve this goal, a much higher share of the revenues generated by economic growth must remain uncommitted, so future Congresses can respond better to the needs and opportunities of their times. Each Congress must be allowed to brag about what new things it has achieved, rather than on which promises it has reneged. The economic gains from fiscal democracy reinforce the political gains, since excessive attempts to control an uncertain future, by leaving little or no room to respond to new needs and opportunities, are doomed to fail.

Next time: Why today’s weakened presidency also leads to a dysfunctional Congress. For much more detailed information, see my recent book listed below.