The current partisan rift over fiscal policy and the deadlock negotiators face regarding the impending fiscal cliff are nothing new. Indeed, divisions over fiscal policy have long been at the center of competition between the two parties. While both parties are taking positions that will benefit them electorally, they may be doing so to the detriment of the country’s broader economic well-being. But it is worth noting that the parties’ positions on fiscal policy have not been stable over the last seventy years, and both have switched on matters related to taxes and debts. A brief review of the history of the modern Republican Party’s fiscal policy positioning provides insights on the origins of the situation we face today, as well as insights into the party’s use of tax policy as means to combat government expansion and to win elections.
While the modern Republican Party has long been viewed as the fiscally conservative party, the meaning of fiscal conservatism has varied over the last seventy years. The position of the modern Republican Party has its roots in the mid-1900s. During the 1940s, Republicans had proposed tax cuts as a means to force government retrenchment in the wake of New Deal policies and spending. Just as we are witnessing in the current fiscal cliff standoff, Republican Members of Congress in the 1940s and 1950s rejected increasing taxes as a means for addressing the nation’s fiscal imbalances. For example, in 1951, House minority leader Joseph Martin (R-MA) argued against President Harry Truman’s proposal to increase taxes:
The Administration’s contention that this tax bill is needed to control inflation is economic voodoo talk. No set of controls and no pyramid of taxes ever devised by man wills top inflation in America when the root of the evil is government spending.
Similarly, as they do today, Republicans argued that tax cuts were a better means for stimulating the economy. In 1953, House Ways and Means Committee Chairman Daniel Reed (R-NY) argued that “tax reduction, far from enlarging the deficit, would serve to increase federal revenues by stimulating economic growth.”
Although the modern Republican Party has come be associated with support for tax cuts and opposition to tax increases, this wasn’t always the case.