Deficit politics ruled in the early 1990s. Politicians left and right fretted over spending cuts and tax hikes, and political agendas were reshaped by the nation's gnawing anxieties about debt. As Rick Henderson wrote in reason's February 1994 issue, President Bill Clinton had the same view of deficits and domestic spending that President Ronald Reagan did before him: "Big deficits can preclude spending on new programs." The difference, Henderson argued, was that "while Reagan used deficits to keep big spenders at bay, Clinton [found] deficits an impediment to his ambitious agenda."
President Barack Obama has had more luck with his ambitious legislative agenda than Clinton did. But with the national debt and deficit skyrocketing to unprecedented levels, worries about what the country spends and owes are finally starting to take a toll.
In July's mid-session budget review, the White House revised its projected future deficits upward by $150 billion, forecasting that the shortfall would exceed $1.4 trillion this year and next. Meanwhile, the Congressional Budget Office has begun to issue dire warnings about the state of the country's balance sheet, estimating that the overall debt will reach 90 percent of gross domestic product—the threshold at which many economists believe a nation runs a significant risk of a financial crisis—by 2020.
Those staggering figures have begun to spook legislators. Throughout the summer, Republicans refused to support a $33 billion unemployment extension unless it was paid for. The "doc fix"—a $208 billion unfunded change in Medicare reimbursements promised to doctors in exchange for their support of the health care bill—has failed to materialize. Plans for a multiyear boost in reimbursements were scrapped in favor of a six-month extension. And at the end of June, Congress rejected an extension of the stimulus package's Medicaid funding boost that many governors were counting on and most Washington legislators had considered a done deal. The extension passed only when, weeks later, Democrats reworked the bill to offset the spending.
Even the Obama administration has paid lip service to the dangers posed by the mounting debt. In July outgoing Office of Management and Budget Director Peter Orszag used his final public appearance in that role to note that the country remains "on an unsustainable fiscal course."