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As Some Deficit Hawks Turn Dove, the New Politics of Debt Are on Display – The New York Times



Some Republicans who once scolded about fiscal austerity are now embracing government spending, underlining that the public supports more generous relief.

Over the past four years, President Trump and his allies in Congress have all but obliterated the Republican Party’s self-professed commitment to less spending and smaller deficits, pushing policies that have bloated the federal budget deficit to record levels.

Even before the pandemic ravaged the economy, the deficit — the gap between what the United States spends and what it receives in taxes and other revenue — had ballooned, driven by a $1.5 trillion tax cut and more generous government spending. Then Congress adopted two stimulus packages totaling more than $3 trillion, which will be financed with borrowed money. U.S. debt has grown so much that in 2020 it was projected to surpass the size of the entire annual economy for the first time since World War II.

That spending — which some see as largess, but many characterize as, in part, a needed response to a dire crisis — has upended the politics of what was once a bipartisan concern, leaving Washington’s fiscal hawks in an increasingly lonely corner in the economic debate.

“Since I arrived in Congress in 2011, federal debt has almost doubled,” Senator Ron Johnson, Republican of Wisconsin, wrote in an recent opinion piece for USA Today, adding that the latest stimulus bill will push it over $29 trillion. “Unfortunately, few in Congress seem to care.”

The Republican embrace of deficit spending hit a wall with the party’s leadership this past week, as Senator Mitch McConnell of Kentucky, the majority leader, rebuffed Mr. Trump’s demand to quickly increase the size of stimulus checks to $2,000 from $600. That decision drew scorn from some in his own party, with Senator Josh Hawley of Missouri upbraiding Republicans for denying struggling workers additional relief.

“I hear a lot of talking about how we can’t afford it,” Mr. Hawley said on the Senate floor on Friday. “I do notice, however, that we seem to be able to afford all kinds of other stuff. We can afford to send lots of money to other governments. We can afford to send all kinds of tax breaks and bailouts to big corporations. But we can’t seem to find the money for relief for working people that the president and the House and the Senate all support.”

The split in the party offers a hint of the landscape that awaits President-elect Joseph R. Biden Jr., whose agenda will require Congress to agree to more spending. Mr. Biden is expected to push for another stimulus package once he takes office and has listed other priorities, including investments in infrastructure, health care and climate change, all of which require government money.

Come Jan. 20, Republican lawmakers are all but certain to cast themselves as the nation’s fiscal stewards and resurrect their deficit concerns to oppose policies backed by Democrats. For months, they have pointed to worries over government debt to argue against Democrats’ demands for a second trillion-dollar-plus stimulus package, ultimately aligning on a $900 billion bill.

They will be reviving those deficit concerns after a historic spending spree by a Republican president whose promises to help struggling farmers, manufacturers and workers have proved hugely popular with voters and reinforced a shift in thinking about the costs and benefits of federal deficits.

Just 47 percent of U.S. adults called the deficit “a very big problem” in a Pew Research Center survey conducted this summer, down from 55 percent in the fall of 2018, a decline that came even as the annual deficit had grown by trillions. And spending money is popular: Polls have found support for larger stimulus checks, and throughout the past year the public has gotten behind generous government relief.

“The deficit argument is often put in theoretical, high-level terms,” said Ernie Tedeschi, a policy economist at Evercore ISI. “The effects of a spending policy are tangible.”

Some Republican lawmakers, especially those said to be considering presidential runs in 2024, have in recent months positioned themselves to pick up Mr. Trump’s baton in certain areas. Senator Marco Rubio of Florida and Mr. Hawley both came out in favor of sending $2,000 stimulus checks to Americans, and Mr. Rubio championed a program that disbursed more than $500 billion in forgivable loans to small businesses affected by the pandemic.

There is also a theoretical basis to the political shift. Even before the pandemic, many economists had begun to rethink their long-held view that large public deficits and debt would bog down the economy by pushing up borrowing costs for businesses and sending consumer prices soaring. A decade of relatively low interest rates and steady economic growth had prompted many economists to suggest that the United States could, indeed, afford to run a budget deficit.

The cost of debt “is substantially smaller than the current consensus,” Olivier Blanchard, a senior fellow at the Peterson Institute for International Economics and the former chief economist at the International Monetary Fund, said at a closely watched lecture in January 2019. “The implication of this is that in the future, we should probably revisit the fiscal rules that we are using.”

That changing calculus was driven by the fact that interest rates across developed economies have dropped, thanks to long-run trends including populations that are aging and save more, increasing the supply of money available for lending.

In fact, the Fed slashed interest rates to near-zero as the pandemic took hold in March, and has made clear that it is unlikely to lift them anytime soon. The result is that it is historically cheap for the United States to borrow money.

And while running big deficits might have once stoked fears about inflation — as too many dollars chased too few goods — price gains have been too low for comfort for years. Add to that the emergency needs prompted by the pandemic, and even the Fed’s leader, who had long warned about the nation’s debt load, has said this is a reasonable time to spend money.

“As a general rule, it is important to be on a sustainable fiscal path,” the Fed chair, Jerome H. Powell, a Republican, said at a news conference last month. “From my way of thinking and many others’, the time to focus on that is when the economy is strong and when unemployment is low, and taxes are, you know, are pouring in.”

The political rethinking about the deficit — especially in times of economic weakness — is a stark change from earlier eras. In the 1990s, President Bill Clinton highlighted his success in cutting the deficit and creating a budget surplus as a political achievement for Democrats. Concerns about excessive federal spending and the national debt also helped fuel the ascent of the Tea Party in the late 2000s, giving rise to a new breed of Republican who succeeded in ushering in austere spending caps that continued to bedevil lawmakers. But after 2014, Republicans have joined Democrats in waiving those caps, and a bipartisan, bicameral deal struck in 2019 ensures their expiration this year.

But even as some economists and politicians become more comfortable with high public debt levels, others warn that they could create vulnerabilities down the road. If interest rates increase, it could cost the government more to keep up with those payments each year — either leaving less for other types of spending or requiring Congress to pile on an ever-growing debt load to keep up.

Republicans have often worried out loud about the deficit while passing policies that will have the effect of expanding it. For instance, tax cuts that cleared Congress earlier in Mr. Trump’s administration were expected to increase the deficit by $1.9 trillion in the decade through 2028, based on a Congressional Budget Office analysis.

But the party has generally invoked fiscal responsibility to block bigger spending programs.

“Republicans are happy to run up the deficit to cut taxes, but not happy to run up the deficit to spend more,” said Michael Strain, the director of economic policy studies at the American Enterprise Institute.

Al Drago for The New York Times

That position was undercut somewhat this past week, as five Republican senators and 44 Republican members of the House backed a plan to send bigger stimulus checks to constituents. That included the two Republican senators locked in tight runoff races in Georgia, who ditched their long-held deficit concerns to back Mr. Trump’s call for $2,000 payments.

In August, one of the senators, David Perdue, told “PBS NewsHour” that he was opposed to direct payments, arguing that tax incentives were a more effective means of relief. On Tuesday, he threw his support behind the checks.

“I’m delighted to support the president in this $2,000,” Mr. Perdue said on the Fox News program “America’s Newsroom.”

Other Republicans have nodded to the fiscal impact of spending more money, but called for it anyway.

“I am concerned about the debt, but working families have been hurt badly by the pandemic,” Mr. Rubio wrote on Twitter.

Mr. Tedeschi said there was a chance that the Republican embrace of more spending could outlast Mr. Trump’s tenure.

“There is an element of the Republican Party that is going to have a different lens on debt than had been the case before Trump, even after Trump is gone,” he said. And as the pandemic drags on, even people who would oppose spending in normal times may see it as justified given the conditions. Many deficit hawks supported the $2.2 trillion relief package that passed in March when the need was especially obvious.

“What is unclear right now is how this shift in Republican thinking translates into longer-term policymaking,” Mr. Tedeschi added.

Based on recent events, that shift does not seem to be gaining traction with top Republican leaders.

Mr. McConnell, ignoring the concerns of those in his own party, blasted Democrats for trying to rush “borrowed money” out the door.

“Borrowing from our grandkids to do socialism for rich people is a terrible way to get help to families who actually need it,” Mr. McConnell said on Thursday.

And Representative Kevin Brady of Texas, the top Republican on the Ways and Means Committee and a self-identified fiscal hawk, condemned the push to increase the size of stimulus checks, arguing on Monday that it would do little to stimulate the economy.

That line of thinking drew a quick rebuke from the top Democrat in the Senate, who said Republicans cared about the deficit only when it was politically convenient.

“By now, Republican objections over the debt and deficit are comical. They added nearly $2 trillion to the debt for a massive tax cut for corporations and the wealthy — and that was during a steady economy,” Senator Chuck Schumer of New York, the minority leader, said on Thursday.

“Just as a Democratic president is about to take office,” he added, “all of the sudden the deficit-scolds are back.”

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Crosbie vows to clean up ‘Liberal corruption’ in Newfoundland and Labrador politics –



While campaigning in Marystown on Thursday, Progressive Conservative Leader Ches Crosbie berated the Liberals over their governance of the province, saying he would put an end to “Liberal corruption.”

Though technical issues interrupted the livestream of Crosbie’s speech, a transcript was sent to reporters, and Crosbie took questions by phone.

Crosbie again said the most critical issue in the province is jobs, “but Liberal corruption, scandal and cronyism are barriers to job growth.”

Crosbie says after filing a freedom-of-information request for the draft of a report commissioned by the Liberal government and done by consulting firm Goss Gilroy, a discrepancy between the final report and the draft was discovered.

The $22,000 report asked people who had left the province why they left and what it would take for them to return.

“They tried to bury the finding that … a leading reason for not working in Newfoundland and Labrador is the perception that it was who you know that would get you a job,” Crosbie said.

Crosbie said the PCs would hire people based on merit, and the government has a role in setting an example for everyone, including the private sector.

When asked why Newfoundland and Labrador voters should trust this wouldn’t happen if he is elected, Crosbie said voters can look to his decades-long career as a lawyer.

“My practice has consistently been all about holding corporations and governments to account,” he said.

Crosbie said, “(Industry, Energy and Technology Minister Andrew) Parsons is still in cabinet … despite being investigated by police. This is banana republic stuff. You can quote me on that.”

RNC officer Joe Smyth alleges political interference by Parsons, who was formally the justice minister, regarding a previous charge of obstruction of justice against Smyth that was dropped. The allegations are currently being investigated by the Nova Scotia RCMP.

Industry, Energy and Technology Minister Andrew Parsons. - Telegram File Photo
Industry, Energy and Technology Minister Andrew Parsons. – Telegram File Photo

Parsons responded to Crosbie’s corruption comments on behalf of the Liberals Thursday.

“Well, It’s the same old song and dance from Ches and the same Conservative line. Normally, I don’t care too much about what he says, but I do get frustrated when he impugns my character wrongly and he knows this,” Parsons said in a phone interview from his district on the west coast.

“If he wants to talk about ethics, I don’t need a lecture from him. Let’s me and him have a little contest and go back and talk about personal ethics. … If he wants to talk about the PCs, the biggest corruption job on the people of this province ever committed was the billion-dollar

Muskrat debacle that was committed on the backs of Newfoundlanders and Labradorians that he supports.”

Parsons said the PCs have former cabinet minister Nick McGrath running in Labrador, despite the Humber Valley Paving controversy.

And he slammed Crosbie for slinging mud when politicians should be moving away from personal attacks to policy discussions.

“Ches talks a big game and it’s too bad — he’s not putting forward any semblance of a plan why people should trust him,” Parsons said.

“His goal is to smear everybody and hope it makes him looks good in comparison.”

Meanwhile, Crosbie said people have the right to know who’s donating money to political parties and how much.

“Right now, we have a system where there’s no limit on donations and there’s nothing to prevent corporations, or unions for that matter, making donations,” he said. “There’s no better disinfectant than sunlight.”

He says they will look into the code of conduct for MHAs and introduce recall legislation so, “voters have recourse when their elected representatives are not doing their jobs.”

On Wednesday, Crosbie called for the immediate release of the interim report of the Dame Moya Greene-led Economic Recovery Team.

Premier Andrew Furey said there is no report, but a group of individuals tasked with coming up with ideas.

Crosbie said he laughed when he heard Furey’s comments.

“Either it’s not a report yet, because it hasn’t been written yet, or he’s appointed a bunch of people to sit around and shoot the breeze and have good ideas and none of us are ever going to know what those ideas are because they’re not going to be written down,” Crosbie said. “That last explanation would be absurd.”

At a media event Thursday morning, Furey said he doesn’t want to rush Greene and her team, as that’s how the government has made mistakes and economic flops in the past. An interim report is due later in February, and a final report at the end of April.

“I’m trying to shift decision-making more to a more rational, logical approach, and this is one I think will work,” Furey said.

“I think this is a solid decision-making process. We’re going to gather evidence, and broadly consult with all stakeholders. Every person in Newfoundland and Labrador will have an opportunity to have a say should they choose. Then we are going to table that to the House of Assembly as a very open and transparent process.”

Fixing the province’s financial troubles will require short-, medium- and long-term solutions and lots of collaboration, Furey said.

“There is no simple solution to this. There’s not going to be like an incredibly blunt and frightful budget that shocks everybody into their basements,” he said.


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Should Politics Play A Role In Our Investments? – Forbes



With yesterday’s inauguration of Joe Biden, it seems the perfect time to consider the role that politics may play in our investments. Over the past weeks and months, politics has been a hot topic. Undoubtedly, we can expect the economy to change and the markets to react as policies and priorities shift. Many are worried about the outcome of the election—and many others are excited. So, with all of the different emotions at play, how do we think about politics as we make our investment decisions?

The Choice Facing Financial Advisors

As Commonwealth’s chief investment officer, I serve a wide range of advisors and clients. They all have political opinions, and I may fundamentally disagree with many of them (half?) on very important issues. How can I handle this disconnect?

As I see it, I have a choice. I can take public positions that might feel good but will both alienate and ill serve a substantial portion of my community, while convincing no one. Or, I can focus on communicating what I both know about and have been tasked to do, in order to help people, as investors, navigate the current turmoil.

All financial advisors face the same decision. For all of us, no matter what our opinions, stating them can make us less effective for a substantial portion of our clients. And we can’t sidestep the issue by saying we have no opinions, because of course we do. What to do?

The way I have tried to deal with it is by explicitly separating the two roles I have: as a citizen (where I have very strong opinions) and as an economist and investment advisor (where all that matters is the data). By decoupling the two, I acknowledge I have my own opinions, but I try to make them less relevant to the discussions we are having.

I might say something like this. “As a citizen, I certainly have my own opinions, which may (or may not) be the same as yours. As your advisor, however, they don’t matter. My job here is to help you navigate the uncertainty around these events in your investments, not in the rest of your life. Because of that, we can look at the economic and market facts, which is what I am here to do, and make a decision that is best for you. My only concern, sitting in this chair, is your financial future.” I have used something like this with multiple client groups, on both sides, and it has been effective.

A Focus on Long-Term Outcomes

Another way to approach this is to demonstrate how it works in practice. In the last two elections, for example, I had people—on different sides—who wanted to sell out when Obama was elected and when Trump was elected. In both cases, it would have been a mistake. This example is a good follow-up, as you can directly look at emotional decisions, tie them back to the factual results, and make the point that as an investor, data is what is needed most. And that is the job of an advisor. However good or bad things are now, investors need to be focused on the long-term outcomes, not the short-term headlines. Taking the politics out can and does yield better long-term results.

Bumps in the Middle of the Road

This approach doesn’t always work, of course. I typically get feedback, some of it ferocious, whenever I write a piece that touches on politics, with my recent blog post on Washington turning a light shade of blue a good example. Several people felt very strongly, based on that post, that I must be a hard-core Republican. Others thought that the piece showed a clear Democratic basis and needed to be rewritten.

What I tried to do, though, was write something straight down the middle, presenting the facts and reasonable conclusions in a nonpartisan way. With this one, more than some of the others, I clearly failed in the eyes of some readers. That is inevitable, and the feedback helps me get better, so I appreciate it. I will try to do better. But I also draw comfort from the fact that I got fire from both sides. The middle of the road can be an uncomfortable place as well.

Recognize the Disconnect

What if you are not an advisor but just concerned about your own investments? The advice is the same. Look at the data. Don’t make emotional decisions. Realize the U.S. economy and markets are largely disconnected from politics. And keep an eye on the long term. No matter how you feel about either administration, investing is a game of decades during which we will have a wide range of politics.

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Nova Scotia finance minister says she will leave politics when next election called – Toronto Star



HALIFAX – A key member of outgoing Nova Scotia Premier Stephen McNeil’s cabinet says she too will leave politics once the next provincial election is called.

Finance Minister Karen Casey, who is also deputy premier, made the announcement following a cabinet meeting Thursday, saying that after 15 years representing the riding of Colchester North, she is ready to retire and wants to spend more time with her four grandchildren.

Casey said while she had been pondering her future for some time, she only made a final decision over the last week.

“Fifteen years, I think, is a good amount of public service to give to my constituents,” Casey told reporters. “I’m happy with the work that we (government) have achieved, and it’s time to let somebody else represent Colchester North.”

Casey, a former teacher, also served in the education and health portfolios and was named deputy premier in 2017.

Over her time in the education portfolio, she was instrumental in the Liberal government’s move to rein in contract demands by the province’s teachers — a battle that ultimately saw the imposition of a contract that ended a two-month work-to-rule campaign by public school teachers in February 2017.

As finance minister, Casey also played a part in helping the government table five consecutive balanced budgets.

“I learned a lot personally in the finance portfolio, but there were challenges there, and I quite like a challenge,” she said.

McNeil, who is leaving politics next month, said he counts Casey as a personal friend and believes she played an “integral role” in helping return the province to fiscal health.

“We have really run a duo operation here in lots of ways,” McNeil said. “She is one person that I have always sought counsel of in my most difficult days.”

Casey was a former interim leader of the Progressive Conservatives and defected to the Liberals in January, 2011 at McNeil’s invitation.

“That allowed me to join a caucus and a leader … whose values I thought I shared,” said Casey. “What motivated me? It would be knowing that my ideas and those of my constituents and me as a person would be respected.”



Casey confirmed she would stay on until the next election, which must be called by the spring of 2022.

This report by The Canadian Press was first published Jan. 21, 2021.

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