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.