In an interesting project syndicate column, Brad DeLong makes the case that since the Republican party seems to have completely broken with what was once known as fiscal conservativism (i.e. the government should not run deficits except in recessions), the next Democratic administration may not want to trim the deficit too much. He writes:
Those of us who served in the Clinton administration and worked hard to put America’s finances in order and turn deficits into surpluses are keenly aware that, after eight years of the George W. Bush administration, things look worse than when we started back in 1993. All of our work was undone by our successors in their quest to win the class war by making America’s income distribution more unequal.Sounds like "starve the beast" in reverse (hat tip: Economist's View).
A chain is only as strong as its weakest link, and it seems pointless to work to strengthen the Democratic links of the chain of fiscal advice when the Republican links are not just weak but absent. Political advisers to future Democratic administrations may argue that the only way to tie the Republicans’ hands and keep them from launching another wealth-polarizing offensive is to widen the deficit enough that even they are scared of it.
They might be right. The surplus-creating fiscal policies established by Robert Rubin and company in the Clinton administration would have been very good for America had the Clinton administration been followed by a normal successor. But what is the right fiscal policy for a future Democratic administration to follow when there is no guarantee that any Republican successors will ever be “normal” again? That’s a hard question, and I don’t know the answer.
On a related note, Greg Mankiw sees evidence for "starve the beast," but Romer and Romer do not.