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July 31, 2018
Everyone Knows Deficits Don't Matter — And Everyone Is Wrong

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[This article was originally published on February 20, 2018 in Tax Notes magazine.]

As everyone knows, voters don’t care about budget deficits. To cite just one piece of recent evidence, a poll conducted last month by the Pew Research Center asked respondents to name the most important issues facing the country: Deficits ranked 14th out of 19 options.

But despite what everybody thinks, they’re wrong — or at least overconfident about the irrelevance of deficits. With budget shortfalls headed north of $1 trillion over the next few years, it seems plausible to expect that deficits will gain new political salience. Indeed, there are two reasons to think they will become an important issue in the near term.

First, while polls suggest that other issues matter more, they don’t show that deficits matter not at all. The same polls cited to argue that deficits are irrelevant show that roughly half the nation is concerned about the rising tide of red ink.

Second, while deficits rank low on the list of national priorities, that hasn’t always been the case. In general, the political prominence of deficit reduction has been correlated with both the general state of the economy and the sheer size of the deficit in question. Right now, the first of those two factors is bolstering the case for irrelevance. The latter, however, is not.

Half Is Not Nothing

Most of the surveys that rank deficits below other national issues tend to show substantial concern about federal budget shortfalls. The Pew survey, for instance, found that 48 percent of Americans believe deficit reduction should be a “top priority” for Congress and President Trump. That number puts it well behind issues at the top of the list, including terrorism (73 percent), education (72 percent), and the vaguely defined “economy” (71 percent).

But 48 percent is nearly half, and half is not nothing. Indeed, 48 percent put the deficit ahead of many issues that often dominate the national debate, including immigration (47 percent), “military” (46 percent), climate change (46 percent), and global trade (38 percent). (“Military” seems to deserve quotation marks since, like “economy,” it is oddly vague and might reasonably overlap with terrorism.)

Other surveys also show widespread concern about deficits. A Kaiser Health Tracking Poll from January, for example, asked respondents about the issues they want candidates to address during the midterm election campaign. Only 17 percent identified the deficit as “the most important issue,” but 47 percent said it was “very important but not the most important.” To round things out, 25 percent said the deficit was “somewhat important,” and 8 percent said it was “not too important.”

When 64 percent of Americans believe the deficit ranks at the top or near the top of the nation’s most pressing problems, it’s hard to defend the idea that deficits don’t matter.

Other surveys suggest that deficits have some hidden political relevance. A December poll by CBS News found that 55 percent of respondents disapproved of the way Trump has been handling the deficit, while 33 percent approved. That same poll asked whether voters would accept an increase in the deficit if it meant that their own taxes would be lower. Only 33 percent said yes, while 57 percent said no.

Having accused other analysts of overstating the importance of poll data, let me be careful to avoid the same error. Deficits certainly don’t rank at the top of the electorate’s collective priority list, and depending on how other things develop in the months to come, deficits may remain a minor factor in the 2018 midterm election.

But polls show that voters harbor an abiding concern about rising deficits. Depending on other factors — including the broader trajectory of the economy — that latent concern might become more active. After all, political campaigns are an exercise in narrative construction. To the extent that deficits can be made to fit within a larger, compelling narrative — for instance, one about protecting cherished entitlements like Medicare and Social Security from would-be budget cutters — voters may begin to care quite a bit about deficits.

Context Matters

History suggests that context is key when it comes to the political importance of rising deficits. A quick survey of poll data from earlier decades indicates that deficits have sometimes loomed large in electoral outcomes.

In 1986, for example, an ABC News exit poll asked midterm voters to name issues that were “very important” to the votes they cast. “The federal budget deficit” placed second at 34 percent, behind only “reducing unemployment” at 36 percent; at the time, unemployment was running at 6.9 percent.

In the ABC survey, deficits beat out a variety of other high-profile issues, if only narrowly, including “state of your local economy” (33 percent), “protecting Social Security” (32 percent), “the illegal drug problem” (32 percent), and “state of the national economy” (32 percent). Obviously, these priorities were tightly clustered, but it seems fair to conclude that deficits were hardly irrelevant; they ranked near the top of voters’ priority list.

Surveys from the 1990s suggest that deficit concerns were still important to voters. The issue received attention in the run-up to the 1990 midterms. A September 1990 ABC News/Washington Post poll asked voters how important the deficit would be in influencing their vote for members of the House: 75 percent said “very important,” while 20 percent said “somewhat important,” 1 percent said “somewhat unimportant,” and 3 percent said “not very important.” This poll, of course, was conducted amid a bitter political debate over a sweeping deficit reduction measure, later enacted as part of the Omnibus Budget Reconciliation Act of 1990.

Still, other polls from 1990 suggested a political dynamic like the one we have today, with voters concerned about deficits but not casting their votes solely based on those concerns. A Time/CNN/Yankelovich Clancy Shulman Poll from October 1990 asked how a sitting lawmaker’s support for the pending deficit reduction package would affect the respondent’s vote in November. Just 13 percent said it would be “the most important issue,” while 21 percent said it would be “one of the most important issues.” Fully 43 percent said it was “only somewhat important,” and 16 percent said it was “not important.”

Too many factors influence electoral outcomes to draw lots of conclusions from final tallies, but for what it’s worth, Democrats picked up seven House seats in the 1990 midterms and one Senate seat. Given the historical tendency for a president’s party to lose votes in midterm elections, however, it’s hard to ascertain the effect of the deficit from those results.

What is clear, however, is that deficit concerns ebbed and flowed throughout the 1990s, depending on the broader political and economic context. In 1994, as Democrats came to grips with the electoral disaster of President Clinton’s first midterm elections, a VNS Election Day exit poll asked voters which issues had mattered most to them in casting their vote. Healthcare topped the list at 30 percent, while the deficit and crime tied for second at 14 percent each. For reference, Democrats lost 57 seats in the House that year and nine in the Senate.

Two years later, the deficit ranked a clear second in voter priorities, according to an NBC News/Wall Street Journal poll from March, with 16 percent calling it “most important” in influencing their vote. By comparison, 33 percent said “jobs and the economy.” Of course, it’s possible that these worries about the deficit overlapped with broader economic worries, but it seems fair to conclude that deficits were not the top issue for most voters yet remained important.

The salience of deficits, predictably, seems correlated with their size. The deficit reached 5.7 percent of GDP in 1983 and was still 4.8 percent in 1986 when voters ranked it near the top of their priority list. Similarly, a second period of deficit concern came in the early 1990s, when deficits were again surging. (They reached 4.4 percent of GDP in 1992.)

After the Crash

Big deficits, in other words, have a way of capturing the political limelight. The same could be said of a much later period: In 2010 the deficit ranked high on the voter worry list.

However, in January 2009, as Barack Obama assumed the presidency, voters were far more worried about the general state of the economy than they were about the rising deficit. Asked in a New Models National Brand poll for the top concern influencing their congressional voting intentions in the following year, 45 percent named the economy and just 4 percent said “national deficit/spending.” (The linkage of deficits with spending is a problematic aspect of this poll, as is the separate category assigned to “taxes.”) Follow-up surveys by the same pollster in 2009 and 2010 showed similar results.

Although voters may have been unwilling to assign deficits top priority, they voiced broad concern about them. When asked about their absolute, rather than relative, concerns, deficits continued to play a large role. A Gallup/USA Today poll from March 2010 asked how deficits would affect voting intentions for the 2010 midterms: 46 percent said the deficit was “extremely important,” and another 33 percent said it was “very important” in influencing their vote.

Other surveys found similar results. A Pew poll from July 2010 reported that 69 percent considered the deficit “very important,” 22 percent said it was “somewhat important,” 5 percent said it was “not too important,” and 2 percent said it was “not at all important.” A Fox News/Opinion Dynamics poll the same month found 44 percent at “extremely important” and 36 percent at “very important.” An ABC News/Washington Post poll from August 2010 found just 15 percent of voters saying the deficit was the “single most important issue” in determining their vote for Congress, but 61 percent saying it was “very important.”

It’s hard to argue that an issue doesn’t matter when 75 to 80 percent of voters think it’s extremely or very important. And no one should be surprised at these results, given that the budget deficit had ballooned to almost 9.8 percent of GDP in fiscal 2009. That’s the kind of number that grabs voter attention.

Throughout the 2010 election, generalized worries about the state of the economy took precedence over narrower concern about the budget deficit. However, the deficit remained important to voters, even if it wasn’t the deciding factor in casting their votes.

No Single Factor

Trying to pin down the political significance of deficits, at least with any precision, is a fool’s errand; too many factors shape electoral outcomes to identify any single one as pivotal. Elections are never decided by single issues, unless those issues are defined so broadly as to lose most of their meaning (as when pollsters list “economy” as an option for voter worries).

It’s safe to say, however, that strong claims about the irrelevance of deficits are unsupportable. Yes, deficits tend to rank low in comparative rankings of voter concerns. But they rank high when voters are asked to report how much they care about the issue in absolute terms. Voters, it turns out, care quite a bit about a lot of things. And deficits are one of them.

Whether deficits will end up playing an important role in the 2018 midterms is unclear. But one thing is certain: Their significance will not be determined solely by their position on a comparative ranking of voter worries. Instead, it will turn on the larger trajectory of the nation’s economy and the size of the deficit. Lastly, one political uncertainty must also be considered, and that is the skill of Democratic leaders at weaving deficits into a larger, more compelling narrative about Republican governance.