This series of Volume 3 response posts are written by former Miller Center fellows who offer their perspective on the topic of fiscal policy and how to best prepare the next president for the challenges of the first year. This series was coordinated and edited by Christy Ford Chapin, Assistant Professor of History at the University of Maryland, Baltimore County.

Government budgets are a material expression of collective priorities, values, and underlying commitments. Dull and dry though they may appear, they contain within themselves the secret of who actually exercises social power and which groups are able to exert control over the resources of the state. As economist Joseph Schumpeter wrote: the “spirit of a people, its cultural level, its social structure, the deeds its policy may prepare—all this and more is written in its fiscal history, stripped of all phrases. He who knows how to listen to its message here discerns the thunder of world history more clearly than anywhere else.”

Unfortunately, much of the public discussion of fiscal policy fails to capture the full sense of what’s at stake in choices about how to raise and spend public funds. Although fiscal policy reflects our social priorities, questions about fiscal policy are often invoked in ways that seem intended to restrict the political imagination; they are framed to explain why it is not feasible to pay for different social goods. We hear this language, for example, in the essays by Maya MacGuiness and Jared Bernstein, both of which emphasize the importance of developing a “realistic” fiscal policy, although from different perspectives.

It’s not that questions about who will pay and how don’t matter; of course it’s important to think about how to finance social programs. But the real challenge is coming up with a way of talking about fiscal policy without using it to reprimand those who want to demand more of the government, those who call for an expansion of social commitments and solidarity more generally. After all, the question of what we can and can’t afford is often at heart a political question. The available revenues—especially in a wealthy society such as ours—reflect choices about policy that go deep into the past.

There is a way in which discussions of fiscal policy can become so focused on technical questions around revenue and spending that we lose sight of the broader politics, ultimately making it harder to see the underlying reasons why a government lacks revenues. So it's important to frame the questions in terms of social priorities, to see them this way, and not to take the constraints for granted.

My own recent research has been on urban fiscal crises, specifically the fiscal crisis of New York City in the 1970s when the city was forced to cut its generous social programs because of serious budget shortfalls—closing public hospitals and health clinics, introducing tuition at the city university, defunding public day cares, and laying off fire fighters, police officers, and teachers. At the time and afterwards, the cutbacks were seen as inevitable—the only possible choice.

But the city’s financial problems themselves were the result of many political decisions: Albany requiring that the city cover a full quarter of the bill for Medicaid, Washington’s subsidizing of suburban development, and adoption of tariff policies that permitted the garment industry to move overseas. By focusing intensely on the city’s accounting problems, and painting a picture of New York’s politicians as irresponsible spendthrifts, the Ford Administration framed the issue in a way that left the city few alternatives to steep budget cuts. The structural problems the city faced—and which it shared with many other urban centers in the northeast and Midwest in the late 1970s and early 1980s—were excluded from public debate. 

Jared Bernstein closes his piece with an argument about what’s at stake in debates over fiscal policy: “At the end of the day, we’re in this together, and we can either decide we want to pay for—in a progressive manner—the menu of public goods we want, or we can decide we don’t want to.” While it’s naïve to suggest that “we” all have the same ability to affect government spending (some people have far more power to decide how our collective resources are spent than others), his emphasis here seems right: the choices of a government about how to tax and spend are the ones that outline the kinds of social commitments that we have to each other. More than anywhere else, this is where we answer the question of what kind of society we want to be.

Kimberly Phillips-Fein is a historian of twentieth-century American politics and teaches at the Gallatin School of Individualized Study at New York University. She is the author of Invisible Hands: The Making of the Conservative Movement from the New Deal to Reagan.