French philosopher and writer Jean-Pierre Faye advanced a “horseshoe theory” to describe politics, asserting that the extreme left and extreme right are closer to each other than they are to the political center. In other words, the far left and the far right are not at opposite ends of a linear political continuum — rather than a line, the ends of the political spectrum begin to move toward each other in the shape of a horseshoe.
The right’s tax cutting strategy coupled with the left’s entitlement spending agenda make deficits almost a foregone conclusion. This mutual acceptance of deficits could be an example of the horseshoe theory: Both the right and left agree that deficits don’t matter.
Candidates rarely campaign on cutting entitlements or raising taxes, and no one wins elections by calling attention to the deficit. These trends could reflect horseshoe theory.
Alternatively, these related trends could reflect nonpartisan loss aversion, which is the human tendency to prefer avoiding losses over acquiring gains: It is better to avoid losing $5 than it is to find $5.
If taking away a benefit already in place requires more effort than providing the benefit in the first place, cutting entitlements and raising taxes could be viewed as less favorable than deficit reduction on both sides of the aisle.
Perhaps the idea that deficits don’t matter has become a centrist view — maybe a lack of concern about deficits covers the entire surface of the horseshoe. This centrism, however, could be situational. Today, U.S. deficits appear relatively benign from a global standpoint. As a colleague surmised: “The U.S. deficit doesn’t look so bad anymore because Europe’s behavior has been so fiscally irresponsible that we look like geniuses here.”
Alternatively, the current sentiment regarding deficits could be a centrist reaction to loss aversion that relies on higher deficits elsewhere. A genuine horseshoe might also consist of modern monetary theorists on the left who believe deficits don’t matter if they finance programs instead of tax cuts and supply-side advocates on the right who think deficits don’t matter if they finance tax cuts instead of programs.
A horseshoe might also exist around tariffs and free trade. President Trump and Sen. Bernie Sanders, I-Vt., have both expressed support for tariffs as a way to increase American competitiveness. It’s difficult to see tariff imposition as a centrist policy because tariffs are so unpopular.
It’s also difficult to view tariff imposition as form of loss aversion. If the absence of a tariff is the presence of a benefit, then imposing tariffs doesn’t avert a loss — it creates one. If the tariff itself is viewed as a benefit, loss aversion suggests it will be harder to remove the tariff after it is imposed. Domestic and foreign responses to the recent use of tariffs, however, indicate a belief that avoiding — or removing — them averts a loss.