What does a balanced federal budget look like? Many people have never seen one. I was lucky enough to be Speaker Newt Gingrich’s director of planning when Republicans were able to pass and President Bill Clinton signed the first balanced budget in 29 years. 

Critics at the time argued that the GOP 1997 tax cut would blow up the deficit, but instead, it balanced the budget as economic growth surged. Hill Republicans, working with a Democratic president, did the impossible — not only balance the budget for four straight years from 1998 to 2001, but actually deliver a $236 billion surplus in 2000. 

So how did we get from there to here? With the country floundering under the weight of a $36 trillion debt, Congress seems mired in a monumental clash of economic viewpoints, and I’m not talking about the usual R versus D clash of economic theories. It seems Hill Republicans have returned to a slightly modified debate between the supply siders and the fiscal hawks of decades ago that dramatically changed the economic direction of the country.

After four years of sky-high inflation and interest rates under Jimmy Carter and the clear failure of Keynesian policies, President Ronald Reagan’s supply siders led a remarkable economic comeback. His policies generated four straight quarters of 8 percent growth or higher and led to the “Morning in America” election in 1984, when Reagan carried 49 states. 

The lesson learned? Congressional Republicans need to limit government’s role in the economy by focusing on dynamic growth policies. 

Republicans, fiscal hawks or supply siders, need to get their collective arms around four key challenges that have created a difficult policy and political environment. 

1. Normalization of the Biden COVID budget

During his presidency, Joe Biden normalized the 2020 COVID-19 budget. In fiscal 2019, federal outlays were $4.4 trillion. The next year, federal outlays increased to $6.6 trillion, a huge increase but one supported by both parties in response to the pandemic. 

But Biden, through the American Rescue Plan and budgets and bills passed during his administration, kept outlays above $6 trillion during the course of his term. In fiscal 2024, Biden outlays were $6.8 trillion, which was $1.5 trillion higher than Congressional Budget Office projections done in February 2021, based on if there had been no changes to the Trump budget by Biden. 

Overall, during the four Trump budgets, outlays totaled $19.1 trillion, while during Biden’s years, they totaled $26.0 trillion, an increase of 36 percent. The last year the deficit was under a trillion dollars was 2019. 

A Winston Group survey (Jan. 7–10) found that voters said 76 percent to 16 percent that government spending was a bigger problem than not enough revenue coming in from taxes. Biden’s legacy of trillion-dollar deficits is the “albatross around the neck” of Hill Republicans as the budget reconciliation bill moves to the Senate.

2. Specter of inflation

Congressional Republicans must address inflation. They understand that Biden lost the election because of the impact of his economic policies on inflation.

During the Biden presidency, prices went up 21.4 percent as inflation reached a high point in the summer of 2022, the highest level in 40 years. In contrast, during President Donald Trump’s first term, inflation went up only 7.7 percent. 

Biden’s inflation increased government spending along with the cost of borrowing to cover prior debt and newly incurred debt on his watch, and it also reduced the purchasing power of ordinary Americans by 4.6 percent.

Republicans in the Senate now must craft a budget bill that keeps inflation down and can pass the House, no small feat. 

3. Threat of the TCJA expiring

Since the passage of the Tax Cuts and Jobs Act in 2017, Republicans have allowed Democrats and the media to negatively define it, when in fact, that legislation has been a fiscal success that delivered economic relief to most Americans. 

Revenues to the federal government since it was passed have gone up from $3.3 trillion in 2017 to $4.9 trillion in 2024, a 48 percent increase. The legislation did what it was supposed to do — bring in more revenue and give working people tax breaks. 

The Biden outsized budgets were the problem, not the TCJA. If this tax bill is not made permanent, it will be middle- and lower-income people who will feel the pain. 

Just two examples: For a married couple, filing jointly and making between $24,300 and $98,600, almost all would see their rates go up from 12 percent to 15 percent. For a couple earning between $98,600 and $199,000, rates will go up from 22 percent to 25 percent.

Those who take the standard deduction, or about 90 percent of all tax filers, would see about a 45 percent decrease in their deduction. Without the TCJA, the deduction for a married couple filing jointly would go from $30,000 to $16,600.

Most Senate Republicans seem to favor making the tax cuts permanent, but the debate between the fiscal hawks and the supply siders that drove Republican policy changes in the Reagan era is likely to be in play outside this issue.

4. Crush of health care costs 

While most Republicans agree that government spending can be cut, the increasing costs of health care, specifically Medicare and Medicaid, remain the biggest hurdle. While making government more efficient can reduce costs, ultimately, chronic diseases and multiple health issues, especially for seniors, will inevitably increase costs. 

For example, the cost of Alzheimer’s, mostly for people over 65, hit $360 billion in 2024 and is expected to reach $1 trillion a year by 2050. In 2022, medical costs and lost productivity from diabetes rose to $413 billion.

Policymakers can’t avoid this reality. The way out from under these costs is medical innovation, and that means supporting scientific research and discovery. 

A Republican disagreement over economic approaches four decades ago brought about one of the strongest economies in history with jobs, growth and low inflation. As a similar debate begins to reignite, it’s important to remember that successful Republican economic policies have been based on the idea that it is the private sector — business and individuals — that drives growth and opportunity.

David Winston is the president of The Winston Group and a longtime adviser to congressional Republicans. He previously served as the director of planning for Speaker Newt Gingrich. He advises Fortune 100 companies, foundations and nonprofit organizations on strategic planning and public policy issues, as well as serving as an election analyst for CBS News.