Peter Suderman makes an excellent point about the Obama Administration’s mantra that “we just want to return to the Clinton-era tax rates; things were pretty good back then!”
Most of us can agree that the Clinton years, which saw growing median incomes as well as tiny deficits and steady economic growth, were economic good times, and we’d all like to see that sort of economic performance repeated. If that’s the case, then why should we limit ourselves to just replicating one tiny fragment of Clinton-era governance—higher tax rates on a fairly small number of earners? Why not replicate other aspects of Clinton’s policy mix as well?
Probably because that would entail mentioning something that Obama’s frequent invocations of the Clinton years always ignore: that Clinton’s spending levels were far, far lower than they have been for the last four years—or than President Obama has called for them to be in the years to come.
Government spending as a percentage of the economy fell during the Clinton presidency, starting at 21.4 percent and finishing up at about 18.2 percent of GDP in both 2000 and 2001. In 1993, Clinton’s first budget spent $1.4 trillion. The last budget he helped create spent $1.8 trillion. So far, President Obama has spent about $3.5 trillion every year, averaging more than 24 percent of GDP.
I think it’s important to note what Bill Clinton and the Republicans did not do in the 90’s to balance the budget. They did not slash spending left, right and center. They did not gut critical programs. In fact, spending grew in nominal terms. They also did not set vague goals and promise spending cuts in future years in exchange for tax cuts and stimulus spending today.
What they did was exercise restraint. What they did was keep government programs in check and in budget. Even Bill Clinton’s 1993 stimulus bill went down in flames thanks to Republican filibustering (the economy somehow recovered anyway). They did cut some spending significantly — welfare and military spending most notably. But, for the most part, they succeeded by simply not making things worse and letting the economy take care of the rest.
As several Reasonoids have pointed out, this kind of restraint could get our budget balanced within a decade, even without tax increases. Had that kind of restraint been exercised in the last decade, our budget would be hundreds of billions less than it is now. As it is in most of life, 90% of success is simply not fucking up.
That having been said, I think we face a very different challenge right now. The principle budget danger is not discretionary spending but entitlements. Every day we put off the reckoning makes it more difficult, with the ranks of the retired swelling with more and more Boomers. That requires statutory changes to the law and, thankfully, the Republicans appear to be holding out for that. Getting our entitlements under control would do more to get the budget under control than all the discretionary cuts and tax hikes in the world.
Clinton also inherited a much better situation. The economy was rebounding, the Cold War was over and Reagan-Bush I had a far better spending legacy than Bush II-Obama do. Like it or not, some spending is going to have be deep-sixed, preferably starting with corporate welfare. And I’m afraid that Stimulus V: The Search for More Weather-Stripping, is simply not on.
The general point stands: if Obama wants Clinton-era taxes, he needs to start showing Clinton-era spending restraint.