President Barack Obama and Democrats, as well as a handfull of Republicans, are completely fixated on the raising taxes on top-income earners as part of any “fiscal cliff” deal that is eventually worked out.
The insistence is troubling because the issue at hand isn’t taxes. Sure, the recession and subsequent slow recovery has caused tax revenues to dip, but that is to be expected of any economic downturn. What has led to our current situation is Washington’s addiction to spending.
We hear President Obama and his apologists talk about Clinton-era tax rates, as if that were some sort of “holy grail.” However, Peter Suderman explains that if we’re going to get Clinton-era taxes, we should get Clinton-era spending as well:
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.
That’s true no matter how you measure it.
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.
A truer Clintonian agenda, meanwhile, wouldn’t only complicate President Obama’s spending plans. It would also require Obama to openly pursue higher tax rates on middle class earners as well as their wealthier counterparts—something he and many in his part have explicitly rejected. Indeed, such an agenda would be difficult in part because it would reveal the true cost of the federal government. We may not know exactly what policy mix is the absolute best for economic growth. But we do know that Clinton’s economy was strong, and that he came as close as any modern president to balancing the federal budget—and he did it both by taxing most everyone at higher rates and by spending a lot less on the federal government than we do now.
Let’s not forget that Clinton was also a better politician. He knew that he couldn’t get everything he wanted through a Republican-controlled Congress and, on multiple occasions, he was forced to compromise. Clinton was effective selling his message to the American people, even when he was boxed in by Republicans, despite numerous scandals and becoming the second president to be impeached. In fact, Clinton even stole the Republican message in 1996, proclaiming in his State of the Union address that the “era of big government is over.”
While he is a great orator, Obama is much more ideological, which is why he isn’t going to back down from his agenda. He won the election. He’s got political capital, and he’s going to spend it; especially now that Republicans are vulnerable and members are retreating on the tax issue.
But if Obama gets his way, the tax revenues that will come in aren’t going to close the budget deficits that’s we’re seeing and expected in the next several years. In order to deal with the budget issues, Obama would actually have to deal with outlays in a substantive way. Unfortunately, that prospect is dim.