Wednesday, July 6, 2011

Barbara Boxer’s blatant rewriting of history - The Fact Checker - The Washington Post

History is constantly rewritten and reinterpreted. Democrats and Republicans are both gifted at such rewrites. However, this isn't my rhetoric blog, this is an economics site. Let's take a look at the historical realities of claims by Democrats that the "Clinton Tax Rates" were responsible for boom times and a reduced annual deficit.

A quick note: We did not have a surplus under Pres. Clinton. We had a projected surplus over a decade, but no actual surplus. Budget gimmickry likely overstated the ten year total, too, since that assumes no disasters, wars, or recessions. Good luck living in that fantasy land.

For actual Clinton debt numbers, consider the following:

Yes, the deficit was almost eliminated in FY2000 (ending in September 2000 with a deficit of "only" $17.9 billion), but it never reached zero--let alone a positive surplus number. And Clinton's last budget proposal for FY2001, which ended in September 2001, generated a $133.29 billion deficit.
http://www.craigsteiner.us/articles/16
But Democrats insist on rewriting history.
Posted at 06:00 AM ET, 07/01/2011
Barbara Boxer’s blatant rewriting of history - The Fact Checker - The Washington Post
By Glenn Kessler 
“I think we ought to go back to the people and the party that was the only party and the only people to balance the budget in 40 years. I hate to break it to my Republican friends, but that is the Democratic Party. We are the ones who did it. We did it when Bill Clinton came into office. We did it after hard work. We did it after painful cuts. We did it with smart investments.”
— Sen. Barbara Boxer (D-Calif.), June 29, 2011
Again, there was never a balanced budget, only the projections of balance within a dream world. There were no serious cuts, either. More importantly, that balance was made possible only by a Republican Congress and Pres. Clinton negotiating much slower increases in government spending. The lower annual deficit was the result bipartisan argument and debate — not Democrats raising taxes.



FiscalYearYearEndingNational DebtDeficit
FY1993 09/30/1993 $4.411488 trillion
FY1994 09/30/1994 $4.692749 trillion $281.26 billion
FY1995 09/29/1995 $4.973982 trillion $281.23 billion
FY1996 09/30/1996 $5.224810 trillion $250.83 billion
FY1997 09/30/1997 $5.413146 trillion $188.34 billion
FY1998 09/30/1998 $5.526193 trillion $113.05 billion
FY1999 09/30/1999 $5.656270 trillion $130.08 billion
FY2000 09/29/2000 $5.674178 trillion $17.91 billion
FY2001 09/28/2001 $5.807463 trillion $133.29 billion

Mr. Kessler observes:
Each party in Washington seems to have their own narrative. Sen. Boxer’s comment above, from a long floor speech Wednesday lambasting Republicans for pushing a balanced budget amendment to the constitution, is a case in point. 
In Boxer’s telling, the budget surplus that emerged in 1998 and continued for four years sprang forth from a critical moment — the passage of Bill Clinton’s 1993 deficit-reduction bill. For those who don’t remember, it was a cliffhanger vote in both houses of Congress, with not a single Republican lawmaker supporting it.
As the above table illustrated, what surplus? And more importantly, we have to ask what role the GOP Congress played compared to the increased tax rates. Did the tax rates make a huge difference? If so, then we should consider revenue increases now. If not, then it was the spending restraint we should be repeating. Of course, the reality might be that both taxes and slower spending growth are needed (or real cuts for a change).

Boxer added: “But we know what happened. We not only balanced the budget, but we had a surplus. We not only had a surplus, but the debt was going down so fast we thought we would never have to have Treasury bonds again. On top of that, we created 23 million jobs.”But is that really what happened? Were Republicans — who controlled the House and essentially the Senate when the budget was in surplus in 1998, 1999, 2000 and 2001 — irrelevant to the process?
From Kessler's column:
Clinton set a target of cutting the deficit by $496 billion. Hefty tax increases on the top two percent of taxpayers were an important element, but Clinton also had to include enough changes in social policy to win over the party’s progressive wing, such as a boost in Head Start funding and a major expansion of a tax credit for the working poor. 
But here’s the important point: the Clinton plan was never intended to achieve a balanced budget. After the bill’s passage, the Congressional Budget Office estimated that the deficit would decline modestly — from $290 billion in 1992 to $200 billion in 1998. In the phrase of the era, there were still “deficits as far as the eye could see.” 
Indeed, the Clinton budget plan was actually slightly smaller, on an inflation-adjusted basis, than the deficit-reduction package signed into law in 1990 by President George H.W. Bush ($770 billion versus $830 billion). Many Republicans also opposed that deal — which Boxer supported — because it included higher taxes.
Sen. Boxer definitely loses the argument that Democrats intended to balance the budget. Clinton had no such plan. What Pres. Clinton did offer was slower growth of government. This was more self-serving than politicians seem to remember. The public and investors were worried, as they are again today, about the debt and annual deficits. There was pressure to do something. Unfortunately, something didn't mean solving the problem. The only thing the Clinton plan did was to make the problem less worse each year.

Fast forward to 1995. The Democrats lost control of the House and the Senate, largely because of bruising budget battle. Clinton’s fiscal year 1996 budget again proposes $200 billion deficits every year for the next five years…. 
But Republicans immediately set the goal of achieving a balanced budget within seven years. After resisting for a few months, Clinton shocked many fellow Democrats by announcing that he, too, would embrace the idea of a balanced budget.
So where do Democrats like Sen. Boxer get their inaccurate, non-sensical talking points? From the Center for American Progress. Is anyone surprised? Writes the Washington Post's Kessler:
Boxer’s staff referred us to an article by Michael Linden of the Center for American Progress to make the case that the GOP had little to do with achieving a balanced budget. Linden wrote the analysis in response to an article by former House speaker Newt Gingrich claiming major responsibility for achieving the surplus. (Like we said, each party has their own narrative.) 
In the article, Linden asserted that “virtually the entire fiscal improvement” in the mid-1990s was due to Clinton’s 1993 budget and an improving economy, “and particularly the interaction between them.” He argued that legislation passed by Republicans between 1995 and 1997 “combined to actually worsen the fiscal situation—albeit slightly.”
So, was it all Clinton? Of course not.
[Linden] ignores the substantial shift in the policy debate in Washington that occurred because of the GOP takeover of Congress. He also glosses over the fact that the government ended up with a gusher of revenue that had little to do with Clinton’s 1993 budget deal: capital-gains taxes from the run-up in the stock market, as well as taxes paid on stock options earned by technology executives. 
From 1992 to 1997, CBO estimated, revenue increased at an annual average of 7.7 percent in nominal terms, or about 2.4 percentage points faster than the growth of the gross domestic product, the broadest measure of the economy. CBO Deputy Director James L. Blum in 1998 attributed only 1 percentage point of that extra tax revenue to the 1993 budget deal. The rest, he said, came from capital gains.
Now we finally have the truth. The Clinton Tax Rates contributed only 1 percent of new revenues. One little, tiny, statistically impossible to calculate with certainty, percent to increased federal revenues. One lousy percent did not eliminate the annual deficit and the debt never went backwards.

How does Boxer's source at CAP respond to the CBO data? Kessler reports this revealing admission:
Linden says: “I can’t really answer the question about how much Clinton had to do with the economy. He presided over it.”
So, should we raise taxes or restrain spending? It appears spending cuts win the day, if we look at history. But, politics isn't about reality, and too many economists don't even know the actual historical data associated with the Clinton presidency.

No comments:

Post a Comment