The decade the GOP hopes you’ve forgotten

It wasn't that long ago that America solved a debt crisis by (gasp) ... raising taxes on the rich

Topics: Budget Showdown, War Room,

The decade the GOP hopes you've forgotten

(updated below)

If there’s one aspect of the deficit reduction plan that President Obama outlined last week that congressional Republicans most object to, it’s probably his call for higher income tax rates on the wealthiest Americans. Specifically, Obama wants to let the Bush-era rates for the wealthiest 2 percent of Americans expire at the end of 2012.

With a few notable (and, within their party, increasingly marginalized) exceptions, Republicans have vehemently attacked this suggestion. According to the GOP’s line, to raise taxes on anyone now, even (or especially) the wealthy, would kill the recovery and cost jobs, depriving the Treasury of revenue and only making the deficit problem worse.

“We don’t have deficits because Americans are taxed too little, we have deficits because Washington spends too much,” is House Speaker John Boehner’s standard line on the issue — a refrain that is echoed by virtually every other Republican on the national stage.

If this anti-tax adamance — and the dire warnings of what life in a post-tax hike America would look like — sounds familiar, it’s for good reason. Republicans issued the exact same warnings the last time a president proposed addressing exploding deficits (in part) through tax increases on the wealthy.

This was back in 1993, when Bill Clinton came to office after a campaign in which the national debt — which had then just crossed the $4 trillion mark — played an unusually prominent role. The ’92 White House race had taken place against the backdrop of high unemployment and widespread economic anxiety and pessimism. It is under these conditions that voters can be persuaded that annual deficits and the national debt are deeply related to their suffering and must be addressed immediately. Thus, Paul Tsongas in the Democratic primaries and Ross Perot in the general election gained remarkable traction by promoting aggressive anti-deficit programs. Leaders of both parties publicly agreed that deficits should be a top national priority.



While Clinton, as a candidate, conceded that deficits were a significant problem, he didn’t exactly run as a hawk on the issue. But he did call for a tax increase on the wealthiest Americans to offset a tax cut for the middle class without running up more debt. As president, though, he was quickly persuaded by Fed Chairman Alan Greenspan to attack the deficit far more aggressively. This meant reneging on the middle-class tax cut pledge. Ultimately, Clinton and Democratic leaders on Capitol Hill united behind a plan that would raise taxes on the top 1.2 percent of income earners and create a new 39 percent bracket for the wealthiest Americans.

The Republican reaction was identical to what we are hearing from today’s GOP. For months in the spring and summer of 1993, they loudly and relentlessly decried Clinton’s effort to enact “the largest tax increase in the history of the world” — a plan that, they warned, would smother what was then a tentative economic recovery, plunge the economy back into recession, throw millions of Americans out of work, and ultimately result in a far worse deficit problem.

They also pointed to the budget accord that George H.W. Bush had struck with congressional Democrats in the fall of 1990, in which the president agreed to go back on his “no new taxes!” campaign pledge. Those tax hikes, the Republicans of ’93 told Americans, had caused the recession of the early ’90s — and here were Clinton and the Democrats ready to make the same mistake all over again! It was a nice talking point, even if the facts weren’t quite on their side. In reality, the country had already been in a recession when Bush had made his deal, and economists later determined that that recession ended in the spring of ’91. But unemployment and the anxiety it produces can linger long after the end of the technical end of a recession, so to most Americans in mid-’93, the GOP line had the ring of truth. Moreover, the GOP noted that the Bush plan had been designed to fight the deficit — and yet, the problem was now worse. Again, there was a logical explanation: The downturn of the early ’90s — like the downturn of the past few years — had hurt the Treasury’s revenue stream. Again, this was lost on most Americans.

Thus, the GOP succeeded brilliantly in driving up opposition to the Clinton plan. Fearful voters turned against it in polls as they heard about the devastating effects it would have on the economy and their own lives. The hysteria was stoked by literally every Republican on Capitol Hill; not a single GOP member of the House or Senate ended up voting for the plan.

Thanks to the magic of C-Span’s video archive, it’s easy to revisit the GOP’s fear-mongering of ’93 — all of the warnings about the terrible things that would happen if the Clinton budget were ever signed into law. For instance, here are some of the highlights from a press conference organized by the House’s top conservatives (led by Newt Gingrich, who by mid-’93 had become the House GOP’s leader-in-waiting) immediately after the House approved Clinton’s budget (on a 218-216 vote) in early August:

John Kasich (then a Republican congressman from Ohio, now that state’s governor):

I feel bad for the people who really are the working people in this country, people in my family, who are going to get the penalties from people who don’t want to invest more, take any more risks. They’re going to lose their jobs, and that’s the tragedy of this program

 Gingrich:

“I believe this will lead to a recession next year. This is the Democrat machine’s recession. And each one of them will be held personally accountable.”

Kasich, again

“The proof will be in the pudding. We’re going to come back here next year, there will be higher deficits, there will be more spending, we’ll continue to have a very slow economy, people aren’t going to go to work.”

 And on and on it went like this. Here’s the full video:

It’s important to note that this was not an isolated event — that Newt and his friends simply fell victim to some heat-of-the-moment hyperbole. This was the Republican Party’s line for all of 1993, one repeated by senators, congressmen, talk shows hosts, activists, and state and local officials at every level of the ballot. Here, for instance, is another C-Span clip, this one from a group of conservative senators — Malcolm Wallop, Trent Lott, Larry Craig and Paul Coverdell — making the exact same case earlier that summer:

The entire video is well worth watching. Note how similar — identical, really — the rhetoric is to that favored by today’s Republicans. Virtually any line offered by any of the Republicans from ’93 — for instance, Coverdell’s statement that “[i]t’s going to slow the economy. It’s going to put people out work. I’ve been saying for the last week, the person I feel worst for in all of this is the person filling out that job application — because it’s a tight job market now, and it’s going to get tighter” — could easily be recycled and used by a Republican in 2011.

What’s fun about looking back at the ’93 clips, of course, is that we know how the story ended. There was no second recession in the next year. The economy didn’t slow down. Jobs weren’t killed. Revenue didn’t shrivel up. What did happen is that the tentative recovery turned into a full-fledged recovery and economic growth eventually exploded. There are all sorts of explanations for the prosperity of the 1990s; at the very least, we can say that Clinton’s budget did absolutely nothing to stop this prosperity from taking hold — even though the GOP insisted that it would make any kind of recovery impossible. What’s more, with the higher rates in place thanks to the Clinton budget (and the Bush budget, for that matter), Uncle Sam benefited from an unprecedented infusion of revenue. By 1998, the country was running surpluses and rapidly paying down the debt. When Clinton left office, America was on track to pay off its entire debt. By any measure, the Clinton tax increases had worked — spectacularly.

And yet, there is no evidence that this powerful example has had any effect on the GOP’s budget posture in 2011. What Republicans do seem to remember is the short-term political gain that their fear campaign helped them achieve. In the 1994 midterms, the Clinton budget was an enormous liability for Democrats, with even many of the 98.2 percent of Americans whose income taxes weren’t raised convinced that Clinton and his party had targeted them. It may be the most enduring irony of the Clinton presidency: Perhaps his most significant achievement ended up contributing to one of the worst drubbings his party suffered in the 20th century.

Update: Numerous commenters and emailers have responded to this story with revisionist claims that seek to downplay the significance of the Clinton budget on the revenue surge of the ’90s and to instead credit the Republican Congress that took over in 1995. For instance, via Twitter, I was sent a link to this 1998 piece from Stephen Moore, who asserted that the balanced budget that was announced that year had nothing to do with Clinton’s policies:

And 1993 — the year of the giant Clinton tax hike — was not the turning point in the deficit wars, either. In fact, in 1995, two years after that tax hike, the budget baseline submitted by the president’s own Office of Management and Budget and the nonpartisan Congressional Budget Office predicted $200 billion deficits for as far as the eye could see. The figure shows the Clinton deficit baseline. What changed this bleak outlook?

Newt Gingrich and company — for all their faults — have received virtually no credit for balancing the budget. Yet today’s surplus is, in part, a byproduct of the GOP’s single-minded crusade to end 30 years of red ink. Arguably, Gingrich’s finest hour as Speaker came in March 1995 when he rallied the entire Republican House caucus behind the idea of eliminating the deficit within seven years.

I’m not sure what this is — or was — supposed to prove. Remember: The universal claim of Republicans in 1993 was that if the Clinton budget and its tax hikes on the wealthy ever became law, the country would immediately be plunged into another recession and millions of Americans would lose their jobs. That didn’t happen at all. Moreover, when the economy began growing rapidly in the middle and late years of the decade, the new, higher rates established by the Clinton budget helped produce a massive revenue windfall — enough to lead to record surpluses and to bring into sight the elimination of the entire national debt. You don’t need to claim that Clinton’s ’93 budget itself spurred the economy or that it was the only reason a balanced budget was reached so quickly (yes — there were other factors!) to acknowledge that (a) it did not cause any of the economic turmoil that Republicans guaranteed Americans it would and it did not hinder — at all — the sustained growth that marked the rest of the decade; and (b) it brought in far more revenue than the pre-Clinton budget tax rates would have — and this revenue made achieving a balanced budget much easier.

Steve Kornacki

Steve Kornacki writes about politics for Salon. Reach him by email at SKornacki@salon.com and follow him on Twitter @SteveKornacki

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