President Clinton upstaged Republicans as they opened debate on their budget reconciliation bill by holding a press conference to announce that deficit spending for fiscal year 1995 has come in lower than his original projections. Since Mr. Clinton has been in office the deficit has gone from a high of $290 billion to $164 billion, so the President proudly claimed, “My policy is working!” Has Clintonomics been good for the country and good for the economy, at least for the short run?
Let’s go back to where we were when Ronald Reagan left office. At that time the deficit was only $152 billion, or $12 billion less than it is today. Since that time we’ve had two record tax increases. Both were supposed to increase revenues and shrink the deficit; but the deficit is higher, not lower, than it was in 1987. If the economic policies of Clinton and his predecessor have proven anything, it’s that raising taxes to reduce the deficit is counterproductive.
When President Bush took over the White House he made a rather unusual bargain with the Democratic leaders. He increased taxes, and let them go right on with their spending spree. That tax increase did what tax increases always do. It depressed the economy which plunged the country into a recession. During a recession the deficit rises at a faster rate because more people are out of work and the demand for government services increases. Although we were taxed at a higher rate, profits went down, so the government actually took in less.
The country had just begun to start the long climb back, when Mr. Clinton took over. After a normal recession the economy generally kicks up to around six percent, but Mr. Clinton turned around and raised taxes again so the economy never made it into overdrive. It’s been struggling to stay above the three percent growth range, which is the long-term average.
Now, let’s look at what’s happened to those interest rates Mr. Clinton is so found of bragging about. Interest rates were on a steady decline when Mr. Clinton took over. The decline continued until September of 1993, right after the tax increase. Interest rates have begun another decline, but this is largely due to the optimism created by the Republican takeover and the promise to balance the budget.
Despite all this talk about cutting spending Mr. Clinton has not delivered. His cuts were not real cuts, but Washington cuts — a cut from what he really wanted to spend if money was no object. However he has not increased the rate of spending like his predecessor George Bush, because Republicans in Congress have kept the pressure on, something they would not do with one of their own big spenders in the White House.
So, why did the deficit go down? It’s a result of lower interest rates — the money we have to pay on the giant national debt is less — and the sell off from the savings and loan debacle, a one time phenomenon. This produced a window of opportunity for Mr. Clinton to have given us a budget that was actually balanced if his cuts had been real.
What Mr. Clinton failed to mention is that the Congressional Budget Office projects that without changes, especially in the large benefit programs, our deficit spending is going to zoom back up, hitting $284 billion in the year 2000. That’s why we must back the Republican budget plan, as weak-kneed as it is. Presently it’s the only real choice we have to put this country on the road to fiscal stability.