Back to Work - Bill Clinton [14]
At first, because we had a relatively small debt that was mostly held by Americans, the deficit spending led to significant job growth. It was like eating all the candy you want and never having to go to the dentist, though even then the income gains it produced were disproportionately concentrated in the top 10 percent of earners. By 1990, there was enough concern about the rapidly increasing debt that the Democratic Congress passed, and President Bush signed, a budget that began to do something about it. The most highly publicized features of the 1990 budget were a few modest tax increases and the so-called PAYGO rule, which required Congress to fund new programs either by cutting other spending or by raising revenue.
At the time, several moderate Republican representatives, including Minority Leader Bob Michel of Illinois, supported the bill. It was the right thing to do, a responsible first step. However, the antigovernment bloc in the House, led by Newt Gingrich, opposed the budget, using inflammatory language to characterize Republicans who voted for it and the president who signed it as traitors to the antitax cause and, in President Bush’s case, as breaking the famous “Read my lips: no new taxes” pledge he made in his 1988 speech to the Republican National Convention.
Though the budget passed, the fight over it was a political victory for the antigovernment forces. Among House Republicans, Bob Michel emerged weaker, Minority Whip Newt Gingrich stronger. And President Bush’s prospects for reelection lessened when he drew a vigorous primary challenge from Pat Buchanan, who harped on the broken “no new taxes” promise.
Though I was the ultimate beneficiary of the president’s misfortune, I couldn’t help feeling sympathy for his dilemma. He got the worst of both worlds. First, job creation virtually ground to a halt during his term, the inevitable consequence of what he had rightly called “voodoo economics” during his first run for president in 1980. By the late 1980s, the decade-long deficit binge had produced high interest rates, low levels of new investment, the erosion of manufacturing employment, and stagnant wages. Second, when President Bush agreed to sign the 1990 budget to begin turning things around, his party’s loudest voices condemned him as betraying the Reagan Revolution and weakening the economy. The antitax climate was so intense that in his acceptance speech at the 1992 convention, the president felt compelled to say he’d made a mistake in signing the tax increase and to pledge he’d never do it again. His antigovernment wing was demanding ideological purity, even in the face of evidence that trickle-down economics defied the laws of arithmetic and no longer produced jobs. They still wanted to eat candy and never go to the dentist.
When President George W. Bush took office, it was the first time antigovernment Republicans had held both houses of Congress and the White House. They could do whatever they wanted. It soon became clear that what they wanted were big tax cuts, less regulatory oversight, and higher levels of spending. To be fair, some increased spending on national security was inevitable after 9/11. But even afterward, they cut taxes again. It was the first time the United States had ever cut taxes while waging a war. The House Republican whip, Tom DeLay, actually said that in wartime, there is nothing more important than cutting taxes.
The PAYGO rule, which had done so much to ensure fiscal discipline, was scrapped, allowing the administration and Congress to enact both big tax cuts and big increases in spending on wars in Iraq and Afghanistan, on a new prescription drug benefit for seniors, on education through the No Child Left Behind Act, and on the world’s fight against