Newt Gingrich is at it again. He says Republicans, and especially Newt himself, created the budget surpluses of the late 1990s.
Newt has all of his facts wrong. But then, he usually does.
The Center for American Progress provides an analysis of the cause of the 90s deficit reduction/budget balancing success and pinpoints just who and what was responsible for the late 1990s deficit reduction and budget balancing. It wasn’t the Republicans or Newt. In fact, the policies of the Republicans and Newt, in particular, made deficit reduction and budget balancing harder. So, who got the job done? President Clinton and the Democrats, that’s who by doing all the things Newt and the Repubs opposed.
This from the Center’s analysis of the facts:
President Clinton’s 1993 budget bill—officially known as the Omnibus Budget Reconciliation Act of 1993. OBRA, which mainly raised taxes on wealthy people but also raised the gas tax, extended limits on discretionary spending and cut back on some mandatory spending, was signed into law on August 10, 1993. Just five months prior, theCongressional Budget Office projected a 1998 deficit of $360 billion. One month after the bill passed, the CBO’s new estimate of the 1998 deficit was down to $200 billion. The CBO explained the dramatic improvement this way: “For the first time in two and one-half years, the deficit projections have taken a decided turn for the better… The reconciliation act deserves most of the credit for the improvement over the long run.” Indeed, of the $160 billion improvement from March to September of that year, CBO directly credited OBRA with $143 billion. In fact, OBRA turns out to have been the single largest contributor to the 1998 surplus.
In September 1997, the CBO wrote:
“Over the past four years, growth in revenues has consistently outpaced that of gross domestic product (GDP) by 2 to 3 percentage points. Several factors have contributed to that outcome. The tax increases enacted in the Omnibus Budget Reconciliation Act of 1993 were the main causes in 1994 and 1995. Also, the personal and corporate income tax bases grew faster than GDP over the period, especially in 1996 and 1997. Higher income taxpayers experienced above-average income growth, which boosted revenues because their income is taxed at higher marginal rates.”
The Center explains:
In other words, the rapid growth in personal and corporate income, especially among those at the top of the income ladder, interacted with the higher tax rates that Clinton and the Democratic Congress enacted in 1993. The result was even more revenue flowing into the treasury than just the economic factors or the new tax system alone would have predicted.
So how did Clinton and the Democrats balance the budget and bring down the deficit in the 90s? It was simple and common sense. First, make reasonable cuts in federal spending, nothing extreme just precise cuts here and there. Second, raise taxes on those Americans who can most afford to pay a little bit more—the wealthy.
Think about it. Let’s say we heeded the lessons of the late 1990s Clinton era. Let’s make some cuts like Obama has proposed. And, let’s end the Bush tax cuts for the wealthy and maybe add a small tax increase for those making over a million per year to be in effect until revenues improve, the deficit shrinks and the budget gets under control.
Would taxing the wealthy work? Well, it did in the 90s. And note, the reason revenues went up was wealthy people did very well. They paid more taxes because the improving economy made them richer. Everybody won, not just the few. That’s what I call progressive policy-making. We need more of it. And, we need less lying from liars, like Newt.
