Clinton Era Taxes and Clinton Era Spending

Posted by on Dec 6th, 2012 and filed under Congress, Economy, Government Spending, Legal, Politics, Presidency. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry from your site

by George Landrith

With the budget and fiscal crisis facing the United States and difficult economic times surely ahead for the foreseeable future, President Barack Obama has vociferously argued that Republicans must agree to tax increases. He argues for what he terms are modest tax increases on the wealthiest Americans that are equal to the tax rates during President Bill Clinton’s time in office. Why is Obama only interested in Clinton era tax rates, but not Clinton era federal spending rates?

There is one correction that must be made  from the outset — despite Obama arguing that he wants to return to Clinton era tax rates, Obama’s tax proposal is actually substantially higher than the Clinton era tax rates. Obama’s plan taxes income on capital gains and dividends at much higher rates than during the Clinton years. Obama’s plan almost triples the taxes on dividends from 15% to 43.4%. Likewise, Obama’s plan for taxes on capital gains is more than 15% higher than the applicable Clinton tax rates. Obama is not actually proposing that we return to the Clinton era tax rates — he just says he is.

Nonetheless, Obama is at least rhetorically fond of Clinton-era tax policy. Why isn’t he equally enamored with Clinton era federal spending?

While Clinton did force a tax increase after his election in 1992, the budget was not balanced until the GOP took control of the House and Senate and insisted on fiscal discipline. Nonetheless, if in Barack Obama’s mind, the Clinton era is the loadstar for tax policy and economic good times, why isn’t the spending policy of the same era also interesting to Obama?

The Republican Congress passed a balanced budget in 1998, 1999, 2000 and 2001. The first three of those years were during Bill Clinton’s second term in the White House. Thereafter, balanced budgets seemed to take a back seat to other political priorities.

In 2008, Barack Obama won election to the White House and Democrats won control of both the House and Senate. The federal budget deficit exploded and the U.S. had four record setting years of trillion dollar deficits. Those growing trillion dollar deficits will continue unless spending is brought back under control.

So far, Obama has shown no seriousness about controlling spending. In fact, Obama has demanded that Congress give him no limit on future borrowing and said that he will discuss spending cuts next year after Congress gives him the tax increases he is demanding.

When President Clinton took office in January 1993, the federal government was spending 22.1% of GDP. Eight years later, when Clinton concluded his second term, in January of 2001, the federal government was spending almost 4 percentage points less of GDP — at 18.2%.

During Obama’s four years, federal spending has grown to an average of 24.4% of GDP. That means that under Obama the federal government is spending virtually one dollar out of every four dollars in the entire U.S. economy. Given Obama’s current plans, the federal government will continue to gobble up more and more of the economy — leaving less and less for hard working, entrepreneurial Americans.

Obama says he wants a “balanced approach,” but this is merely a cynical rhetorical trick. The truth is he wants tax increases and has little interest in reducing spending.

America’s need for robust economic growth strongly argues for maintaining lower tax rates which will spur growth, encourage job creation, and increase incomes. Higher tax rates in the face of recession make no sense at all. At the same time, we cannot continue to spend as we have the past 10 years. Our current deficits are caused because government has been spending too much. Way too much. While American families have seen their average incomes decline over the past four years, the federal government’s appetite for our tax dollars has grown at a record pace. Obama’s solution is to demand more tax dollars. He calls that “balanced.” That is Orwellian doublespeak.

If President Obama wants to return to Clinton era tax rates, he should also be willing to return to Clinton era spending rates. If and when Obama begins talking about Clinton era tax rates and Clinton era spending rates, then you will know he is at least serious about a “balanced approach.” Short of that, Obama is simply an advocate for bigger, more expensive and more intrusive government.

In other words, Obama believes Americans should pay more and have less while he spends more of America’s hard-earned dollars. That isn’t balanced. That isn’t right. That isn’t fair. And it won’t return America to prosperity.

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George Landrith is the president of Frontiers of Freedom, a public policy think tank devoted to promoting a strong national defense, free markets, individual liberty, and constitutionally limited government. Mr. Landrith is a graduate of the University of Virginia School of Law, where he was Business Editor of the Virginia Journal of Law and Politics. In 1994 and 1996, Mr. Landrith was a candidate for the U.S. House of Representatives from Virginia’s Fifth Congressional District. You can follow George on Twitter @GLandrith.

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