What is deficit reduction
The Wall Street Journal
Conservative politicians always threaten the public that, if Congress or the President raises taxes on the wealthy, the economy will slow down, unemployment will go up, and workers' wages will go down.
Conservatives’ hidden agenda: we want to allow our wealthy supporters—the ones who benefited most from the economic policies that forced huge sacrifices onto American workers during the 1980s and 90s—to be able to keep more of their money.
Reality: Raising taxes on the wealthy is much more likely to reduce the deficit and make more money available to proactively solve America’s problems—and save money in the long run. In addition, it may have absolutely no negative effect on economic growth, jobs or wages.
Here’s what conservative politicians said about the 1993 deficit reduction legislation that raised taxes on the top 1.2% of our wealthiest citizens:
"Clearly, this is a job-killer in the short-run. The impact on job creation is going to be devastating." —Rep. Dick Armey, (Republican, Texas)
"The tax increase will…lead to a recession…and will actually increase the deficit." —Rep. Newt Gingrich (Republican, Georgia)
"I will make you this bet. I am willing to risk the mortgage on it…the deficit will be up; unemployment will be up; in my judgment, inflation will be up." —Sen. Robert Packwood (Republican, Oregon)
"The deficit four years from today will be higher than it is today, not lower." —Sen. Phil Gramm (Republican, Texas)
"The President promised a middle-class tax cut, yet he and his party imposed the largest tax increase in American history. We hope his higher taxes will not cut short the economic recovery and declining interest rates he inherited… Instead of stifling growth through higher taxes and increased government regulations, Republicans would take America in a different direction." —Sen. Robert Dole (Republican, Kansas)
So, what was the Wall Street Journal ’s analysis of the the 1993 deficit reduction legislation?
A Vote for Clinton’s Economic Program Becomes
The Platform for Often-Misleading GOP Attacks
Contrary to Republican claims, the 1993 package with a $240 billion tax increase is not "the largest tax increase in history."
The 1982 deficit-reduction package of President Reagan and Sen. Robert Dole in a GOP-controlled Senate was a bigger tax bill, both in 1993-adjusted dollars and as a percentage of the overall economy; and both recent laws are dwarfed by the tax bills of World War II.
Moreover, except for a small gasoline-tax boost and an increase for the best-off Social Security recipients, the tax increases in last years bill mostly didn’t touch the middle class but hit the wealthiest 1.2% of Americans.
GOP candidates also ignore the bill’s tax cuts for individuals and businesses, and nowhere do they describe the plan as a $433 billion, five-year deficit-reduction package.
"It’s the silly season. People are running for office, and people who run for office say silly things," says Carol Cox Wait, a former top GOP aide on the Senate Budget Committee who now heads the Committee for a Responsible Federal Budget…
In all but 11 of the 435 House districts, more taxpayers were eligible for an income-tax cut than got a tax boost… Even in those 11 districts… more than three-quarters of the people saw no change at all in income taxes.
— WALL STREET JOURNAL. October 26, 1994, A22.
And what was the Journal ’s take on the subject three years later?
Scary Deficit Forecasts For Clinton Years
Fade As Tax Revenue Grows
It Rises Faster Than Outlays, Thanks to ’93 Budget Bill
And a Steady Economy
Where has the federal deficit gone?
When Bill Clinton was elected president four years ago, the government was hemorrhaging red ink at a rate of almost $300 billion a year, and forecasters saw little improvement in the offing. Today, his budget office estimates
the fiscal 1996 deficit at just $117 billion—the lowest in dollar terms since 1981, the year Ronald Reagan took office.
Measured as a share of the total economy, the U.S. deficit this year will run only about 1.6%—smaller than the deficits of Japan, Germany, Britain or, indeed, any of the world’s advanced nations except Norway.
Clearly, a stronger-than-expected economy has a lot to do with it. The tax increases in the 1993 deficit-reduction package that Mr. Clinton pushed through get credit as well. And, to a lesser extent, so do the spending cuts engineered by the Republican Congress…
For the current fiscal year, ending Sept. 30, collections now are expected to be $97 billion higher than the $1.356 trillion the Congressional Budget Office projected 3 Ѕ years ago as Mr. Clinton was taking office. That is about 7% more.
By the CBO’s analysis, just over half of the $97 billion increase beyond projections is due to tax boosts in Mr. Clinton’s 1993 antideficit plan. The rest is due to a variety of factors.
—WALL STREET JOURNAL. August 1, 1996, A1.
(Note: For the deficit reduction, the Journal gave more credit to Clinton’s tax increases than to the cost-cutting Republican Congress.)
And another year later—the Journal is still giving credit to "tax-on-wealthy" for the deficit reduction:
Tax on Wealthy Is Boosting U.S. Revenue
Treasury Says 1993 Increase Is Helping Cut the Deficit
President Clinton sold the 1993 income-tax increase as a way to shrink the budget deficit at the expense of the rich.
Republican adversaries predicted it wouldn’t generate much revenue because the rich would work less and take bigger deductions. Now there’s growing, if still tentative, evidence that Mr. Clinton may have been right after all.
The recent flood of revenue pouring into Treasury coffers—enough to push the federal budget to a record $93.94 billion surplus for the month of April—appears to have come mostly from the nation’s biggest earners, indicating that the controversial tax increase may indeed be taking from the rich. "The available data suggest the surge in tax collections has come from the taxpayers with high incomes, who were the only ones affected by the 1993 changes," says Deputy Treasury Secretary Lawrence Summers.
Corporate taxes, which were increased modestly under the 1993 law, also have brought in more revenue, but at about the level the Treasury had been predicting…
The package, part of the 1993 budget agreement, drew harsh criticism from the right. Texas GOP Rep. Dick Armey, who is now the House majority leader, predicted dire results, "Who can blame many second-earner families for deciding that the sacrifice of a second job is no longer worth it?" he wrote.
"The basic fact is that people looked at the 1993 budget agreement and said there’d be a recession, the deficit would go way up and that tax collections would go way down," says Mr. Summers. "What has happened is there has been a boom, the deficit has gone way down and tax collections have gone way up."
— WALL STREET JOURNAL. May 22, 1997, A2.
Not only was the entire national deficit eliminated after raising taxes on the wealthy in 1993, but the economy grew so fast for the remainder of the decade that many conservative economists thought that the Fed should raise the prime interest rate in order to slow it down.
This is another of conservatives’ hidden agendas: they keep promising workers that if we cut taxes on the wealthy and the economy grows, their wages will go up. But when wages even start to go up —for whatever reason—conservatives do everything they can to slow down the economy. They never openly tell the public about the second part of their strategy when they discuss taxes, economic growth and wages.Now go to: