Borrowing a page from Clinton to close the budget deficit

Among a certain set of Americans, the Bill Clinton years are revered as a shining example of fiscal responsibility. The fact that they refer to the Bill Clinton years instead of the Newt Gingrich-Dennis Hastert-Trent Lott years may give you an idea of who I mean.

Anyway, their implication is that, if only we could go back to the policies that prevailed from 1998 to 2001, when Washington ran budget surpluses, we could balance the budget again. To which I say: Sure, going back to the spending levels in those years sounds great!

Now, it’s true that these people really advocate going back to Clinton-era tax rates — especially on those mean ol’ “rich” people. (Never mind the cuts for the rest of us, which make up the vast majority of the “cost” of the tax cuts these people like to complain about.)

But let’s consider for a few moments what the spending of the last 10 years would have looked like if we’d maintained Clinton-era levels.

For four decades before Clinton became president, federal spending, adjusted for inflation, grew at an annual pace of 2.54 percent. During his presidency, it grew barely half as fast: 1.46 percent a year.

Had that slower rate of spending growth prevailed after Clinton left office, Washington would have spent almost $4.3 trillion less than it did.

Debt-ceiling debate? We wouldn’t have needed the last three increases in the nation’s borrowing limit, much less another one now.

Of course, the economy generally grows much faster than that 1.46 percent spending growth rate. And we add people faster than that, too. So, to help account for such variables, let’s you and I instead go back and use gross domestic product as a yardstick.

The 2001 budget marked the 15th time in 18 years, going back to 1983, that federal spending as a percentage of GDP fell or stayed flat. It bottomed out at 18.2 percent of GDP, its smallest share of the economy since the Eisenhower era, and averaged 18.5 percent during the surplus years of 1998-2001.

Alas, that proportion has grown most years since — peaking (so far) at more than a quarter of GDP in this year’s budget.

What if Washington had simply held the line at that 18.5 percent average during the past decade, instead of letting spending spiral? With that proportion as a cap, the feds would have spent $3.5 trillion less between 2001 and today.

But what about the need to stimulate the economy during the Great Recession? Set aside for now the question of whether the 2009 stimulus package was truly successful. Had spending been lower in the years leading up to 2009, Congress could have passed the very same package and we’d still be $2.5 trillion less in debt.

Either that, or lawmakers would have had more leeway to pass the much larger stimulus package neo-Keynesians insist was necessary (I disagree).

What’s done is done, but the 18.5 percent cap would work wonders for future budgets.

Even without touching tax rates, that spending cap would put the budget into surplus before the middle of this decade — assuming White House projections about revenues and economic growth are correct.

Rather than borrowing another $3.1 trillion during the next five years, we’d borrow just $80 billion. That’s right: Clinton-era spending would let us get back to discussing numbers that start with B’s instead of T’s.

Take us back to that place, and we can talk about taxes to cover the other $80 billion.

– By Kyle Wingfield

Note: This column appeared in Sunday’s print edition of the AJC but its publication online was delayed until I returned from vacation today.

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134 comments Add your comment

Drifter

July 11th, 2011
10:11 am

The mess we’re in will only be corrected by decreased spending and increased taxes. In other words, everybody is going to have to give up something…aka compromise. There are Democrats who will only vote for Democrats not matter what. There are Republicans who will only vote for Republicans no matter what. It’s the thinking people who will count and they’re watching both sides right now. Bush ran up the debt. Obama ran it up even more. The next election is the GOPs to lose. By refusing to compromise, they might do just that.

Bart Abel

July 11th, 2011
10:37 am

RE: “What if Washington had simply held the line at that 18.5 percent average during the past decade, instead of letting spending spiral? With that proportion as a cap, the feds would have spent $3.5 trillion less between 2001 and today.”

Welcome back, Kyle.

Total stimulus spending so far has amounted to less than half a trillion dollars or about a quarter of a trillion dollars per year. To the extent that it kept the economy from shrinking, its cost was actually lower than the amounts spent when offset with revenues saved.

In other words, $250 billion in annual stimulus spending is responsible for a much smaller portion of the $1 trillion-plus annual deficits than many would have us believe. The depth of the recession was so deep, that trillion dollar deficits were forecast before Obama was ever inaugurated.

GDP is generally measured by adding consumer, business, and government spending. The reason that government spending is a larger portion of the economy is not primarily because government spending has gone up, but because consumer and business spending has gone down (hence the recession). When one or two components of GDP go down as a portion of the total, then mathematically, the other components make up a bigger portion of that total.

The spending cap that Republicans are proposing in their new version of their proposed balanced budget amendment would mean that when consumer and business spending goes down, government would have to automatically exacerbate the recession by reducing government spending proportionately at a time when unemployment payments, Medicaid payments and other stabilizers for people out of work would otherwise need to increase…at at time when there’s a hole in our economy caused by reduced private sector spending that government would typically step in to plug.

In short, a spending cap as a percentage of GDP would mean that when we’re in a recession, the government would be required to make the recession worse. This approach, otherwise known as austerity, hasn’t worked in Ireland, the U.K., or anyplace else in the world. Despite that, the GOP wants to enshrine this failed economic approach in our Constitution.

fair and imbalanced

July 11th, 2011
10:42 am

Lets go back to the great W years.

Bullwinkle

July 11th, 2011
10:55 am

Well said, Drifter.

And why am I thinking the middle class is about to get robbed again?

realist

July 11th, 2011
10:55 am

increasing taxes on the “wealthy” isn’t the answer. the wealthy are the one’s who create jobs. Has anyone making 30k a year ever offered you a job? probably not.

td

July 11th, 2011
10:58 am

Drifter

July 11th, 2011
10:11 am

Why do we have to increase taxes and increase them on what or whom?

Churchill's MOM.....Ron Paul for President

July 11th, 2011
11:00 am

since you ertr “gone fishing” I assume that you missed “Meet the Press” yesterday. Your boy Tiny Tim Pawlenty was on and made a fool of himself. He was incapable of giving a straight answere. As “Politico” says TPAW will be first in and first out of the GOP primary race.

Churchill's MOM.....Ron Paul for President

July 11th, 2011
11:02 am

SB Since you were “gone fishing”

the guy on the couch

July 11th, 2011
11:03 am

Still love this piece by a mayoral candidate in Waco, TX

Put me in charge of food stamps. I’d get rid of Lone Star cards; no cash for Ding Dongs or Ho Ho’s, just money for 50-pound bags of rice and beans, blocks of cheese, and all the powdered milk you can haul away. If you want steak and frozen pizza ….. get a job.

Put me in charge of Medicaid. The first thing I’d do is to get women Norplant birth control implants or tubal ligations. Then we’ll test recipients for drugs, alcohol, and nicotine and document all tattoos and piercings. If you want to reproduce or use drugs, alcohol, smoke or get tats and piercings …. get a job.

Put me in charge of government housing. Ever live in a military barracks? You will maintain our property in a clean and good state of repair. Your home will be subject to inspections anytime, and possessions will be inventoried. If you want a plasma TV or Xbox 360 …. get a job and your own place.

In addition, you will either present a check stub from a job each week or you will report to a government job. It may be cleaning the roadways of trash, painting and repairing public housing, whatever we find for you. We will sell your 22 inch rims and low profile tires and your blasting stereo and speakers and put that money toward the common good.

Before you write that I’ve violated someone’s rights, realize that all of the above is voluntary. If you want our money, accept our rules.. Before you say this would be demeaning and ruin their self esteem, consider that it wasn’t that long ago when taking someone else’s money for doing absolutely nothing was demeaning and lowered self esteem.

If we are expected to pay for other people’s mistakes we should at least attempt to make them learn from their bad choices. The current system rewards them for continuing to make bad choices.

JGG

July 11th, 2011
11:08 am

Kyle – I’ll give you the 18.5% if the R’s go back to Clinton tax rates. The House of Reps (R’s and D’s) just increased the Pentagon budget. I guess they were serious about cutting spending after all.

CJ

July 11th, 2011
11:19 am

Spending caps would make the economy worse during a recession. When consumer spending and business investment declines than government stimulus is needed to help fill the gap and mitigate the damage. FDR did it, Reagan did it, Bush 41 and 43 did it, and yes, Obama did it too. As Bart Abel pointed out, you don’t have to be an economist to understand the arithmetic.

The Republican Party was for government stimulus before they were against it, and they became against it when they decided that their number one priority is to make sure that this president fails.

MPercy

July 11th, 2011
11:21 am

JGG, I think I’d be cool with that. Clinton’s spending was $1.5T less in 2000 in inflation adjusted dollars than Obama’s spending in 2010. I’d take the Clinton-era tax rates *for everyone* if we could also get Clinton-era spending.

Problem is…as evidenced by innumerable spending cuts + tax increase deal…is that the spending cuts never materialize or are legislated away. So all we’re left with is the tax increases, which simply pave the way for ever-increasing spending.

P.S. I think many people would support rolling back the Obama (nee Bush) tax cuts *for everyone* more readily than they support rolling back only some of the changes.

Jefferson

July 11th, 2011
11:22 am

As it stands today, the GOP solves no problems, they only create them.

Drifter

July 11th, 2011
11:24 am

We have to increase taxes because we’re in debt for over $14 trillion dollars…haven’t you heard? On Whom? On everybody. If you’re getting government benefits, they’re going to be cut. If you’ve got a government job, you’re salary’s going to be cut. If you pay taxes, you’re going to pay more. Like I said before…everybody’s got to give something to get us out of the mess we’re in.

Rafe Hollister

July 11th, 2011
11:25 am

Bush and Palin have retreated somewhat and no longer prominent enough to absorb all the venom from the left, so this venom is going to go toward, “kill the rich”. Nothing the GOP can do to about this unless they can create another villian equal to Bush/Palin.

Carlosgvv

July 11th, 2011
11:29 am

Kyle, the policies that prevailed in those years were to were to balance the budget. These are different economic times now and comparing those policies to the spending levels of that era is disingenuous at best. At least you are honest enough to openly support the Bush-era tax cuts for the rich while conveniently ignoring how Republicans are all too willing to throw the poor and those on Social Security and Medicare under the bus.

reader

July 11th, 2011
11:46 am

Just more, and more of useless fights in Washington, while nothing gets solved. All these politicians brought us into this mess. They are unable to take us out of it, there is no accountability, or responsibility, only their own interests. How sad – once the strongest country of the world, now the one in red all the way up, and on its knees. We just can’t get anything right. How sad, how sad. And no bright future for our kids, and grand kids.

td

July 11th, 2011
11:48 am

Drifter

July 11th, 2011
11:24 am

I would not object to a tax increase if I knew it would go to paying off the debt. When the congress implements all the spending cuts first and then makes a law that said all increase taxes will go to pay off debt only then I would be more than happy to get on board and I am sure most conservatives would too. Remember Obama said $4 in cuts to every $1 raised.

Jefferson

July 11th, 2011
11:57 am

SS caused NONE of the deficit. If you are going to hold back checks, hold congress and the US armed forces money and see how they like it. The troops may attack congress.

No Tea Party for you...

July 11th, 2011
12:04 pm

Kyle, Don’t see your point. Your column show’s how great Bill Clinton handled the economy. You won’t get your Tea Party membership card that way.

By the way, where did that extra $1.5T (difference between Clinton’s and Obama’s spending) go? How about $1T in Iraq (Bush started), $.5T in Afganistan (Bush started badly), hundreds of billions for Medicare prescription drugs (Bush started), and hundreds of billions in tax cuts for the rich (also under Bush). So what has Obama done that increased spending? Mostly he just hasn’t been able to stop what Bush started.

td

July 11th, 2011
12:22 pm

No Tea Party for you…

July 11th, 2011
12:04 pm

If those “Bush” wars were so bad then why has Obama kept the same policy and even enhanced the troop levels in Afghanistan? What about that 1T in stimulus spending under Obama and the future 1T plus for Obama care? How are these going to be paid for?

Check these stats

July 11th, 2011
12:26 pm

“The fact that they refer to the Bill Clinton years instead of the Newt Gingrich-Dennis Hastert-Trent Lott years may give you an idea of who I mean.”

I’m sure you would in turn call this the Boehner and Reid years as well?

And those Bush tax cuts weren’t geared towards the average Joe. While marginal tax rates were lowered, more Joes paid more in the AMT. Capital gains rates were lowered and we know average Joes have vastly more stock options than the rich. There’s no way you can be for deficit reduction and tax cuts at the same time.

seabeau

July 11th, 2011
12:27 pm

Guy on the couch!! Ya gotta love em in Waco!!

td

July 11th, 2011
12:27 pm

Jefferson

July 11th, 2011
11:57 am
SS caused NONE of the deficit

We yes and no. Since our leaders have really not put SS in a “lockbox” and we are now paying out more then we are taking in then it will be a big part of the problem in the next few years.

Medicaid and Medicare are a lot bigger problem and will bankrupt this country if they are not addressed. Go look at the article in this paper today as to what it is going to cost Georgia in the next few years for increased Medicaid eligibility under Obama care.

jd

July 11th, 2011
12:27 pm

The middle class was the loser in this recession… Wall Street doing great, and profits will increase should US default as the interest paid on debt will rise (Goldman Sachs is brilliant — participate in the greatest financial scam ever and profit both ways!)

Funny how blame accrues to Dems and credits accrue to Reps…

Jefferson

July 11th, 2011
12:37 pm

If you want to cut medicare & medicade cut the PAYMENTS to the providers, tell them that the pay for the job. The people expect,deserve, and paid for the services.

td

July 11th, 2011
12:37 pm

jd

July 11th, 2011
12:27 pm

You my friend really needs to go look up Wall street, banks and hedge funds and see who they have contributed their money too in 2008 and 2010. Let me give you a hint it was not the Republicans. You are being duped by the left wing mass media into think the Dems support the middle class and the poor.

td

July 11th, 2011
12:41 pm

Jefferson

July 11th, 2011
12:37 pm
If you want to cut medicare & medicade cut the PAYMENTS to the providers, tell them that the pay for the job. The people expect,deserve, and paid for the services

I am begging you to go read the article in this paper today about Medicaid. The government is already paying the doctors 80 cents on the dollar. It is so low now that doctors are not accepting more patients in Medicaid and I am sure Medicare is the same way.

Jefferson

July 11th, 2011
12:53 pm

Hospitals and Doctors as an industry cannot live without Medicade & Medicare. Take the profit from health care and pay the providers not the suits and the money that is there is what it is.

jconservative

July 11th, 2011
1:02 pm

Welcome back Kyle.

Social Security and Medicare are on the table. Have they ever really been off the table?

The problem with these two programs is that in 1965 Johnson asked & received authority to “borrow”
the Social Security Trust Fund. In 1983 Reagan asked & received authority to “borrow” the Medicare Trust Fund. To pay the two funds back taxes will have to be raised. The Republicans refuse to raise taxes and have decided to cut Social Security and Medicare benefits instead.

Which is fine. Except the Federal Government took money out of my pocket for 50 years for Social Security and for 43 years for Medicare. Then the Federal Government “borrowed” the money to spend on another Medicare program, Bush’s Part D, military adventures in the Middle East and a major expansion of the Federal Government over the last 30 years.

I insist that they pay back the money they borrowed from the Social Security & Medicare Trust Funds they currently owe. About $3.5 trillion. Then I will be happy and shut up. And if they pay it back and still cut benefits that is OK with me.

Where I come from we generally don’t cotton to deadbeats. And presently the House & Senate are populated by deadbeats.

Pay you bills!

Jefferson

July 11th, 2011
1:03 pm

After reading the article – I agree there is a problem, but I already knew that. Take the British system and improve it…

Drifter

July 11th, 2011
1:07 pm

I can live with a tax increase to pay off the debt too…along with a balanced budget. I’m sticking to my assertion that everyone has to give up something too. If there are Democrats and Republicans who are unwilling to give anything, I won’t vote for them.

Jefferson

July 11th, 2011
1:10 pm

The debt limit is a seperate issue to solve than the deficit, to tie them together is political BS led by the GOP.

what??

July 11th, 2011
1:13 pm

Kyle,

I think you just argued aginst your own party. You refer to the Clinton years and then make a direct comparison to Obama. Wasn’t there a republican congress and president between them. Wouldn’t the situation have been better if instead of turning a surplus into a defict, they just kept the same model as the president and congress before them?

No Tea Party for you...

July 11th, 2011
1:20 pm

td…

Once a war is started, it has to be wound down. You can’t just decide to leave and pull all the troops immediately. Never should have gone into Iraq (no involvement in 911, no WMD found, not nice guys, but not our job to make them nice). Afganistan was the right war, but we should have gone in, done our business, and gotten out. Had a chance to get Bin Laden at Tora Bora, but got distracted by Iraq. That mistake probably cost us 5-6 years and half a trillion dollars. We are now getting out of Iraq and starting to pull out of Afganistan. Bush was in both for 7 years. Obama has been in office for 2 and a half. He’ll get it done.

Ronnie

July 11th, 2011
1:21 pm

What, There you go again, using logic and reasoning.

No Tea Party for you...

July 11th, 2011
1:28 pm

td..

Also, the stimulus spending may have prevented a recession from becoming a depression. What would our umemployment rate be with GM, Chrysler, AIG, BOA, and a bunch of others out of business? Can you say souplines? I think we had to do something, but don’t think we were tough enough on the executives who got us into this mess. Lastly, you assume the new healthcare law will cost $1T. But who do you think pays for uninsured people now. You do, in your increased medical premiums, co-pays, etc..

Rob Woodall Has Always Gotten His Healthcare for Free (but Paid By You), Yet he wants your grandparents to forgo food to pay out from their fixed income for healthcare

July 11th, 2011
1:28 pm

How could we lay waste to the middle east if we were advocating Clinton-era spending?

We couldn’t be fighting them over there so we don’t have to fight them over here, and being embraced as liberators, or letting Iraq finance its own reconstruction, or..

midtownguy

July 11th, 2011
2:08 pm

When conservatives discuss our debt with no mention of military spending I have a tendency to dismiss their comments. Obama’s “stimulus” was a drop in the bucket compared to Bush’s wars (which Obama has continues and thrown in Libya). I will agree to entitlements “on the table” when I get military spending “on the table” along with an acknowledgment that we have to accept the fact that we can no longer afford to police the world.

Linda

July 11th, 2011
2:30 pm

Depleting the resources of the soundest government in the world.

Plan of Action for the US: Spend! Spend! Spend under the guise of recovery–bust the government–blame the capitalists for the failure–junk the Constitution & declare a dictatorship.

How red the sunrise is.

(from a cartoon that appeared in the Chicago Tribune April, 21, 1934 during the Great Depression)

http://gatesofvienna.blogspot.com/2009/05/spend-spend-spend.html

td

July 11th, 2011
2:48 pm

jconservative

July 11th, 2011
1:02 pm

If I have read the studies correctly then you will get paid back with interest for Social Security within the first 5 years of receiving. So once you received those 5 years of benefits are you willing to quit receiving and let everyone else down the line get their money back?

td

July 11th, 2011
2:53 pm

midtownguy

July 11th, 2011
2:08 pm

If I am not mistaken, military spending cuts are the majority of the cuts the Bidden group proposes. Although our military is one of the few real responsibilities of the Federal government. The first cut should be the entire Department of Education (this is a 100% state responsibility), then you privatize Medicare, Medicaid, section 8 and all other housing assistance. You pay for birth control and tell all others that if they want to have children they need to pay for them on their own. After all of the above is done then we can talk about tax increases to pay off our debt.

fat cat

July 11th, 2011
2:57 pm

take accountability for the disaster that was GW and we can talk…

td

July 11th, 2011
3:01 pm

No Tea Party for you…

July 11th, 2011
1:28 pm

You my friend are mixing stimulus spending with bailouts. The 1T in stimulus spending had nothing to do with the bailouts. Now let us talk about the bailouts. What happened to the GM stockholders? What group received the most benefit from the bailout? What would have been wrong with the company filing bankruptcy? The answer to all of the above is the unions would have lost and would have had to make concessions. I think all of the banks paid back the US with interest except for AGI (not really a bank). Will we ever see all the money paid back from GM? GM would not have shut its doors, they would have reorganized and come back just like the airlines have done.

Linda

July 11th, 2011
3:50 pm

According to the Treasury Dept. & the annual national debt, from election to election, the debt increased:
$1.7 T during Reagan’s 8 yrs.
$1.5 T during GHW Bush’s 4 yrs.
$1.6 T during Clinton’s 8 yrs.
$4.4 T during G Bush’s 8 yrs. &
$4.5 T during Obama’s 20 mts. since elected.

Obama is now adding more to the debt each year than Reagan, GHWB & Clinton did during their presidencies. The US could default because the Democrats want even more money.

John

July 11th, 2011
3:54 pm

@realist,

“increasing taxes on the “wealthy” isn’t the answer. the wealthy are the one’s who create jobs.”

The wealthy have gotten much more wealthier over the last few years…so, where are the jobs? Voodoo economics, aka trickle down, isn’t working, is it?

Moderate Line

July 11th, 2011
4:16 pm

In 2001 we spent 2.91% of GDP on defense. In 2010 we spent 4.76, Also, we spend 6 times more than China and 12 times more than Russia.

In 2001 we 18.2% of GDP total government spending in 2010 we spent 23.8. 33% of the increase in spending has been due to defense spending.

1.848
.8% increase is due to unemployment insurance payout.
.826 is due to increase in medicare.

We are now up to 62% of the increase in spending.

To blame all the deficit spending on Obama is sly considering one of the biggest drivers is defense spending which is a sacred cow for the conservatives.

Moderate Line

July 11th, 2011
4:20 pm

jconservative

July 11th, 2011
1:02 pm
Welcome back Kyle.

Social Security and Medicare are on the table. Have they ever really been off the table?

The problem with these two programs is that in 1965 Johnson asked & received authority to “borrow”
the Social Security Trust Fund. In 1983 Reagan asked & received authority to “borrow” the Medicare Trust Fund. To pay the two funds back taxes will have to be raised. The Republicans refuse to raise taxes and have decided to cut Social Security and Medicare benefits instead.

Which is fine. Except the Federal Government took money out of my pocket for 50 years for Social Security and for 43 years for Medicare. Then the Federal Government “borrowed” the money to spend on another Medicare program, Bush’s Part D, military adventures in the Middle East and a major expansion of the Federal Government over the last 30 years.

I insist that they pay back the money they borrowed from the Social Security & Medicare Trust Funds they currently owe. About $3.5 trillion. Then I will be happy and shut up. And if they pay it back and still cut benefits that is OK with me.

Where I come from we generally don’t cotton to deadbeats. And presently the House & Senate are populated by deadbeats.

Pay you bills!
++++
Medicare has run a deficit since it’s inception. Medicare currently gets around 40% of it’s funding from general taxiation.

http://www.ssa.gov/OACT/TRSUM/index.html

GW

July 11th, 2011
4:25 pm

Undo the 2001 and 2003 tax cuts, Kyle. That’s fine by me. Put us back at the tax code that existed before Bush took office. Go for it. Write an article supporting the elimination of the Bush tax cuts along with catch-up payments for all the years they were intact. Go for it, Kyle.

Linda

July 11th, 2011
4:42 pm

One of the economic indicators is the Consumer Confidence Index created in 1967. It’s interesting to see how it has fluctuated among presidents & after major events. It’s lowest point in its history was in 2/09. That was right after Obama was elected, the month he & the Democrats passed the economic stimulus bill & the time that the American people became outraged & began protesting, i.e. the birth of the Tea Party.