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.