The Economy After 4 years: Clinton vs. Bush

[Iriemon]

Yes for the 1994 budget and the effects on the economy began to be felt later in that year and on into 1995. At a time when GDP should have been soaring, having inherited a recovering economy he stifled growth and revenues with his tax increase.

Stifled growth? The economy with the Clinton tax increase grew better than with Reagan tax cuts.

Clinton:

1993 7532.7 2.67%
1994 7835.5 4.02%
1995 8031.7 2.50%
1996 8328.9 3.70%
1997 8703.5 4.50%
1998 9066.9 4.18%
1999 9470.3 4.45%
2000 9817.0 3.66%

Average: 3.71%

Reagan:

1981 5291.7 2.52%
1982 5189.3 -1.94%
1983 5423.8 4.52%
1984 5813.6 7.19%
1985 6053.7 4.13%
1986 6263.6 3.47%
1987 6475.1 3.38%
1988 6742.7 4.13%

Average 3.42%

If you tack the Bush I years into it, the Reagan average drops to 3.0%.

Revenues?

Let's look at those over the past 12 years.

1993 1154.4
1994 1258.6 104.2
1995 1351.8 93.2
1996 1453.1 101.3
1997 1579.3 126.2
1998 1721.8 142.5
1999 1827.5 105.7
2000 2025.2 197.7
2001 1991.2 -34.0
2002 1853.2 -138.0
2003 1782.3 -70.9
2004 1881.1 98.8

We can sure see that revenue growth as a result of the Bush tax cuts.

[FONT=Helvetica, Arial]Using the Washington University Macro Model, a computer simulation of the economy, researchers concluded that the recovery from the 1990-91 recession has not been as strong as it might have been without the tax increase. Among the effects: [/FONT]

Big deal. You can make a "model" that says anything. You reckon these are the same folks who modelled the budget cuts in 2001 which lead Bush to tell us that the surplus would continue and the debt cut by two trillion, even with his tax cuts?

[FONT=Helvetica, Arial]During this recovery, the gross domestic product has increased less than half as much as the average during three previous long recoveries -- during the 1960s, 1970s and 1980s. Industrial production and total employment have increased just over half as much, and unemployment has declined by less than half the number during the previous expansions.

[FONT=Helvetica, Arial]http://www.ncpa.org/~ncpa/pd/economy/ecoa4b.html
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The article you cite appears to have been written years ago, and only looks at '93-96. That, of course, doesn't tell the whole story of the boom experienced while Clinton was president.

I hate to post a lot of figures, but otherwise this becomes just a you-say I-say kind of thing. These are the GDP numbers from the Dept of Commerce, Bureau of Economic Analysis, in constant 2000 dollares; http://www.bea.gov/bea/dn/home/gdp.htm, and the % increase/decrease from the prior year.

1970 3771.9 0.17%
1971 3898.6 3.36%
1972 4105.0 5.29%
1973 4341.5 5.76%
1974 4319.6 -0.50%
1975 4311.2 -0.19%
1976 4540.9 5.33%
1977 4750.5 4.62%
1978 5015.0 5.57%
1979 5173.4 3.16%
1980 5161.7 -0.23%
1981 5291.7 2.52%
1982 5189.3 -1.94%
1983 5423.8 4.52%
1984 5813.6 7.19%
1985 6053.7 4.13%
1986 6263.6 3.47%
1987 6475.1 3.38%
1988 6742.7 4.13%
1989 6981.4 3.54%
1990 7112.5 1.88%
1991 7100.5 -0.17%
1992 7336.6 3.33%
1993 7532.7 2.67%
1994 7835.5 4.02%
1995 8031.7 2.50%
1996 8328.9 3.70%
1997 8703.5 4.50%
1998 9066.9 4.18%
1999 9470.3 4.45%
2000 9817.0 3.66%
2001 9890.7 0.75%
2002 10048.8 1.60%
2003 10320.6 2.70%
2004 10755.7 4.22%

Average annual growth in the 70s = 3.26%.
Average annual growth in the 80s = 3.07%
Average annual growth in the 90s = 3.11%
Average annual growth in the 00s = 2.59%

The 70s were a period of high taxes. The 80s had the Reagan tax cuts. And the 90s had the Clinton tax increase. The 00s had the Bush tax cuts.

As I posted above, the average annual growth during the years Clinton was president was 3.71%, which is better than average in the 70s, 80s 90s, or 00s.

Doesn't seem to me that tax rates have made a heck of a lot of difference in terms of affect on economic growth over the last 3 1/2 decades.

 

[Iriemon]

Where were you then, it was WIDELY reported.

"Probably there are people in this room still mad at me at that budget because you think I raised your taxes too much. It might surprise you to know that I think I raised them too much, too."
--Bill Clinton (Reuters, 10/17/95)

Probably only in that "liberal media." OK, Clinton said that in 95. Given the fact that the budgets were just balanced in '00, and we were just in the position to start paying down the debt, I disagree with him, I'd say the tax increase was about right. Once the debt was paid down we could have cut back taxes.

They were declining before then because growth was increasing as the economy was recovering from recession and revenues were increasing as a result. What we have learned is you don't tax your way out of deficits you GROW your way out of deficits. And what else we have learned is you don't tax yourself into growth.

I posted the stats showing GDP growth in my previous post. In this one, lets take a look at your claim that "you don't tax your way out of deficits."

This is the deficit/surplus data from the CBO.gov website. The % is the deficit as a percentage of Federal revenues.

1979 -38.7 -8.4%
1980 -72.7 -14.1%

In 1981 Reagan is elected and passes tax cuts. Let's see how we grow out of the deficits ...

1981 -73.9 -12.3%
1982 -120.0 -19.4%
1983 -208.0 -34.6%
1984 -185.6 -27.8%
1985 -221.7 -30.2%
1986 -237.9 -30.9%
1987 -169.3 -19.8%
1988 -194.0 -21.3%

In 89 Bush I becomes president and continues the Reagan economic program, except for a small tax increase (top rate 28% -> 31%) in an attempt to trim the budget.

1989 -205.2 -20.7%
1990 -277.8 -26.9%
1991 -321.5 -30.5%
1992 -340.5 -31.2%

Not growing out of the deficits there.

In 1993, Clinton is elected. The Dems pass a tax increase raising the top tax rate to 39%.

1993 -300.4 -26.0%
1994 -258.9 -20.6%
1995 -226.4 -16.7%
1996 -174.1 -12.0%
1997 -103.3 -6.5%
1998 -30.0 -1.7%
1999 1.9 0.1%
2000 86.6 4.3%

2001, Bush becomes president, slashes taxes.

2001 -33.3 -1.7%
2002 -317.5 -17.1%
2003 -536.1 -30.1%
2004 -567.4 -30.2%

The empirical data doesn't, IMO, support your contention that tax cuts grow the economy out of deficits. Quite the contrary.

I agree tax cuts can have some stimulation for economic growth. How much depends upon on the rate. If taxes are 90%, a tax cut can make a big difference. If taxes are 39%, they will have much less impact.

For the tax cuts to grow the economy out of deficits, not only must the tax cuts increase growth, but must increase growth proportionally more than the revenue loss from the fact that less % of income is being collected. Cutting the taxes to 0% would give you a little better growth, but no matter how much growth you have it wouldn't cut the deficits.

I borrow to buy my house and I am the one who has to pay it back and it is still great. It's when borrowing and spending get out of hand that it is bad.

Total Debt as a fact of revenues was higher in 2004 than any time since 1962, which is the oldest data CBO reports. Because of the deficits we have no savings in the SS trust fund. I think it is out of hand.

Unlike your home mortgage, our kids will be on the hook because of the Republican debt.

OK, so let's grow the economy and end the deficits. If you want to make the case that increasing taxes increases economic growth I'd like to hear it because I know of no economist with his reputation that would suggest any such thing.

Increases taxes does not increase growth. However, history has shown that a relatively modest increase in taxes, say from 33% to 39%, does not have much of an effect on growth. However, it has a significant effect of the Govt tax receipts.

But if your theory is that tax cuts solve the problem, why not cut taxes to 1%? That should wipe out the deficits and make huge surpluses, right? Of course not.

 

[Iriemon]

And before our fanancial markets were attacked and before we went to war.

The stock market correction and the wars have had an effect. But they do not explain the $2.2 trillion borrowed. The Iraq war has cost what, about $250 billion? The stock market correction had an effect, but as we have agreed, the overal economic recession was mild. If you believe the White House, the tax cuts have caused $620 billion and new spending have caused $470 billion in terms of effects on the deficits.

But if the Democrats had a plan to balance the budget why did they never explain what it was?

The Dems didn't just have a plan to balance the budget, they did it. The plan in 2000 was to stay the course, and use the surpluses to pay off a lot of the debt, and give our kids something that would really benefit them: a debt-free America.

Of course, Bush told us he could slash taxes and pay down the deficit by $2 trillion in 10 years. So far he has borrowed $2.2 trillion. Looks like he will be $5-6 trillion off. But everyone makes mistakes. He could have been using that Washington University Macro Model.

Are you saying Democrats never borrow?

At least since 1980, the Repubs are the undisputed heavyweight champs at this.

Yes an rightfully so, had Clinton done NOTHING as far as the economy we would have had higher growth and higher revenues and more income in the pockets of the working citizens.

To the contrary. Clinton created a government with fiscal responsibility, which benefits industry and the markets. Average annual economic growth during Clinton's term (3.71%) was better than Reagan's (3.42%), Bush I's (2.1%), Bush II's (2.3%) or Nixon's (2.8%) for that matter.

It doesn't take courage to raise the taxes of the minority in order to try and get the votes of the majority and they rightfully paid for it.

It takes tremendous political courage to raise taxes. Who wants to pay higher taxes? In 1993 the Dems raised taxes and were voted out of power.

It sure doesn't take courage to cut taxes and borrow from the future like the pass-the-buck Republicans do.

Sure it made great political fodder for them, you actually fell for it? But then Clinton was dragged kicking and screaming to a balanced budget and tax cuts which kept the economy growing and put money in everyones pocket.

Tax cuts? Clinton and the Dems raised the tax rate from 31% to 39%. I don't personally recall Clinton objecting to having balanced budgets.

I used to give the Republicans credit for this -- still do to an extent with the Gringrich/Lott brand that seemed to at least have some concept of fiscal responsibility.

But the Republicans have shown their true colors controlling the WH as well. Spending increasing twice as fast and exploding deficits and debt.

Actually it kept a economic downturn quite mild and set up the growth we are seeing now.

I agree it was quite mild. So we are over it now. Let's stop stealing from our kids.

Had they increased taxes as the Democrats wanted to the economy would have worsened, incomes would have declined and the recovery would have taken much longer. Are you seriously suggesting that a tax increase at the time of a downturn was the proper course to get the economy moving? That is shear folly.

The Dems didn't want to increase taxes in 2000. Kerry proposed putting them back at the same level as Clinton had them, at a time of record economic growth.

As I have said many times, if Bush proposed a temporary tax cut to stimulate the economy, I'd have no problem with that. But bush wants permanent borrowing.

Because the Republicans refused to enact his spending request which were always higher (except for years he was contained by the previous years budget agreements).

Clinton vetoed Republican spedning pork (which Bush refuses to do) and vetoing their attempts to cut taxes and borrow the money, which they are doing now.

He also admantly oppose wel-fare reform which also dramatically cut federal spending and vowed to repeal if re-elected (which of course he did not and then tried to take credit for it).

Clinton signed the welfare reform act.

Hardly. He and the congress also inherited the peace dividend which help ease spending.

Defense spending under Clinton was basically flat: $292 B in 1993 and $295 B in 2000.

Oh I agree spending should be cut. But to believe that Kerry with a Democrat congress would have spent less is absurd.

I can't image they'd have done worse than the lot we have. I hope. But given the fiscal failure for the last 5 years, I'll try anything new.

So tell me what spending you would propose we cut.

I'd put taxes like they were in the 90s and cut spending about 10% across the board -- that would about do it.

 

[Iriemon]

No it is not debatable. And why do you use ANNUAL figures instead of quarterly?

Using annual data figures is something usual or tricky? Sure there was a couple up and down quarters. I have agreed there was an economic slowdown. But as you agree, it was mild. GDP never went down on an annual basis, which to me, indicates a slowdown, or a very mild recession, if you arbitrarily want to call it that.

Iriemon: With growth projected at over 4% again this year, we are well out of the "recession"

And that growth is cutting the deficit projects in leaps and bounds.

Only if you buy the White House's ponied up figures, which includes the SS surplus they are stealing but is supposed to be saved for the boomers' retirements, and excludes the costs of the war.

Here's the real picture -- what the Govt actually borrowed, according the the Treasury department:

2001 5,807 133
2002 6,228 421
2003 6,783 555
2004 7,379 596

These are total US Govt debt figures for those fiscal years, and the increase from the previous year.

For fiscal year 2005, the debt has grown from $7,379 (9/30/04) to $7,932 (8/23/05) a $553 billion increase, with a little more than a month to go.

Doesn't look like a real great improvement to me.