Jonathan Chait

Who Created The 1990s Surplus, Clinton Or The GOP?

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Former GOP House staffer Scott Galupo, while crediting my skepticism of supply-side economics, thinks I give Bill Clinton too much credit for the 1990s surpluses, when the credit belongs to House Republicans:

The idea it was Clinton’s boldness alonejust a triviality that he was dealing in those days with a deficit-hawkish Republican Congressthat cleaned up a fiscal mess is equally risible. I was a (lowly) congressional staffer in those days; I remember the appropriations fights, the threats of White House vetoes, the howls of protest at cruel Republican budget slashers.

It wasn't Clinton's boldness alone that caused the budget surplus to appear. George H.W. Bush's 1990 deficit reduction deal, which was also denounced in apocalyptic terms by conservatives, did more to reduce the deficit than Clinton's 1993 budget. The 1990s economy helped as well, though both Bush and Clinton deserve credit for helping lay the groundwork for that growth by putting sensible fiscal policy into place.

Galupo makes three points in defense of his claim that Republicans deserve more credit than Clinton for the surplus:

It was Contract with America-era Republicans that established the rhetorical framework within which the aforementioned budget fights occurred.

Here’s liberal columnist E.J. Dionne assessing the Clinton presidency in an exchange with Robert Kuttner:

"[D]uring the mid-1990s, Clinton himself tacked further to the right than the situation required. He embraced a Republican view of welfare reform. He went along with a brutal immigration bill and assaults on civil liberty in the name of crime control. He accepted the idea of a balanced budgetand then when an economic boom pushed the budget into surplus, he declared that he would pay off the entire national debt."

Clinton's declaration in favor of paying off the national debt was indeed a fiscally conservative position. But it wasn't a capitulation to conservatives -- it was a direct repudiation. Republicans proposed to dissipate the surplus through tax cuts. Clinton insisted on saving the surplus, vetoing their plan, though Republicans ultimately succeeded when Clinton left office and was replaced by a Republican who shared their tax cuts uber alles ideology. Republicans deserve approximately the same share of credit for preserving the 1990s surpluses as the America First Committee does for winning World War II.

Second,

And here’s the Clinton White House’s own website, boasting of a rather important piece of legislation conveniently unmentioned in narratives of deficit reduction that stop at 1993:

"[H]e signed the Balanced Budget Act of 1997, a major bipartisan agreement to eliminate the national budget deficit, create the conditions for economic growth, and invest in the education and health of our people."

I understand why the Clinton administration likes to claim the 1997 Balanced Budget Act as an achievement. But it did nothing to reduce the deficit. By 1997, the deficit was dwindling away to nothing. The role of the "Balanced Budget Act" was to take credit for something that was about to happen anyway. The cuts same in the form of lower discretionary spending caps which were never implemented. It did reduce Medicare spending, but devoted all the savings to a children's health insurance program and a capital gains tax cut. Budget experts I've spoken with believe deficit would have been lower if the Act had never passed into law.

Third, Galupo dismisses the 1990s surpluses as mere projections:

It’s critical to remember, too, that ’90s-era surpluses were never cold cash under the federal mattress, but, rather, projections that evaporated with the NASDAQ meltdown, 9/11, and, yes, the Bush tax cuts of 2001.

That's not true at all. By the end of the Clinton administration, the federal government was paying off the national debt:

Now, it's true that the surpluses projected to continue indefinitely into the future disappeared. But the surpluses were, in fact, cold cash. They were bound to disappear even without Bush's policies. But, of course, the probability that they'd disappear was exactly why Democrats insisted that enacting permanent tax cuts was such a bad idea. Republicans scoffed at the warning that the surpluses would prove temporary. (You can find copious examples in my book.) Once again, they were wrong.

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