Second, Ferrara writes about the futility of tax increases: “In 1993, President Bill Clinton tried again as the Democrat-controlled Congress passed a tax increase as part of another budget deal. By 1995, however, Mr. Clinton greeted the new Republican-controlled Congress with a budget that projected $200 billion deficits indefinitely into the future.”
Despite the implication – that Clinton’s tax increase made the fiscal picture worse – the deficit fell every year under Clinton from the record $290 billion that he inherited from President George H.W. Bush until the budget reached balance in 1998.
The notion that, somehow, things started to turn around when Republicans took over Congress in 1995 is absurd. So, too, is the notion that Clinton’s tax increase generated higher deficits or hurt the economy.
What actually happened, as I was fond of writing as OMB’s communications director from 1994 to 1997, was that Clinton’s 1993 budget deal with congressional Democrats – which every Republican opposed – helped generate what the White House called a “virtuous cycle” of lower interest rates, more business investment, more jobs, lower inflation, stronger growth, and higher living standards.
Third, Ferrara writes about how to balance the budget going forward: “Start with the tax reforms necessary to maximize long-term growth and shoehorn spending into that revenue base.”
Ferrara would cut the corporate tax rate, impose a flat tax on individuals, close tax loopholes, eliminate the estate tax and alternative minimum tax, kill all unspent funds under last year’s stimulus bill, restructure Social Security and Medicare, reform all means-tested programs including Medicaid, roll back other spending, phase out farm subsidies, and end “corporate welfare.”
That’s a radical agenda for addressing our looming budget deficits, but one that deserves a hearing as much as any other.
In mulling it, however, policymakers should not be fooled by the falsities and unsubstantiated claims that Ferrara puts forward in today’s piece.
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Lawrence J. Haas is former Communications Director to Vice President Gore and, before that, to the White House Office of Management and Budget. He's now a public affairs consultant who writes widely about foreign and domestic affairs, including fiscal policy.
