History Proves Grand Budget Deals Ineffective

It may seem counterintuitive to liberals that taxing the “rich” more will not fix our deficit problems (even though doing so would be a drop in the ocean, when you consider the immensity of our fiscal problems and the fact that the “rich” can respond in a number of ways so they will not be hit too hard).  Taking more money from high-income earners is overly simplistic and misguided.  It hasn’t worked in the past, and it won’t work now.

We’ve pointed this out before, and Heritage reminds us again, Congress and the White House simply can’t ignore the mistakes of the past as they try to avert the fiscal cliff, and more importantly, as they formulate long term solutions to our fiscal mess. 

Under President Reagan, taxes were raised in 1982 with the Tax Equity and Fiscal Responsibility Act.  Although this $98 billion tax increase was supposed to reduce the deficit from $128 billion in 1982 to $104 billion in 1983, the actual deficit increased to $208 billion.

Note, spending cuts never materialized.

Later, in 1984, President Reagan agreed to a tax hike totaling $49 billion.  Once again, this increased the deficit from $185 billion to $212 billion.  As if this was not enough, taxes were hiked a third time in 1987 and produced the same negative result.

It seems as though Presidents Bush and Clinton were not the most astute students of American budget history, because they both subjected American taxpayers to bad budget deals.

President Bush, who had specifically promised not to raise taxes, succumbed to pressure and did so anyway — fully one-third of the deal, or $158 billion, consisted of tax hikes.

Again, spending cuts were not satisfactorily made, and mostly came from our national defense budget.  Moreover, non-defense discretionary spending actually increased by $45 billion, and another $144 billion in unspecified discretionary spending turned out to be an empty promise.

Conservatives had warned against these tax hikes and for good reason.  Bush’s plan resulted in total outlays that increased by 13 percent from 1990 to 1993 and the deficit increased by 17 percent in the first two years of the plan.

President Clinton was up at bat next, and he must have been napping in his Budget History 101 class as well.  President Clinton had the great fortune of being in office in the midst of a technological boom that gave the economy a big boost and consequently more tax revenue was raised.  The deal that he derived along with the Republican controlled Congress did cut taxes by $80 billion.  However, Clinton increased spending, and total “programmatic” spending increased by 14 percent from 1997 to 2001.

The bottom line is that we do not have tax revenue problems.  We have spending problems, and the deficit will not be fixed until politicians in Washington acknowledge this.

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"Grand bargains" of the past resulted in tax hikes. Spending wasn't cut and the deficits weren't fixed.

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