Saturday, October 30, 2010

This Time is Different.

Another important difference between 1994 and today is that presidents George H.W. Bush and Bill Clinton and Democrats in Congress had already done the heavy lifting of getting the federal budget onto a sustainable path. In the 1990 and 1993 budget deals — both enacted against the strenuous opposition of congressional Republicans — taxes were raised and strong deficit controls put in place that led naturally to surpluses so long as the budget remained on auto-pilot, with no big new spending programs or tax cuts. Under these circumstances, gridlock was just what the doctor ordered.

It should be remembered also that Republicans had the very good fortune to take power right on the brink of the 1990s technology boom, which raised the real gross domestic product 4.7 percent in 1995, 5.7 percent in 1996 and 6.3 percent in 1997 — which sent tax revenues cascading into the Treasury.

But today the situation is quite different. The economy is in the tank and the budget is clearly on an unsustainable path, in large part due to actions taken by Republicans when they were in power. They completely dismantled the deficit controls put in place by the elder Bush and Clinton so that they could cut taxes willy-nilly without paying for them, and in the process thoroughly decimated the government’s capacity to raise adequate revenue to fund its essential functions.

Bruce Bartlett, Fiscal Times.