If their campaign promises are to be believed, both Sen. John McCain and Sen. Barack Obama as president would increase government spending on a host of fronts. Those visions must be tempered by the news that the White House budget office projects the next president will inherit a record federal deficit of at least $482 billion.
Both candidates may want to review the George H.W. Bush “Read my lips: No new taxes” speech from the 1988 GOP convention before they speak at their own conventions.
The budget office blames the weak economy, in which fewer people are working, and those who are working are earning less and paying less in taxes. Also to blame is the stimulus package that sent $150 billion to taxpayers in an effort to prime the economy’ s pump. To be fair, the $482 billion, as a percentage of the total economy, is actually smaller than the deficits of the late 1980s and early 1990s.
But the Bush administration has little defense for its handling of the federal purse strings. In 2000, Mr. Bush inherited a $128 billion surplus. During his campaign for the White House, Mr. Bush argued the surplus was proof that Americans had been overtaxed and they deserved tax breaks. When the economy reached a plateau later in 2000 and in early 2001, Mr. Bush argued for tax breaks as a means of spurring growth.
According to the Center on Budget and Policy Priorities, the tax breaks Mr. Bush enacted — heavily weighted toward wealthy Americans — do not, as the administration suggests, pay for themselves by generating more tax revenue. “There is no evidence that the tax cuts caused any increase in economic growth, let alone growth sufficient to offset their cost. In fact, the 2001-2007 economic expansion was among the weakest since World War II with regard to overall economic growth,” the CBPP notes on its Web site.
The CBPP also reports that a federal tax cut for wealthier Americans in the early 1980s did not create any more economic growth than tax hikes on those same earners in the 1990s.
The presidential candidates will accuse each other of raising taxes on some segment of the population. A far more honest discussion about taxes would not use terms like “raising” and “lowering.” Instead, the terms of the debate about paying for government services should focus on where the line is drawn dividing those bearing a bigger burden — logically, those better able to pay — and those whose burden should be lightened.
No president is going to “lower taxes” for everyone.
And on the looming deficit, the next president may want to take a lesson from Bill Clinton, who wanted to roll out big ticket initiatives when he took office in 1992. According to then-Labor Secretary Robert Reich, then-Federal Reserve Chairman Alan Greenspan essentially made a deal with President Clinton: deal with the deficit, and the Fed will lower short-term interest rates, thereby spurring economic growth.
The rest, as they say, is history: record economic expansion and surpluses.