The Year the GOPs Con Game was Exposed

Dec 5, 2012   //   Economy, Featured Story, Politics

 

The GOP’s decision to reinstate tax cut policy in 2001 exposed their hand.  It was not about deficit reduction, growing the economy, or job creation.  It was about ideology and, no doubt, special interests.  It was a backdoor approach where government revenue was cut in an attempt to curtail spending on popular programs they otherwise could not take head-on.  This while obstructing the work of Congress, spinning a web of deceit about the benefits of their policy, and weakening our country’s financial standing.  It’s time to play hardball during ‘fiscal cliff’ negotiations and force them to be specific about what spending cuts they are talking about to offset the tax benefits they wish to preserve for the wealthiest.  They wouldn’t have the nerve. 

The year was 2001.  It was then that the GOP laid bare its intent regarding its tax cut and economic policies.  For the Republican party, it was not about critically evaluating outcomes associated with 12 years of supply-side policy between 1981-1992 to those from 8 years of progressive tax/economic policy between 1993 – 2000.  It was not about choosing which policy proved better at reducing debt, producing surpluses, and stimulating economic growth and job creation.   Rather, the choice they made was about ideology and, no doubt, special interests – and at the expense of weakening our country’s financial standing and security simply to get their way.  That choice in 2001 exposes the sham, the deceit, and the con game that the Republican party has perpetrated on this country, including its own constituency.

The GOP’s underlying intent was simply to unravel social programs they never believed in.  It was done through a backdoor approach – a tactic that has come to be called “Starve the Beast”.  Reagan alluded to the tactic in the 1980 presidential debates when he said, “Jon Anderson tells us that first we’ve got to reduce spending before we can reduce taxes.  Well, if you’ve got a kid that’s extravagant , you can lecture him all you want to about his extravagance.  Or you can cut his allowance and achieve the same end much quicker”.  Simply put, cut revenue to the government, and drive up debt, to the point where it can no longer support spending on popular social programs that the Republicans otherwise would not dare take head-on.   Reagan (under whom supply-side/trickle down policy started) was no fan of Medicare.   And such sentiments are alive and well today as demonstrated by Romney’s remarks about 47% of Americans being “dependent on government, who believe they are victims” and conservative pundit Bill O’Reilly who said that a new “voting public who want stuff” was the cause of Romney’s imminent failure and signified an end to a “traditional America”.

The choice to reinstate supply-side/trickle down in 2001 flew in the face of overwhelming data that showed the policy consistently produced unsustainable deficits – deficits that outran the growth of our economy.  And known falsehoods, then and now, continued to be propagated, e.g.,the tax cuts would pay for themselves, tax cuts for the wealthiest ,our ‘job creators’, would stimulate employment. This while  Senate Republican leadership was intentionally burying a non-partisan report earlier this year that “found no correlation between top tax rates and economic growth, a central tenet of conservative economic theory” (ref).  Instead of rebutting the report, they simply took it down prompting Senator Chuck Schumer’s (D-NY) statement that “This has hues of a banana republic”.  And Lindsey Graham (R-SC) continues to argue that “raising tax rates will hurt job creation”.

And now, during negotiations on the ‘fiscal cliff’, Republican leadership still refuses to give specifics about the spending cuts they have demanded.  They witnessed the American public’s rejection of Representative Paul Ryan’s plan to ‘voucherize’ Medicare and privatize Social Security this past election.  Consider that 70% of self-identified Tea Partiers oppose Medicare cuts and by an almost 2-1 margin oppose Social Security cuts - yet they still call for ‘smaller government’?  This crowd has been shown to be driven by social conservatism and religion, not economic issues.  And those that they have elected to office have become an impediment to legislative progress during the ‘Fiscal Cliff’ negotiations thus giving Speaker Boehner a very small window in which to strike a deal.

Throughout his presidential campaign, Mr. Romney was criticized for a lack of specificity.  And consistent with those campaign tactics, the Republican Party is looking to President Obama to do their dirty work for them during the fiscal cliff negotiations; attempting to have the president define the cuts that would weaken popular programs while they duck the inevitable negative public reaction.  It is simply cowardice and deceit that has resulted in a weakening of this country’s financial standing, all in the name of ideology and special interests.  But the president is not taking the bait, refusing to negotiate against himself this time around.

What the Data Showed

To be clear, let’s review the facts that were available in 2001 when the decision was made by the Republican Party to again invoke supply-side policy.  Our country’s position in 2000 was reviewed in a previous article .

  • Between the years 1993-2000, our government had cut 20% (377,000 jobs) from the federal civilian workforce, making it smallest such workforce in 40 years.
  • Federal spending, as a percent of the economy, was reduced from 22% of GDP in 1992 to 18% of GDP in 2001, its lowest level since 1966.
  • Between 1998 and 2000 our country paid down $363 billion in debt and was on track to reduce the debt by $600 billion over four years, the largest four year debt pay-down in American history.
  • Our country was in position to pay off all of its public debt within a decade and the national debt clock was turned off.
  • In 2000 our government recorded a surplus without borrowing from Social Security or Medicare and by 2001 was on track for nine consecutive years of fiscal improvement, the longest such period in American history.
  • Federal income tax for the middle class, as a percent of income, was at its lowest level in 30 years.
  • Our unemployment rate had been reduced from 7.5% in 1992 to 4.2% in 1999, the lowest unemployment rate since 1969.
  • Our economy had created more than 20 million new jobs

The point of the above referenced article was that this was a Tea Party dream-list of accomplishments, just what they claimed to want.  Yet it would have been this very crowd that voted away such accomplishments in 2000 to reinstate the same tax-cut policy that resulted in a quadrupling of our national debt and weaker economic growth and job creation between 1981-1992.

The backbone of these accomplishments was a piece of deficit reduction legislation called the Omnibus Budget Reconciliation Act of 1993 (OBRA93) that passed both houses of Congress without a single Republican vote.  And it was the cry on the right about Clinton raising taxes that, in part, contributed to the Democrats losing control of both houses in the 1994 mid-terms.

Contrast the above outcomes with what was available regarding supply-side performance between the years 1981-1992.

  • Reagan pushed the largest the tax cut in US history ($749 billion over five years) while proposing $1.7 trillion in military spending in the next 6 years, while promising to balance the budget by 1984 (ref) - a promise that was never realized and even became fodder for political cartoons. Instead of achieving a balanced budget, the national deficits ballooned forcing Reagan to raise taxes 11 times (ref).  (Note: Reagan’s budget chief, David Stockman, admitted in a 2010 article: “This debt explosion has resulted not from big spending by the Democrats, but instead the Republican Party’s embrace, about three decades ago, of the insidious doctrine that deficits don’t matter if they result from tax cuts”).
  • Supply-side tax cuts were supposed to pay for themselves by stimulating the economy.  Yet, even during the Reagan recovery our debt continued to rise at a rate that outgrew the pace of our economy and were thus unsustainable.  The debt curves between the two periods speak for themselves.

  • Supply-side tax cut policy was supposed to be good for our ‘job creators’.  Yet, job creation was strongest during the 1990′s when small business boomed and when a 10% surtax (3.6% total) was applied to income above $250,000 for couples (ref).  In fact, Carter’s term resulted in greater job creation than Reagan’s first term and GHW Bush’s term.  (Note, job creation numbers for the GW Bush years are included to demonstrate the reproducibility of the effect).
U.S. president Party Term years Start jobs
(Jan)
Start jobs
(Sept)
End jobs
(Jan)
End jobs
(Sept)
Created
(Jan)
Created
(Sept)
Ave annual increase
(Jan)
Ave annual increase
(Sept)
Jimmy Carter D 1977–1981 80,692 83,532 91,031 91,471 +10,339 +7,939 +3.06% +2.30%
Ronald Reagan R 1981–1985 91,031 91,471 96,353 98,023 +5,322 +6,552 +1.43% +1.75%
Ronald Reagan R 1985–1989 96,353 98,023 107,133 108,326 +10,780 +10,303 +2.69% +2.53%
George H. W. Bush R 1989–1993 107,133 108,326 109,726 111,358 +2,593 +3,032 +0.60% +0.69%
Bill Clinton D 1993–1997 109,725 111,360 121,233 123,418 +11,507 +12,060 +2.52% +2.60%
Bill Clinton D 1997–2001 121,231 123,418 132,466 131,524 +11,233 +8,106 +2.24% +1.60%
George W. Bush R 2001–2005 132,466 131,524 132,453 134,240 -13 +2,716 -0.00% +0.51%
George W. Bush R 2005–2009 132,453 134,240 133,561 129,734 +1,108 -4,506 +0.21% -0.84%
**Approximate
  •  Although supply-side tax cut policy was supposed to grow our economy, GDP (the standard measure of our economy) was stronger during the Clinton years than the Reagan years and far greater than that during the GHW Bush years (ref).

A Time to Play Hardball

In 2001, GW Bush once again put into place the Reagan approach of lowering tax rates while increasing military spending – a formula that rapidly turned record surpluses into record deficits.  Those two elements accounted for 85% of the then record deficits by the year 2005.

And it was that very same formula that was once again put forth by Mr. Romney who campaigned on a 20% across the board tax cut and an increase in military spending.  This while his running mate advocated for ‘voucherizing’ Medicare and privatizing Social Security.  In reality, the approach was doubling-down on ‘the beast’, not just attempting to starve it, but strangle it.

It’s time for some honesty here.  The Republican’s continuing cry for supply-side/trickle down policy is not about correcting deficits or stimulating job growth.  It is about forcing ideology through fiscal warfare directed largely against the middle class and the poor.  Logic dictates that an economy based on 70% personal consumption can not be driven by 1-2% of our population (the major beneficiaries of Republican tax cut policy).   And the economic data during supply-side periods supports the point.  A little redistribution from the top to those who will spend that money into our economy here at home (as was done during the 1990′s), is actually smart capitalism.  We all did well by it.  Such policy is nothing less than an investment that those of us who have done well should be willing make to keep the drivers of our economy healthy – those being our consumers, our broad middle middle class, and the less fortunate amongst us who deserve a chance to develop their potential and strengthen our workforce capabilities.  And that was an investment this author supported having lived at poverty levels when I started my family and within the 1% during the Clinton years.

So it’s time to play hardball when dealing with a party that actually advocated for defaulting on our debt (contributing to our country’s first credit downgrade) and threatening to cut safety nets to the victims of the recent recession if the wealthiest did not keep their tax cuts.  And the Senate has become virtually constipated as Harry Reid has faced 382 filibusters during his 6 years as Senate Majority Leader, that being 381 more than what LBJ faced.  Deceit and obstructionism must not be allowed to carry the day.  Compassion has not been part of their vocabulary.  And the Republicans have gotten dangerously close to meeting their decades long objective of dismantling social programs.

During the ‘fiscal cliff’ negotiations, the Republicans are pushing the president to put forth a plan defining spending cuts.  Yet it is the Republican party that is demanding austerity.  Let’s see what they are talking about.  Let’s have them define precisely what they intend to cut to offset the tax benefits they wish to preserve for the wealthiest.

They don’t have the nerve.

 

 

 

 

 

 

 

 

 

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Featured Article


The Year the GOPs Con Game was Exposed

The GOP’s decision to reinstate tax cut policy in 2001 exposed their hand. It was not about deficit reduction, growing the economy, or job creation. It was about ideology and, no doubt, special interests. It was a backdoor approach where government revenue was cut in an attempt to curtail spending on popular programs they otherwise could not take head-on. This while obstructing the work of Congress, spinning a web of deceit about the benefits of their policy, and weakening our country’s financial standing. It’s time to play hardball during ‘fiscal cliff’ negotiations and force them to be specific about what spending cuts they are talking about to offset the tax benefits they wish to preserve for the wealthiest. They wouldn’t have the nerve.