When Republican presidents compromise with Democratic congressional leaders who say they will cut spending in exchange for higher taxes, the spending side of that equation never materializes. That’s the lesson to be drawn from the 1990 budget deal, which resulted not just in higher taxes, but also increased federal spending, bigger deficits and a sluggish economy.
Study after study shows that whenever elected officials on Capitol Hill secure additional revenue in the form of higher taxes, they spend that revenue and drive the country deeper into debt.
But instead of applying this lesson to contemporary challenges, the John F. Kennedy Library Foundation is instead working to revise the historical record. In May, the foundation named former President George H.W. Bush as one of its 2014 Profile in Courage Award winners for his “decision to put country above party and political prospects” and agree to a tax increase.
Bush signed off on the 1990 budget deal at the expense of his “read my lips, no new taxes” pledge in the expectation that Congress would then exert fiscal discipline and curb federal expenditures. During his 1992 re-election effort, Bush acknowledged in media interviews that the budget deal was a mistake.
“I’m very disappointed with Congress,” he was quoted as saying between campaign stops. “I thought this one compromise, and it was a compromise, would result in no more tax increases. I thought it would result in total control of domestic discretionary spending. And now we see Congress talking about raising taxes again. So, I’m disappointed, and given all of that, yes, [it was] a mistake.”
Bush went on to lose in 1992 in part because President Bill Clinton could run persuasively, albeit insincerely, on a platform of “middle class tax cuts.” With the economy in recession, the Democratic challenger was well-positioned to posture as a champion of average Americans. If Bush had governed by veto, as he had suggested during the 1988 campaign, and kept congressional spenders at bay, he may have avoided the 1992 primary challenge from Pat Buchanan and the third-party candidacy of Ross Perot in the general election. Remember, Clinton won a plurality, not a clear majority.
What Went Wrong?
Edwin S. Rubenstein, a long-time economics advisor and analyst for National Review explained what went wrong with the 1990 budget deal in his book “The Right Data.”
The idea behind the budget deal was to put controls on entitlements by requiring new spending to “pay for itself,” he wrote, with “offsetting tax hikes or reductions in other entitlements.”
But that’s not what happened. Instead, Rubenstein explained, “Congress easily circumvented this rule by putting automatic spending increases into existing legislation. Indeed by their very nature, entitlements are difficult to control. Social Security and Medicare, which together account for 60 percent of all entitlement spending are available to anyone over age 65, whether needy or not.”
Put simply, the problem is overspending, not insufficient levels of taxation.
[sharequote align=”center”]Put simply, the problem is overspending, not insufficient levels of taxation.[/sharequote]
But that’s not the narrative the 15-member award committee wants to see out in circulation. Jack Schlossberg, who is a grandson of former President John F. Kennedy, and a committee member, told audience members during a ceremony at the library in Boston that the 1990 budget deal was in the country’s best interests.
“America’s gain was President Bush’s loss,” he observed.
That Bush is a courageous man who was always willing to put the country first is evident from his long career in public life and his service in World War II. He is a genuine American hero. But when it came time to make the case for his re-election in 1992, Republicans at the Houston convention were reduced to talking about what he stood for rather than what he was able to achieve domestically thanks largely to the fallout from the 1990 budget deal.
Stephen Moore, who is now a chief economist with the Heritage Foundation, authored a highly prescient 1992 policy paper on Bush’s tax compromise that concluded it would cost him the election.
“Not a single benefit promised by the 1990 budget deal has been delivered,” Moore wrote. “The 1991 budget deficit was supposed to have been $253 billion. Instead, it was $269 billion. The 1992 deficit was supposed to be $262 billion. Instead, it will be $314 billion. In 1990, the year before the budget agreement took effect, the deficit was only $152 billion.”
Those are the facts. But where big-government, left-wing activists are permitted to burrow in, revisionist history carries the day. Fortunately, there are also organizations out there like Americans for Tax Reform, which has been quick to expose the perfidy. The award committee “is dominated by individuals with a big government philosophy” and is “chaired by longtime journalist and tax increase advocate Al Hunt,” ATR explained in a press release.
“George Herbert Walker Bush’s tax increase led to higher spending, higher taxes, and the Clinton presidency which brought even higher spending and increased taxes,” said Grover Norquist, the ATR president, said in the release. “The ‘compromise’ of 1990 was bad economics, bad policy, and a betrayal of the American people. Courage would have been standing up to the spending lobbyists in Washington and saying, ‘No.’ Doing what official Washington and its spending lobbies want is not courage. It is a failure of nerve.”
Democratic leaders, including then House Speaker Tom Foley and Senate Majority Leader George Mitchell, promised $2 in spending cuts for every $1 of tax increases.
Here is what actually happened, according to ATR.
“Every penny of the tax increases ($137 billion from 1991-1995) went through. Not only did the Democrats break their promise to cut spending below the CBO baseline by $274 billion—they actually spent $23 billion above CBO’s pre-budget deal spending baseline. Thirty-four House Republicans broke their own Taxpayer Protection Pledges and went along with this one-sided ‘deal.’ As a result, Republicans lost eight seats in the 1990 Congressional midterms, and President Bush only received 38% of the vote in the 1992 Presidential election.”
History will have a lot of kind observations to make about Bush as a commander-in-chief and the role he played in the peaceful reunification of Germany to conclude the Cold War. But he learned far too late in his presidency that he could not deal honestly with congressional figures in both parties who make a living by spending taxpayer money.
Kevin Mooney can be reached at Kevin.MooneyJ@gmail.com and followed on Twitter @KevinMooneyDC. Please visit KevinMooney.Net for additional information and previous reports.
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