LANDRITH: Clinton-era tax rates but not spending rates

Obama’s plan is far from ‘balanced’

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President Obama has argued vociferously that Republicans must agree to tax increases. He describes them as modest increases on the wealthiest Americans, and he claims they are equal to the tax rates under President Clinton. Despite his eagerness to return to supposed Clinton-era tax rates, Mr. Obama is not interested in returning to Clinton-era government spending rates. His inconsistency does not make economic sense.

Mr. Obama is not proposing that we return to the Clinton-era tax rates, he just says he is. Mr. Obama plans to tax certain income at substantially higher rates than Mr. Clinton did. Mr. Obama’s plan almost triples the taxes on dividends, from 15 percent to 43.4 percent. His plan for taxes on capital gains is more than 15 percent higher than the applicable Clinton tax rates.

Nonetheless, Mr. Obama is at least rhetorically fond of Clinton-era tax policy. Apparently he views Mr. Clinton’s policies as the lodestar for tax policy and a healthy economy. Why, then, is he not equally enamored with Clinton-era federal spending?

While Mr. Clinton forced a tax increase after his election in 1992, the budget was not balanced until the GOP took control of the House and Senate and insisted on fiscal discipline. The Republican Congress passed a balanced budget in 1998, 1999, 2000 and 2001. The first three of those years occurred during Mr. Clinton’s second term in the White House. Thereafter, balanced budgets seemed to take a back seat to other priorities.

In 2008, Mr. Obama won election to the White House, and Democrats won control of both the House and Senate. The federal budget deficit exploded, and the United States had four record-setting years of trillion-dollar deficits. Those deficits will continue unabated unless spending is brought back under control.

So far, Mr. Obama has shown no seriousness about spending discipline. He has just won election to a second term, and he has demanded that Congress not limit future borrowing. Furthermore, he took spending cuts and entitlement reform off the table in the current “fiscal cliff” talks, saying he will discuss spending cuts next year, after Congress gives him the borrowing authority and the tax increases he demands.

When Mr. Clinton took office in January 1993, the federal government was spending 22.1 percent of gross domestic product (GDP). Eight years later, after Republicans in Congress balanced the budget and enacted welfare reform, the federal government was spending 18.2 percent of GDP, almost 4 percentage points less. Why isn’t that Mr. Obama’s spending goal?

During Mr. Obama’s four years in office, federal spending has grown to an average of 24.4 percent of GDP. That means that under Mr. Obama, the federal government is spending virtually $1 out of every $4 in the entire U.S. economy. Given Mr. Obama’s plans, the federal government will continue to gobble up more and more of the economy — leaving less and less for hardworking, entrepreneurial Americans.

Mr. Obama says he wants a “balanced approach,” but this is merely a cynical rhetorical trick. The truth is he wants tax increases and has little interest in spending reform.

America’s need for robust economic growth strongly argues for maintaining lower tax rates, which would spur growth, encourage job creation and increase incomes. Higher tax rates in the face of recession make no sense. Additionally, we cannot continue to spend as we have the past 10 years. Our deficits are caused by government spending far too much. While American families have seen their average incomes decline over the past four years, the federal government’s appetite for our tax dollars has grown at a record pace. Mr. Obama’s solution is to demand more tax dollars. He calls that “balanced.” That is Orwellian doublespeak.

If Mr. Obama wants to return to Clinton-era tax rates, he should be willing to return to Clinton-era spending rates as well. His insistence on one without the other implies he is not serious about a balanced approach but is simply advocating for bigger, more expensive and more intrusive government. That isn’t balanced or fair, and it won’t return America to prosperity.

George Landrith is president of Frontiers of Freedom.

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