Democrats have always been strangers to the truth and huge fans of revisionist history. And nothing states that more clearly than the intellectually deficient calls for a return to the “Clinton Tax Rates” to bring prosperity back to the country.
And of course, the de facto leader of the intellectually deficient is Barack Obama who used this false argument during his campaign and managed to fool more than half of the voters who actually believed his speeches.
According to the Iowa City Patch, back in August 2012 (and many more times) Obama said he wants:
“anyone making more than $250,000 a year to go back to the tax rates of the Bill Clinton era.
During that time, 23 million jobs were created, Obama told the crowd at the Herman Park Pavilion in Boone on Monday.
“And, we had the biggest budget surplus in history and the millionaires did pretty good, too,”.
So, Obama and other Democrats would have you believe that because Clinton raised taxes, we had a wonderful economy and even balanced the budget and had a surplus.
Here are some facts about the tax increase.
Clinton signed his tax hike into law in September 1993, the same year he took office. It included an increase of the top marginal tax rate from 31 percent to 39.6 percent; repeal of the cap on the 2.9 percent Medicare tax, applying it to every dollar of income instead of capping it to levels of income like the Social Security tax; a 4.3 cent increase in the gas tax; an increase in the taxable portion of Social Security benefits; and a hike of the corporate income tax rate from 34 percent to 35 percent, among other tax increases.. (Source: US. Department of the Treasury, Office of Tax Analysis, “Revenue Effects of Major Tax Bills,” September 2006)
Clinton even admitted he raised taxes too much saying “Probably there are people in this room still mad at me at that budget because you think I raised your taxes too much. It might surprise you to know that I think I raised them too much, too.”
Oops. That runs counter to those calling for a return to the Clinton tax rates as a solution for the Obama stagnation.
Two years later, with reelection on the horizon and freshly stinging from the 1996 mid term trouncing by Republicans in the House and Senate, Clinton reversed course and lowered taxes, reformed welfare (that Obama has now gutted) and actually became a fiscal conservative. More or less.
Now Republicans, also wanting to take credit for the boom remind people that the economy had been expanding for almost two years when Clinton walked into office and the rate of expansion slowed after the tax increases. And that it was the fiscal restraint that actually led to a balanced budget and even a surplus.
And that much is true enough.
- The economy was slowed by Clinton’s tax increase.
- After a tax reduction, the economy accelerated and we had a boom.
Democrats have revised history to ignore the Clinton tax reductions that helped get him elected to a second term and were one major factor in the economic boom. And Republicans have a right to claim credit for forcing the tax reductions from Clinton.
This chart tells the story:
As you can see, the economy grew far more consistently after the tax cuts. As soon as Clinton took office, the country took a nose dive. Clint0n’s “tax the rich” promises took a toll on the economy just as soon as he took office. The economy gradually began to recover, but as the tax increases took hold, we saw another crash in economic activity. As soon as Clinton signaled that he raised taxes too much late in 1995, the promise of lower taxes alone made a positive impact.
But the one thing that people forget is that in the last couple of years of the 1990’s, the Year 2000 “bug” saw a massive increase in economic activity as nearly every company, not to mention consumers, bought new computers and replaced their technology at unprecedented rates.
And the chart below shows the economic cliff that occurred in 2000 as 9/11 and the end of the Y2K buying spree combined to give the economy a one – two punch that had us in a major economic collapse.
The Bush tax cuts in 2001 and round 2 of the tax cuts in 2003 stopped the decline and the economy. Not to the Y2K levels, but to a more normal economic cycle.
So for those on the left that want to discount the effects of tax cuts on economic growth, the statistics simply do not back you up. Tax cuts – not increases – caused the Clinton boom. And under Bush, the tax cuts reversed the recession.
And for those now screaming that Republicans need to “reach across the aisle” keep in mind that the tax cuts that reversed the Recession of 2000 – 2001 came with the support of only 7 House Democrats and 2 Senate Democrats. Bipartisanship? Hardly!
But there is one trend during the Clinton years that might be worth considering today. While Clinton was under investigation and impeachment proceedings the economy flourished.