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Political Hay
It’s Not the Clinton Economy Anymore
Bringing back 1990s tax rates won’t bring back that decade’s economic boom.
Like Dorothy in the Wizard of Oz, we’re not in Kansas anymore. That is, if Kansas is defined as the 1990s Internet boom. But Barack Obama has constructed an odd time machine to take us back: returning to the Seinfeld decade’s top two income tax rates in exchange for keeping the rest of the Bush tax cuts.
President Obama called on Congress to pass a one-year extension of those tax cuts, with the exception of letting the 35 percent marginal rate rise to 39.6 percent and the 33 percent rate jump to 36 percent. That will deliver a tax increase on individuals making more than $200,000 and families earning over $250,000 while ostensibly protecting everyone else from tax hikes.
The planted axiom is that the good times rolled under those tax rates during the '90s, so returning to them shouldn’t hurt economic growth. After all, Obama reminds us, we simply revert back to what “we were paying under Bill Clinton.”
Except the additional 0.9 percent payroll tax imposed under Obamacare and the 2.9 percent surchage on investment income would actually make marginal tax rates a bit higher than under Clinton. We didn’t have an individual mandate, backed by a penalty the Supreme Court has pronounced a tax, during Slick Willie’s tenure either.
But note that Obama doesn’t think it would be good for the economy to go back to the Clinton-era bottom tax rate of 15 percent from the post-Bush rate of 10 percent. Only raising the top rates will help. “By the way, these tax cuts for the wealthiest Americans are also the tax cuts that are least likely to promote growth,” he said Monday.
Savings and investment don’t do anything to promote growth? This kind of raw Keynesianism holds that burying canisters at the beach is a good way to create shovel-ready jobs and that the broken window fallacy is a truism. Raw politics is likely the bigger consideration: several polls have shown more than 60 percent of the American people — including a majority of self-described Republicans — in favor of tax increases on the wealthy.
Yet those same polls show the public understands such tax hikes won’t do much good. According to a Washington Post/ABC News survey last year, only 4 percent thought raising taxes was the best way to deal with the deficit. Eight times as many — 32 percent — preferred spending cuts. And if Obama was serious about deficit reduction, why not get the larger amount of revenue theoretically available from letting all the Bush tax cuts lapse?
Obama dismisses the idea that his proposed tax hike would hit small businesses that report their income under the individual tax rates such as sole proprietors and subchapter S corporations, saying that only 3 percent of small business owners would be affected. But the top 3 percent hire the most workers. The Joint Tax Committee estimates that roughly 940,000 taxpayers would get hit — a large number of potential employers when the economy is only adding 80,000 jobs a month.
Between 1993 and 2009, nearly two-thirds of net new jobs were created by small businesses. Obama’s tax increase would ensnare 53 percent of net business income. Americans for Tax Reform estimates that a majority of small business profits and more than a third of sole proprietor profits would face higher taxes.
Moreover, the original Clinton tax increases were enacted while the economy was already growing. The recession that ended George Bush’s presidency had been over since March 1991. Initially, they probably slowed the growth somewhat. By one estimate, the “Clinton crunch” resulted in 1.2 million fewer jobs being created than if tax rates had remained the same.
This tax increase would come during a weak economic recovery, with GDP growing at just a 2 percent rate. Unemployment has been over 8 percent for 41 consecutive months, something the country hadn’t seen in over ten years when the original Clinton tax increase became law. This economy, barely out of the Great Recession, is not as capable of withstanding tax hikes.
Clinton agreed to cut capital gains taxes, reducing them to 20 percent before they were knocked down to 15 percent in 2003. Obama seeks to raise them. Under his proposal, the capital gains tax rate would climb to nearly 24 percent and dividends would be taxed at 45 percent.
So no, Obama isn’t exactly bringing back the Clinton-era tax rates. His tax increases aren’t going to bring back that era’s growth either.
About the Author
W. James Antle, III, author of the new book Devouring Freedom: Can Big Government Ever Be Stopped?, is editor of the Daily Caller News Foundation and a senior editor of The American Spectator. You can follow him on Twitter @jimantle.
Letter to the Editor View all comments (41) | Leave a comment
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TLP| 7.12.12 @ 7:26AM
I understand that France is beginning to Hemmorhage Rich People. People with Money to spend on Dinner and a Movie, or a Night Out with their Friends at, say, a Buffalo Wild Wings, are picking up, and Moving.
Interesting.
The old adage is that: If you want LESS of something?
TAX it.
If you want ZERO of something?
TAX it, a lot.
Just ask the Boat Building Industry, and the Hoteliers in New York, how that worked out, when Cuomo the Elder, sought to PUNISH THR RICH.
The Rich stayed Rich, and the Middle Class, who Built the Boats, and who Staffed the Hotels, took it up the @ss.
Where did Denise Rich go to? What about the RICH GOOGLE GUY? Where did he go? Where are all of the Rich people in Maryland, going? Why have we had RECORD NUMBERS of people, relinquishing their Obamaland Citizenship?
How's HIGH TAX California doing, these days?
How's LOW TAX Texas doing?
HIGH TAX Michigan?
LOW TAX Florida?
And, what does Einstein tell us is the definition of Insanity?
It's Voting for the Son of the Atheist Communist and the Muslim Marxist, AGAIN.
Fast and Curious| 7.12.12 @ 8:35AM
The fact that Bill Clinton is viewed favorably in 2012 is more evidence that our country has gone insane. It was only after putting up a fuss that he signed on to the good ideas coming out of congress in the 1990s. Newt did the thinking and the groundwork. Willy went along with the plan and now he's a f---- genius??
George H.W. Bush was a weasel, and ultimately gave us Clinton and the insane notion that democrats actually can preside over a prosperous country. If only Reagan had stuck to his guns and went with Kemp as a runnning mate.
TLP| 7.12.12 @ 9:24AM
C'mon.
Don't be so hard on Clinton.
So, he Raped a Woman?
Who hasn't?
So he was a Pathological Liar and a Serial Misogenyst?
Who isn't?
So, he pulled down his pants in front of a young woman total stranger, Molested another woman who's husband lay Dying, and had Phone Sex and Oral Sex with a Fat Employee, when he wasn't using her to Moisten the tip of his Cigar?
Happens all the time.
I don't understand why everybody doesn't love him.
Joellen| 7.12.12 @ 9:57AM
TLP - what you said! I actually recoil everytime I hear even the slightest praise of the RAPIST - Bubba Clinton. He, his commie loving wife, Hillary, and all the ilk ARE the source of the misery we are living in. Pages would be filled, if we had a honest media, of all the evil these people have commited in their lifetime. I ask all conservative news media - stop with this false, phoney praise of these people.
C'mon Man!| 7.12.12 @ 10:01AM
Clinton was in the right place at the right time, his policies did NOTHING to help the economy. If not for the Gingrich congress, he would have ruined it.
He's an idiot, and this guy wonders what people are so enamored with him for.
TSIndiana| 7.12.12 @ 7:54PM
I agree and think he sold out some American industry too. I experienced four companies destroyed by an "investment group" with a reserve General in charge in his time. Clinton was way too friendly with China. I watched production machines (and the companies) get turned to scrap...parts now purchased from China.
benny havens| 7.12.12 @ 8:19AM
James Carvel said “it’s the economy, stupid!” This election “it’s for the votes, stupid!”
Ralphie| 7.12.12 @ 8:23AM
The culture and foreign affairs are not Clinton's either. Clinton was Obama lite. He was restrained by the traditions of the past and had enough sense to navigate the politics better. And he was more likable. Obama is still more like Nixon in domestic economic matters. Obamacare is wage and price controls
Cobalt| 7.12.12 @ 9:42AM
As bad as he is, Clinton seems to like The United States of America, while Obama has a visceral contempt, even hatred, for our nation.
Lawrence of Lutz| 7.12.12 @ 8:29AM
I still don't get the graduated income tax, God only required 10% from everyone. By-the-way, the people that don't pay INCOME tax, don't have an income (W-2) or are exempt by law.
paintbrush| 7.12.12 @ 8:33AM
Taxes.....When it comes right down to it, what we really need is some government entity deciding which businesses are making too much money, and how to (tax) punish them for it. Only the dimwitted would prefer the corrupt pro growth democracy. Why just look at Europe, which now exists under a kinder, gentler, more progressive democracy, even after Obama won the cold war.
Kwan| 7.12.12 @ 8:50AM
Any economist including those that are to the left of Vladimir Lenin, Kim Jong-il, and Pol Pot will tell you that decreasing taxes increases remittances to the treasury due to the increased economic activity. But according to Obama those that make more than a certain amount must be punished with higher taxes, which continue to stifle the economy and increase unemployment, while he continues to grow the government, increase the debt, and pour more money down the social welfare rat-hole.
Mimi | 7.12.12 @ 9:33AM
In order for some people to understand that " TAXING THE RICH " , makes everyone poor, they have to have formalized (logical) thinking! That is a future result or aftermath of consequeces of things chosen. To think ahead !
Some people get stuck in 7 year old thinking..ie..."He's got more in his glass" even though they each have 3 oz. but in different style glassware! Formalized thinking begins at age 14-15 when the ability to take ALGEBRA occurs.
Some ....never achieve this but go thru life living by the happenings of the present. We seem to have, regretfully those types attempting and failing to lead this great country...and thus the class warfare!
We need to wise up...it's time for some change...to vote in more statesmenship and logical thinking folks.
One more thing..."O" is wanting Mitts tax returns...we want Barrack Obama's school records grades and courses taken....I have a suspicion higher Math was not his forte!!!
Bob Grant| 7.12.12 @ 9:36AM
est we forget the obama/Charlie Gibson exchange where he says:
GIBSON: All right. You have, however, said you would favor an increase in the capital gains tax. As a matter of fact, you said on CNBC, and I quote, “I certainly would not go above what existed under Bill Clinton,” which was 28 percent. It’s now 15 percent. That’s almost a doubling, if you went to 28 percent.
But actually, Bill Clinton, in 1997, signed legislation that dropped the capital gains tax to 20 percent.
OBAMA: Right.
GIBSON: And George Bush has taken it down to 15 percent.
OBAMA: Right.
GIBSON: And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down.
So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?
OBAMA: Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness.
----
...cont
Bob Grant| 7.12.12 @ 9:36AM
...cont
He's also admitted the Buffett Rule would not necessarily increase revenue but the goal is "fairness", nothing else.
These two examples alone are more than enough evidence to demonstrate he's an economic illiterate/incompetent, and has no business handling the country's economic affairs.
The challenge to the republicans is to hammer this message home so, hopefully, enough low-information voters (aka Mushhead Nation) will wake up from their stupor.
Cobalt| 7.12.12 @ 11:11AM
"fairness" = "get even"
Obama is a light-weight idealogue, who takes his marching orders from his handlers.
I have never believed that Obama is competent enough to formulate and execute policy by himself. Also, I have always thought Obama's arrogant, comtemptuous "style" is at least in part, designed to show his base how he can "talk to and handle whitey."
TW in SC| 7.12.12 @ 11:48AM
Clearly stated, Cobalt.
Obama's agenda and ONLY agenda is to confuse what appears to be logistical maneuvering with undermining of the federal system. "Fairness" is a buzzword used to either stimulate or annoy. His only talent is getting on people's nerves...the kind of guy you just want to go away. Or at least just shut up.
His whole method of operation is to cloud what he's actually doing with hopey-changey rhetoric which always breaks down when examined. And you don't have to examine it very closely, either.
PolishKnight| 7.12.12 @ 10:08PM
I disagree TW. Obama's agenda is simply to get more money for his buddies and cronies and make a name for himself to boot. Part of the romance of the socialist agenda is that they can shoehorn it to mean whatever they like while pocketing money. I can understand this thinking from a purely reptilian point of view.
What I have more trouble understanding are leftists who have little to personally gain from being cheerleaders for a system that openly in deed treats them like serfs. Then again, there are conservatives who worship big corporations laying them off and sending their jobs overseas (or hiring through semi-legal means H1B's) and then saying the most important thing is keeping tax rates on the rich low because that's how they're going to get jobs any day now. Yeah, good luck with that.
Both sets of ideologues are fools. At least with the right I can discuss my objections to the ideology but the left clings to every element of their dogma like that crazed monk in DaVinci Code.
JD| 7.12.12 @ 12:55PM
Maybe we should lower the other taxes to 15% in the name of fairness.
Oh, wait, we already have, through deductions and credits. But Obama's people selectively report this in order to optimize their campaign messages.
PolishKnight| 7.12.12 @ 9:42AM
The gay 90's were due to the fabulous computer economy where the USA exported both software and even hardware to the rest of the world. Then just before Y2K, thousands more jobs were created to deal with that possible disaster. Nearly all of the jobs were local.
Then, just as the 90's were coming to an end, both crony capitalists on the right and leftist racists thought they could benefit from H1B's and importing third worlders to get rid of those pesky, well paid IT workers. I know several Republican IT directors and managers who dream of running companies like the mine scene from the temple of doom. California went from being an innovative, albeit highly taxed and leftist, wonderland into an overpriced real estate hell hole. Even after the IT industry collapsed, IT workers were living 8 to a house. I still get calls from recruiters asking me if I want to move there and I laugh my head off.
Clinton's greatness, so to speak, came from the fact that he FAILED to pass his wetdog healthcare bill and then spent the whole time partying and lying in various civil courts. He was kind of like our version of royalty. Maybe that's the solution for us? Just pay the top leftists to sit around and party and sleep with trashy interns and they won't care about socialism anymore? Or better yet: legalize weed and then they'll all be in their mothers' basements eating cheetos!
JD| 7.12.12 @ 1:09PM
If American companies don't hire foreigners, foreign companies will. Then they'll produce so much more cheaply than American companies that the American companies will go out of business. How will that help us?
PolishKnight| 7.12.12 @ 1:40PM
JD, did you ever see this funny commercial from Capital one about the call center staffed supposedly in Russia, by "Peggy?"
http://www.youtube.com/watch?v=F8L2cI8brzQ
It reminds me of the low quality, bad work often done by H1B's and outsourcing. It's not just poison pet food and baby formula coming from these places. They also put out horrific code. Check out this article about how a GOVERNMENT agency outsourced their work to H1B's and how now they're overbudget and late:
http://www.newsobserver.com/20.....puter.html
I've personally seen it. One such company was given a _100_ million dollar contract to redo a mainframe into java that had cost 10 million a year to operate. Do the numbers to figure out the rate of return. After 4 years, they had rewritten only _5_ out of 5000 applications (and management declared it a success). They quietly killed the initiative and outsourced the mainframe at twice the cost.
Hmmm, with crony capitalism like that, maybe we are better off with the commies.
JD| 7.12.12 @ 3:45PM
"Crony capitalism" is a term liberals invented to blame conservatism for the corruption inherent in any blending of government and economy, which liberals love. Do not associate it with the Right.
Yes, I too have experience with low-quality work done by foreigners. You often get what you pay for. But that doesn't mean all foreign-born do bad work, and H1B's in particular often get American pay.
Furthermore, as you point out, governments are just as susceptible to bad decisions as businesses. Often more so.
At the same time, if business leaders are so "greedy", rest assured they wouldn't be employing foreigners if at least some of them weren't improving their businesses because of it.
PolishKnight| 7.12.12 @ 10:04PM
Ironically, JD, others have pointed out that Obama and Democrats with their crony partnerships with Goldman Sachs, Wall Street, etc. have more in common with the technical definition of fascism than any kind of socialist direction. As I like to remind leftists, their method of winning the culture war is producing a crony capitalism similar to post Soviet Russia rather than Sweden or the former USSR.
I never claimed that "all" foreign born do bad work so that's a strawman there. In addition, observing that the government resorted to failed H1B's doesn't change the fact that the example I provided demonstrates that the program is hurting our country more than helping it contrary to your argument. Then you pointing out that the H1B's are not saving us money doesn't help your claim that noble corporations are acting in our best interests either.
Indeed, what this whole, sorry state of affairs demonstrates is that the so-called free market is hardly producing the invisible hand results we've been promised. In any case, if capitalists want to import the hands that wield the rope that hangs them, to paraphrase Lenin, don't expect me to get in their way.
TSIndiana| 7.12.12 @ 7:32PM
Thats why a small tarif should be on products made with cheaper labor, based on the balances of the "current account" with each country. When trade gets too one sided, tarifs increase (but at reasonable amounts).
Mike G| 7.12.12 @ 9:56AM
Give him 1990's tax rates in exchange for 1990's budgets. One is as realistic as the other.
JD| 7.12.12 @ 1:08PM
We'd be WAY in the black if we used 1990s spending numbers with 1990s tax rates, but of course, the true 1990s budgets weren't fixed spending numbers, but rather payout formulas for social programs. More people claiming unemployment, welfare, disability, and social security would increase spending even with the same rules.
Kingofthenet| 7.12.12 @ 1:52PM
This is a watershed day! Conservatives FINALLY admitting our CURRENT tax rates are the LOWEST they have been for a Century, So where is the Job Creation and Trickling Down?
JD| 7.12.12 @ 3:42PM
That is a despicable lie.
Go see my comment under Sowell's column today for a response to your absurd "trickle down" accusation. As for tax rates, google "historical effective tax rates" and see what IRS records say about your claim.
Federal revenue as a percentage of GDP held steady for decades after FDR tripled it, despite taxes on the poor continuing to fall. Reagan started requiring the IRS to keep more detailed effective tax records and break them down by income bracket, which really made Democrats look bad, particularly when federal revenue as a percentage of GDP hit all-time highs.
Then Democrats learned to cook even these numbers by converting social welfare spending into spending through the tax code. Now it looks like taxes are lower, but only when one looks at averages, since the millions of people getting handouts through the tax code bring the numbers down.
Obama has quintupled the number and magnitude of "refundable" tax credits, greatly increasing the number of people getting paid welfare through the tax code. He'd have us believe that if I pay $10,000 in taxes and you get $10,ooo in "negative taxes", and there are no other people in our country, then the net taxation and spending of our country is zero. As a person paying $10,000, I beg to differ!
Kingofthenet| 7.12.12 @ 11:22PM
What kind of psychobabble bullshit is that?, I NEVER mentioned spending, just MARGINAL Tax Rates, i.e. if your in the top bracket you pay LESS now than you did under Reagan(Sorry Occam) and far less than you did under Eisenhower, this SHOULD mean great growth? Why isn't it happening?
JD| 7.12.12 @ 3:42PM
If one simply subtracted out the people "paying" negative taxes, and changed nothing else, we'd be back at historical averages in terms of federal revenue as a percentage of GDP. If we negated the rest of the new spending through the tax code, even for those who still owe net tax, we'd see record taxes.
As it is, the rich pay a high share of their income by historical standards. Democratic liars will claim they used to pay 70%, but that's a blatant lie - they had a lot more deductions back then than they do now.
Occam's Tool| 7.12.12 @ 7:12PM
They were lower under Reagan. And, King, constantly threatening to create a hostile legal and financial environment does not create jobs, money, or investments.
To give anexample you may be able to understand, it's like trying to get someone to not wear an athletic cup by threatening to kick him in the balls. It's as believable and as worthy of trust as any Palestinian leader you can name. In short, Obama's word, character, and plans are worthless for our economy. It's like calling you a philosemite. There is no validity to it.
Kingofthenet| 7.12.12 @ 11:26PM
Here you go:
http://media-files.gather.com/.....3/full.jpg
stmichrick| 7.12.12 @ 2:27PM
What would we be saying about the Clinton economy without the productivity boost brought about by the internet? We only have Al Gore to thank for that I guess.
JD| 7.12.12 @ 3:46PM
It is truly better to be lucky than good. In the case of Democrats, the luck is often "inheriting Republican policies."
TSIndiana| 7.12.12 @ 7:43PM
If President Obama was so "lucky" inheriting war on everything and bank failure... I sure don't what him being UN-lucky.
Tom Kyba| 7.12.12 @ 6:03PM
And so kingofselfesteem tries to play adult again. One silver star for trying.
TSIndiana| 7.12.12 @ 7:25PM
Forget taxes, make a second currency that is equity in every asset of the government. Take the burden off the FED debt money/IRS tax system over a ten year introduction period. A US Treasury Dollar would make sense, along with FED audit as a starting point for accountability.
TheDauntlessConservative| 7.12.12 @ 8:45PM
Mr. Antle; the truth of the matter, unemployment was going up prior to Slick Willie coming to office and kept going up until around 1993. The Republicans took Congress and passed the Tax Reform Act of 1997.
http://www.heritage.org/resear.....1990s-boom
TheDauntlessConservative| 7.12.12 @ 8:50PM
The Bill Clinton Lie
http://thedauntlessconservativ.....inton-lie/
Marie| 7.13.12 @ 3:28PM
We have some of the same players in the federal government now as we did when Clinton was in office. What I don't understand about that is why our economy was so good back then and now it's a disaster. What is it that people have figured out that makes it easy to manipulate our market into a disaster?