LA Times: It's time to tax the rich (Clinton did it and the economy took off)

[Omaha Steve]

http://articles.latimes.com/2010/nov/17/opinion/la-oe-adler-taxpolicy-20101117

Contrary to the Republican mantra, Clinton did it and the economy took off.
Op-Ed
November 17, 2010|By Moshe Adler

The final two years of the George H.W. Bush presidency brought a creeping recession, with an unemployment rate that increased from 5.6% in 1990 to 7.5% in 1992. In June 1992, just five months before the elections, the rate reached 7.8%, and Bush lost his reelection bid ("It's the economy, stupid").

What did the new president do about the economy? President Clinton in 1993 proposed to raise the highest marginal tax rate immediately from 31% to 39.6%. In a Wall Street Journal article, Martin Feldstein, the former chief economic advisor to President Reagan and then as well as now a professor of economics at Harvard, opined that "Mr. Clinton's proposal to raise the marginal tax rates of high-income individuals would hurt incentives, weaken the economy and waste investment dollars."

This was, of course, a reincarnation of the GOP's trickle-down theory — tax cuts for the rich would eventually benefit the middle and lower classes. But Republicans did not let the fact that the Reagan tax cuts had decimated government services and created huge deficits stand in their way. Claiming that it was wrong to raise taxes on the rich in the middle of a recession, every one of them, in both houses, voted against it. Forty-one Democratic representatives and six Democratic senators joined them. The tax increase passed by only the narrowest of margins. In the House the vote was 218 to 216, while in the Senate the increase passed with a tie-breaking vote by Vice President Al Gore.

FULL story at link.

[dennis4868]

1. Even back then you had spineless dems....

Running away from good tax policy.....

[avaistheone1]

2. Can it become any more obvious that this has to be done?

Sheesh.

[drjackryan]

3. re: LA Times: It's time to tax the rich (Clinton did it and the economy took off)

Adler is wrong. Poor analysis on Adler's part.

Lesson Number 1 for all you liberals/democrats/progressive types who croon over bubba clinton:
Article 1 Section 7 US Constitution:

"All bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other Bills."

No sitting potus creates a surplus/deficit: CONGRESS DOES THIS. A REPUBLICAN CONTROLLED CONGRESS SHOULD BE CREDITED FOR ALMOST HAVING A BALANCED BUDGET IF FY00.

*******

In the 1990s, the unemployment rate peaked in June 1992 at 7.8%. Bill Clinton took office in January 1993 with the unemployment rate at 7.3%. So, now we see a downward trend in the unemployment rate before Clinton took office. We can hardly give Clinton the credit for that, now can we? The economy was already expanding under the Reagan's tax reforms, Economic Recovery Tax Act (ERTA) of 1981 and the Tax Reform Act of 1986. The unemployment started to drop in March 1983 which stood at 10.3% and continued to drop passed his last term and into the George H.W. Bush administration to March 1989 when the rate bottomed out at 5%.

A mild recession came in 1990 during George H. W. Bush administration. The unemployment rate held steady between 5%-5.5% until July 1990 when it stood at 5.5% and started to slowly creep up. Bush had a democrat controlled House and Senate in Congress. He made a deal with the democrat controlled Congress with the Omnibus Budget Reconciliation Act of 1990 which did modestly raise some taxes. However, the tax increases from the OBRA of 1990 did not trigger the increase in unemployment rate. It was signed into law in November 1990 when the unemployment rate for November 1990 stood at 6.2%. So, now we see a trend upward in the unemployment rate from July1990 through November 1990 and beyond before the OBRA of 1990 was passed.

What triggered the Recession of 1990 was an expansion of the money supply and deficit spending. https://mises.org/journals/rae/pdf/rae10_1_5.pdf

Now, back to Clinton. As mentioned above, the unemployment rate was dropping before Clinton took office and continued to drop before the tax increases of The Omnibus Reconciliation Act of 1993 was signed in to law in August 1993. The unemployment rate for August 1993 stood at 6.8%. So, how do you conclude that "Clinton's tax increases stimulated the economy"? Next, the Republicans took back Congress in 1994. In 1997, the Tax Relief Act of 1997, which incorporated many tax CUTS, was signed into law in August 1997. The unemployment rate stood at 4.8%. The economy really took off and expanded. The computer and technology sector drove the markets, i.e., the dotcom boom. The unemployment rate stood at 3.9% from September 2000 to December 2000. There was a lot of hiring in the dotcom boom because of the Year 2000 which brought about a lot of preparation for possible computer issues because of potential computer time software problems.

*****

excerpt:
"The Clinton Tax Hike in 1993, President Clinton
ushered through Congress a large package of tax
increases, which included the following:2
• An increase in the individual income tax rate to
36 percent and a 10 percent surcharge for the
highest earners, thereby effectively creating a top
rate of 39.6 percent.
• Repeal of the income cap on Medicare taxes. This
provision made the 2.9 percent Medicare payroll
tax apply to all wage income. Like the Social
Security payroll tax base today, the Medicare tax
base was capped at a certain level of wage income
prior to 1993.
• A 4.3 cent per gallon increase in transportation
fuel taxes.
• An increase in the taxable portion of Social Security
benefits.
• A permanent extension of the phase-out of personal
exemptions and the phase-down of the
deduction for itemized expenses.
• Raising the corporate income tax rate to 35
percent.
According to the original Treasury Department
estimates, the Clinton tax hike was to raise federal
revenues by 0.36 percent of gross domestic product
(GDP) in its first year and by 0.83 percent of GDP in
its fourth year, when all provisions were in effect
and timing differences associated with near-term
taxpayer behaviors had sorted themselves out. In
2007, the fourth-year effect would be roughly
equivalent to an increase in the federal tax burden of
about $114 billion.

What really happened? The economic environment at the
time of the tax hike is important in assessing its consequences.
In January 1993, the economy was entering
entering its eighth quarter of expansion after the 1990–
1991 recession. The recession had been relatively
mild by historical standards, with a net drop in output
of 1.3 percent. Yet even at the start of 1993, the
economy was operating below capacity. Capacity
utilization in the nation’s factories, mines, and utilities
was running at about 81 percent, whereas it had
been around 84 percent through much of 1988 and
1989. The unemployment rate in January 1993 was
7.3 percent but had averaged 5.3 percent as recently
as 1989. At the time of the tax hikes, the economy
was recovering but still far from healthy.
Tax policy aside, much in the context of the
1990s was conducive to prosperity. The end of the
Cold War brought a new sense of hope and greater
certainty to the global economy. The price of energy
was astoundingly low, with oil prices dropping to
about $11 per barrel and averaging under $20 per
barrel compared to prices above $90 per barrel
today. The Federal Reserve had finally succeeded in
establishing a significant degree of price stability,
with inflation averaging less than 2 percent during
the Clinton Administration. And, of course, a tremendous
set of new productivity-enhancing technologies
involving information technologies and
the World Wide Web burst on the scene.
Absent a major negative shock, one should have
expected a period of unusually strong growth from
1993 onward as the economy more fully employed
its available capital and labor resources. In the four
years following the Clinton tax hike (from 1993
through 1996):
• The economy grew at an average annual rate of
3.2 percent in inflation-adjusted terms;
• Employment rose by 11.6 million jobs;3
• Average real hourly wages rose a total of five
cents per hour;4 and
• Total market capitalization of the S&P 500 rose
78 percent in inflation-adjusted terms."

http://www.heritage.org/research/reports/2008/03/tax-cuts-not-the-clinton-tax-hike-produced-the-1990s-boom

Oh, and btw, there was NEVER a "Clinton surplus" and here is why:
Remember all the hoopla about "Clinton gave us surpluses"? And, it still goes on today. That was how the so-called non-partisan Congressional Budget Office reported it. The truth of the matter is the Congressional Budget Office did not add Intragovernmental Holdings in their calculations; therefore, there was no “surplus”. Intragovernmental holdings are debt.

The equation: Public Debt + Intragovernmental Holdings= Outstanding National Debt.

What is the Debt Held by the Public?
The Debt Held by the Public is all federal debt held by individuals, corporations, state or local governments, foreign governments, and other entities outside the United States Government less Federal Financing Bank securities. Types of securities held by the public include, but are not limited to, Treasury Bills, Notes, Bonds, TIPS, United States Savings Bonds, and State and Local Government Series securities.

What are Intragovernmental Holdings?
Intragovernmental Holdings are Government Account Series securities held by Government trust funds, revolving funds, and special funds; and Federal Financing Bank securities. A small amount of marketable securities are held by government accounts. Intragovernmental Holdings is still debt.

Public Debt+ Intragovernmental Holdings=Outstanding National Debt

SOURCE: US Department of the Treasury, Bureau of Public Debt

http://www.publicdebt.treas.gov/ then scroll down toward the center of the page an click on "See US Public Debt to the Penny" or http://www.treasurydirect.gov/ then click on “Debt to the Penny”.

FY ENDING Debt Held by the Public. CBO uses these numbers. Intragovernmental Holdings. CBO does not use these numbers. They lie when they don't. Total Public Debt Outstanding WITH Intragovernmental Holdings Yearly deficit/surplus WITHOUT Intragovernmental Holdings Yearly deficit/surplus WITH Intragovernmental Holdings

09/30/93 Not Available Not Available 4,411,488,883,139 Not Available
09/30/94 Not Available Not Available 4,692,749,910,013 Not Available 281,261,026,874
09/29/95 Not Available Not Available 4,973,982,900,709 Not Available 281,232,990,696
09/30/96 Not Available Not Available 5,224,810,939,136 Not Available 250,828,038,426
09/30/97 3,789,667,546,850 1,623,478,464,548 5,413,146,011,397 Not Available 188,335,072,262
09/30/98 3,733,864,472,164 1,792,328,536,734 5,526,193,008,898 55,803,074,686 113,046,997,500
09/30/99 3,636,104,594,502 2,020,166,307,132 5,656,270,901,633 97,759,877,662 130,077,892,736
09/29/00 3,405,303,490,221 2,268,874,719,666 5,674,178,209,887 230,801,104,281 17,907,308,253
09/28/01 3,339,310,176,095 2,468,153,236,105 5,807,463,412,200 65,993,314,126 133,285,202,313

FY ENDING Total Public Debt Outstanding WITH Intragovernmental Holdings Subtract FY01 from FY93 = Total $ amount of increase in Total Public Debt Outstanding WITH Intragovernmental Holdings
09/30/93 4,411,488,883,139
09/28/01 5,807,463,412,200 1,395,974,529,061



FY Ending Debt Held by the Public. CBO uses these numbers WITHOUT Intragovernmental Holdings This column contains the surplus numbers for each FY. Intragovernmental Holdings are not added in and that is explains his “surpluses”.

09/30/97 3,789,667,546,850 Subtract FY98 from FY97 and so on.
09/30/98 3,733,864,472,164 55,803,074,686
09/30/99 3,636,104,594,502 97,759,877,662
09/29/00 3,405,303,490,221 230,801,104,281
09/28/01 3,339,310,176,095 65,993,314,126



Calculation is simple. Just take any fiscal year and subtract if from the previous year. All data here is compiled from this source, the same data that is used by the Congressional Budget Office and other agencies, but without the spin.

As you can see in the chart above, the Clinton administration left with over $133 billion dollar deficit and increased Total Public Debt by $1,395,974,529,061. Add column of numbers in red. So, we see a trend downward, the numbers in red, in the deficit.

[pscot]

4. You want that with or without anchovies?