James Pethokoukis, over at Reuters, reminds us of the fiscal commission’s tax proposal and how the president, once again, has decided to go against it.
. . . he could have agreed — as House Speaker John Boehner and Republicans suggested — to sharply reduce tax rates in return for fewer special tax deductions/breaks/loopholes/subsidies. Recall that is what his own debt commission recommended.
Instead, he apparently offered to keep top individual rates where they are, at 35 percent, in exchange for tax reform. Now that’s a big tax hike.
Is a deal impossible, then? If history is our guide, then no, it shouldn’t be. Consider this, from Keith Hennessey’s good piece on the 1997 Bipartisan Budget Agreement.
In 1993 President Bill Clinton worked with Speaker Tom Foley (D) and Senate Majority Leader George Mitchell (D) to enact a law that reduced the deficit by cutting entitlement spending and raising taxes. At the time Democrats labeled this a “deficit reduction law,” while Republicans labeled it a “tax increase law.” The law passed Congress with only Democratic votes – all Republicans voted no.
A little more than a year later, Republicans won the 1994 elections and took the majorities in the House and Senate. In 1995 Republicans passed a spending cut bill that would have balanced the budget, and another bill that cut taxes. President Clinton vetoed both.
On May 15, 1997, after months of intense negotiations, President Clinton reached a bipartisan budget agreement with Speaker Newt Gingrich (R), Senate Majority Leader Trent Lott (R), and Senate Minority Leader Tom Daschle (D). House Minority Leader Dick Gephardt (D) did not sign on.
The deal included both tax cuts and spending cuts.
You can see from this table that over a five year period (1998-2002) the agreement:
cut defense discretionary spending by $77 billion and cut nondefense discretionary spending by $61 billion;
“cut” (reduced the growth rate of) Medicare spending by $115 billion;
“cut” Medicaid spending by $14 billion;cut other mandatory spending by $40 billion;
contained new “Presidential [spending] initiatives” that increased spending by $31 billion;
andcut taxes by a net $85 billion (and a gross $135 billion, $50 billion of which was offset by other tax increases).
A pretty interesting reminder, especially considering how much lower our debt was back then and how much farther away the explosion of autopilot programs like Social Security, Medicare, and Medicaid was.