On Sunday, August 19, the Miller Center partnered with ABC’s “This Week with George Stephanopoulos” on the third of six special episodes examining some of the key issues heading into the 2012 Election. On Sunday, six distinguished panelists discussed and debated whether or not the U.S. is headed towards bankruptcy. Today’s guest post is from political scientist and former Miller Center Fellow Jasmine Farrier offering her assessment of the arguments presented in the debate.
Let’s reconcile the harsh sound bite and glib wrap-up – both telling moments in the Miller Center panel this past Sunday on ABC News’ “This Week”. First, Grover Norquist called President George H.W. Bush a liar for breaking the infamous 1988 “no new taxes” pledge in 1990. Second, despite profound disagreements over entitlements, revenue, and discretionary appropriations, some of the other panelists concluded that somehow America will muddle through the current economic and political crises and stave off European-style bankruptcy.
While this final sentiment may strike some as naïve in light of the deep partisan and policy divisions showcased on the program, Norquist’s barb inadvertently served as a reminder that it is OK to indulge in this bit of optimistic fantasy. Once upon a time, during an era of severe partisanship and gridlock, there were balanced fiscal policies, realistic budgeting processes, and a message to voters that we have to pay for what we want: it was called the 1990s. And this magical decade began with President Bush’s breaking that pledge.
The 1990s started with deficits that set a post-war record at the time, measured in both total dollars and as a percentage of the economy. In contrast, the decade ended with two presidential candidates debating what to do with budget surpluses that stretched as far as the eye could see. How did this transformation occur?
Economists will debate the root causes of sudden economic growth in the mid-late 1990s, as well as Alan Greenspan’s stewardship of the Federal Reserve. But there is no question that years of low inflation and low unemployment increased payroll revenue for the government, lowered some entitlement demands, and kept consumers in a buying mood. While there were signs of housing and technology bubbles about to pop, and the gap between the rich and poor continued to expand, the good economic times seemed real and permanent, despite the impeachment circus and the fact that the parties really, really hated each other.
During the 1990s, while politics and elections were as brutal as ever, economic recovery and deficit elimination arose from tough decisions in the White House and Congress – under both parties’ direction. Here are the two most important lessons from the era:
Presidents can be politically courageous. The first President Bush did not want to raise taxes, but did so as part of an extraordinary fiscal and budget process deal with the Democratic-dominated Congress in 1990. The Omnibus Budget Reconciliation Act of 1990 laid the groundwork for fiscal health in the long term by raising revenue, cutting spending, and imposing tough new budgeting rules on Congress and the President. The ultra-conservative wing of the Republican Party was not amused by the tax hikes. The recession did not lift fast enough for voters. President Bush lost in a tough three-man race in 1992.
In 1993, Bill Clinton and the Democratic Congress renewed the 1990 rules, set aside a tax cut pledge for the middle class, and raised taxes on the wealthy. These actions did not attract a single Republican vote, Clinton lost his footing on other policies, and Republicans took the majority of both chambers the following year. Clinton then had to engage in years of hand-to-hand political combat with House speaker Newt Gingrich and the Republican-dominated Senate. Leadership in both of these instances meant getting one’s hair mussed, not detached philosophizing.
Congress can be institutionally insightful. Deficit reduction seems simple, but it turns out that rank-and-file members of Congress want to please voters. Voters want expensive programs, wars, tax breaks, entitlements for the poor, middle class, and rich, all without the burdens of paying for it, and then get miffed about debt burdens on their grandchildren. Members of Congress are also mindful that the House and Senate are not exactly built for courage and coordination to face these pressures, thanks to the Constitution’s creation of two chambers beholden to independent constituencies for different terms of office. But in the 1990s, Democrats and Republicans in the House and Senate finally got serious about setting new rules. Pay-as-you-go meant every new entitlement or tax reduction needed to be offset. There were firewalls between spending categories so savings here could not be slipped over there. Annual budgets afterward were big, ugly, and late, but substantive and mostly played by the rules.
Then it all fell apart in the 21st Century. Fiscal success brought cockiness. The rules expired, the world changed, the economy tanked, and yesterday’s spendthrift became today’s deficit hawk (and vice versa). Perhaps fears of economic bankruptcy are indeed overblown, but partisan hatred is no excuse for disengagement among elected members and leaders. We may soon go from a dysfunctional republic to a nonfunctional one if future Congresses and presidents are too delicate, uninformed, and/or fearful of outside criticism to sit down for the days, weeks, and months it takes to hash out bills that can pass.
The panel today did not seem surprised that the congressional “Supercommittee” failed. The gimmicks that pop up from time to time did not work back then and they will not work now. Forget the teeny tiny line-item veto, the scary big balanced budget amendment, and the haughty blue ribbon commissions. If we really distrust ourselves that much, then we may as well give up the country to robot overlords. Let’s just do the 1990s over, and it need not look any prettier to work out. Let the parties throw dirt at each other. Let the candidates make silly pledges to make us think that governing is easy. Let’s also give them the room to be courageous and break them.
Jasmine Farrier is the author of Passing the Buck: Congress, the Budget, and Deficits (2004) and Congressional Ambivalence: The Political Burdens of Constitutional Authority (2010), both published by the University Press of Kentucky.