The Bush tax be­trayal

‘Read my lips: No more tax [in­creases]’

The Washington Times Weekly - - Commentary - By Stephen Moore

The eu­lo­gies for Ge­orge H.W. Bush keep rolling in and a great Amer­i­can hero’s life has been given proper trib­ute. But there has also been a rewrit­ing of his­tory about the Bush pres­i­dency that needs to be cleared up. Lib­er­als love Ge­orge H.W. Bush for the very tax in­crease be­trayal that de­stroyed his pres­i­dency. This was the of­fi­cial end of the Rea­gan Era. This was not just the po­lit­i­cal blun­der of the half-cen­tury, it was a fis­cal pol­icy catas­tro­phe.

Most read­ers who are un­der the age of 40 have no idea of the real story of what hap­pened. What the his­tory books are writ­ing is that Mr. Bush showed po­lit­i­cal “courage” in break­ing his “Read my lips: No new taxes” pledge, and he was thrown out of of­fice for do­ing the right thing.

Wrong. The quick story is that the Rea­gan ex­pan­sion — in no small part due to the re­duc­tion of the high­est tax rates from 70 per­cent to 28 per­cent — was shrink­ing deficit spend­ing dra­mat­i­cally by the end of Ron­ald Rea­gan’s pres­i­dency. The bud­get deficit had fallen in half down to 2.9 per­cent of GDP by 1988. It was headed to be­low 2 per­cent if Mr. Bush sim­ply had did noth­ing.

We will never know whether Mr. Bush al­ways had a se­cret plan to raise taxes, but we do know that the vil­lain­ous Dick Car­man, Mr. Bush’s bud­get direc­tor, per­suaded Mr. Bush to agree to a bud­get deal with con­gres­sional Democrats to raise in­come taxes in ex­change for spend­ing cuts from Democrats.

But in­stead of cut­ting gov­ern­ment spend­ing, the 1990 bud­get deal be­came a li­cense for Democrats to spend and spend. The bud­get deficit in 1991 was sup­posed to be $253 bil­lion, and if Mr. Bush sim­ply al­lowed the Gramm-Rud­man au­to­matic spend­ing cuts to oc­cur, the deficit would have fallen to be­low $100 bil­lion. In­stead, the deficit that year was $269 bil­lion — with the tax in­crease.

Gov­ern­ment ex­pen­di­tures ac­cel­er­ated at a faster pace than at any time in 30 years. In two years time, the do­mes­tic bud­get grew by al­most 20 per­cent above in­fla­tion.

Back in 1992, I wrote a widely-cited study ti­tled “Crime of the Cen­tury” and re­ported that “the bud­get deal was sup­posed to save $500 bil­lion over five years. When the bud­get deal was passed, the 1991-95 deficit was pro­jected at $770 bil­lion. In­stead the deficit over that pe­riod was closer to $1.2 the tril­lion. The bud­get deal added nearly $500 bil­lion to the na­tional debt; it did not re­duce the debt by that amount.”

The eco­nomic im­pact was worse. The tax in­creases ei­ther caused the re­ces­sion or ex­ac­er­bated it — end­ing the Rea­gan ex­pan­sion.

The econ­omy lost 100,000 jobs and the un­em­ploy­ment rate rose and the un­em­ploy­ment rate rose from 5.5 per­cent to 7.4 per­cent. Real dis­pos­able in­come fell from 1990 to the eve of the 1992 elec­tion. If this tax hike was a suc­cess, so was the Hin­den­burg.

In 1990, two up-and-com­ing stars of the GOP, House mem­bers Newt Gin­grich and Dick Armey, coura­geously bucked their own pres­i­dent and led the re­volt against the tax be­trayal. Mr. Gin­grich fa­mously called the tax hike “an act of supreme stu­pid­ity.” These two would later be­come the first Re­pub­li­can speaker of the House and Ma­jor­ity Leader in nearly 50 years.

Democrats could not hardly con­tain their glee. They knew that the tax hike would di­vide and con­quer the Re­pub­li­can Party and win bacback the White House for the first time in 12 years in ex­ile. With a third-party can­di­date Ross Perot in the race, Ge­orge H.W. Bush, who had a 90 per­cent ap­proval rat­ing in 1990, got less than 40 per­cent of the vote two years later.

Few events of the last four decades have had a more pro­found po­lit­i­cal im­pact than the Bush tax be­trayal. This folly so­lid­i­fied the Re­pub­li­can stance as an anti-tax party ever since. Re­pub­li­cans have not voted for a tax hike ever since.

Three en­dur­ing lessons should be learned by the 1990 bud­get deal.

1) Tax in­creases al­ways lead to more gov­ern­ment spend­ing, not less.

2) Tax in­creases dam­age the econ­omy and can make deficits worse. 3) When Re­pub­li­cans raise taxes they lose. Democrats would seem­ingly give up their first-born son to get Don­ald Trump to vote for a tax hike as Mr. Bush did. They har­bor se­cret hopes that high bud­get deficits (due to spend­ing hikes, be­cause rev­enues are at an all-time high) will sucker Don­ald Trump into a 1990-style tax hike. He likes to make deals. This sce­nario would guar­an­tee Eliz­a­beth War­ren or Joe Bi­den or whomever it might be, the keys to the Oval Of­fice.

Pres­i­dent Trump, don’t go there un­less you want to be as Ge­orge H.W. Bush put it “a one ter­mer.”

Democrats would seem­ingly give up their first-born son to get Don­ald Trump to vote for a tax hike as Mr. Bush did.

Stephen Moore, a colum­nist for The Wash­ing­ton Times, is an eco­nomic con­sul­tant with Free­domWorks. He is the coau­thor of “Trumpo­nomics: In­side the Amer­ica First Plan to Re­vive the Amer­i­can Econ­omy.”


Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.