Now he even has Clinton himself, in a newly released ad, stating this is the case. Recently, at various campaign stops, Obama contrasted Clinton’s policies with the "trickle down snake oil" that Mitt Romney and Paul Ryan are selling. He added, “It did not work then. It will not work now. It’s not a plan to create jobs. It will not reduce the deficit. It will not move the economy forward.” Actually, it did work then, and Bill Clinton’s Presidency is the proof.
Clinton took office in the wake of the Reagan Revolution of the 1980s and contrary to the Obama campaign's recent assertion, the Gipper’s recovery far out-stripped Obama’s “recovery” by every measure. When Ronald Reagan left office in 1989, the economy had roared back from a recession that saw the GDP in America fall to -2.0 percent in 1982 and unemployment rise to 10.8 percent. One of the main impetuses for economic growth was cutting tax rates across-the-board, including the top marginal rate on the “wealthy” from 70 percent ultimately to 28 percent.
What followed was the greatest economic expansion in American history. Reagan created over 19 million new jobs, with a population of 85 million less than today, and unemployment dropped to 5 percent. Revenues to the Treasury almost doubled during the 1980s because of the incredible growth. With a few short-lived exceptions, the nation experienced a strong economy following the Reagan model for two-and-a-half decades.
One exception was in the early 1990s: the GDP growth rate dropped to -0.3 percent in 1991. This downturn came after the Democratically controlled Congress persuaded/forced the first President Bush to go back on his 1988 Republican Convention pledge --“Read my lips, no new taxes”--and raised taxes as a means to supposedly close the budget gap. The top tax bracket increased from 28 percent under to 31 percent.
Deficits actually grew over $150 billion after the bill’s passage. Rather than cutting spending as promised, Congressional Democrats increased spending, while revenues remained flat, and the economy faltered. (The elder Bush should have resisted this “deal” with the same fervor as his distaste for the aforementioned green, stalky vegetable). Shortly after President Clinton took office in 1993, he raised taxes still further bringing the top rate to 39.6 percent.
What was the cumulative effect of these tax increases? The economy did not bounce back as quickly as it did under Ronald Reagan. During the first three years of the Reagan recovery (1983-85) the economy grew at 5.3 percent (an incredible 7.2 percent in 1984 alone). During the first three years of the Clinton/Bush I recovery (1992-94), the economy grew at 3.5 percent. The maxim holds if you tax something more, you get less of it. Since over half of businesses are taxed at the individual tax rate, if you raise taxes, owners have less money available to expand their businesses and hire workers.
The 1990s economy Obama likes to laud, with its budget surpluses and incredible growth, occurred following the Republican Revolution of 1994, when the GOP took control of both houses of Congress for the first time since the 1950s. This rapid tidal shift came about in response to Bill Clinton’s first two years in office, during which he tried to implement government controlled universal healthcare and other big government initiatives.
The Congressional Republicans passed much of their campaign platform, the Contract with America , which called for smaller government and included cutting the capital gains rate from 28 percent to 20 percent and a $500 per child tax credit among other tax cutting measures. The Republicans also ushered in welfare reform, requiring people to work to receive benefits.
Clinton, after initially vetoing or threatening to veto much of the Republican agenda, got on board proclaiming during his re-election year of 1996, "The era of big government is over." The results: revenues rose from under $1.5 trillion in 1996 to over $2 trillion in 2000 (a $500 billion-plus increase) and the welfare rolls dropped nearly in half (by 6.5 million people) saving hundreds of billions of dollars.
During the last four years of Clinton’s Presidency, the annual GDP growth rate averaged 4.5 percent versus 3.3 percent during the first. Because of restrained spending (its lowest rate since World War II) and greater revenues, the nation experienced budget surpluses for the first time in decades and unemployment dropped to 4 percent.
Obama’s answer to his trillion dollar plus budget deficits and slowing economy is to raise taxes on the “wealthy,” to push forward with Obamacare, and to weaken welfare's work requirements. In other words, he’s replicating the early Clinton Presidency, while trying to peddle the latter one as proof his plan will work. Who is the snake oil salesman, again?
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