On the Same Team | TPMCafe: The ongoing debate among progressives about where reducing federal deficits should rank on the policy priority list is completely legitimate, but denigrating Clinton’s 1993 budget agreement is wrong-headed and counterproductive. Remember that every last Republican in Congress, along with some blue-dog Democrats, voted against the legislation entirely on the basis that its tax increases would purportedly send the economy into a tailspin, kill jobs, make deficits even worse, destroy investment markets, and a host of other calamities concocted by the fertile minds of Newt Gingrich and Wall Street Journal editorialists.
Any future Democratic president who attempts to raise revenues, whether for deficit reduction or any of the initiatives on the admirable wish list of the Economic Policy Institute, will be subjected to the same fear-mongering litany. And the most effective response will be to describe how after those alarms were raised in 1993, nothing but good economic news followed. It’s a really bad idea for liberals to help the right out by suggesting that the 1993 budget agreement had nothing to do with the prosperity that followed – especially when it also happens not to be true.
Jared Bernstein somewhat mischaracterizes Alan Blinder and Janet Yellen’s analysis of “The Fabulous Decade” when he writes that they were “unable to pin the Clinton boom on deficit reduction.” Rather, they show quite persuasively that the introduction of the legislation played a crucial role in reducing interest rates, as planned, which in turn helped to stoke investment – as planned. They also demonstrate that the legislation gave the Fed more room than it otherwise would have had to pursue an easy monetary policy. As Jared points out, a number of fortuitous forces also helped to produce the remarkable economic performance in the second half of the decade – which raised real incomes across the board for the first sustained period since before 1973. But the 1993 budget agreement clearly set in motion favorable conditions for the boom in investment that occurred, which was the overriding goal of the legislation.
Obviously, no one knows what would have happened had just one more Democrat in either the Senate or the House voted against the 1993 bill. But we do know that every last horror that opponents said would arise from raising taxes did not occur. Just the opposite. That history will be an essential touchstone for future Democratic presidents, regardless of the extent to which they may worry about deficits. So we should be venerating that history, not unjustifiably trashing it.