Well, with the tax rates expiring and going back to Clinton era levels without action by Congress, don’t we have a chance to test that very hypothesis? If it was the tax rates under Bill Clinton that led to good economic times (and a budgetary surplus), then why is the former president so dead-set against allowing them to go back to 1990 levels? Why is Bill Clinton avoiding the tax rates he put into place to instead endorse the tax rates created by George W. Bush? Will any Democrat remember this in a year and a half when they start clamoring for tax increases again?
I think we all know the truth. Bill Clinton’s economic legacy is a fraud. He got lucky in that 1) Republicans came to power in 1994 and forced spending cuts and welfare reform (I do give Clinton credit for signing that legislation) and 2) the dot.com bubble took place as the internet was developed and companies like google, yahoo, and amazon were created. Of course, the tech bubble later burst, but that was in the final four months of the Clinton presidency, overshadowed first by the Florida recount in a razor-close election and a year later by the tragic events of 9/11.
President Clinton is petrified of the truth, that his tax increases had nothing to do with the booming economy of the 1990’s, and he knows it’s a media myth that would be exposed by raising taxes in this economy with an attentive voting public. During bad times, the damage caused by tax hikes on families and businesses becomes evident. People feel the pain. In a good economy (and especially a bubble economy), the pain is camouflaged. In fact, there may be enough economic momentum to outlast the negative consequences of tax increases in the short term. In the long-term, however, tax hikes still aren’t good – even if they erase the deficit, because tax hikes stunt future growth and punish productivity.
The big news isn’t what Democrats or Republicans gained or gave up in pushing this tax compromise forward. The big news is President Obama and Bill Clinton endorsed George W. Bush’s tax rates over the Clinton tax rates. Incredible, if you think about it! For Obama, it improves his chances of getting re-elected, and for William Jefferson, it protects his phony legacy.
If anyone is enjoying a “comeback” in Washington, I’m sorry Mr. Krauthammer, but it’s not President Obama. It’s George W. Bush.