D. Dowd Muska

 

This Week's Column

   

 

Clueless and Craven, ‘Poppy’ Gets an Award

April 17, 2014

Absurdity doesn’t run deeper than this.

On May 4th, George Herbert Walker Bush will receive the Profile in Courage Award. According to the John F. Kennedy Library Foundation, a quarter-century ago, the 41st president signed a “budget deal which included spending cuts and tax increases aimed at reducing the deficit by approximately $500 billion over the following five years.” The foundation’s selection committee is swooning, because Bush “recognized the 1990 budget deal might doom his prospects for reelection,” but “did what he thought was best for the country and has since been credited with helping to lay the foundation of the economic growth of the 1990s that followed.”

Nice spin. Here are the facts. When Bush took office in January 1989, it was clear that Reaganomics was a success. Question the Gipper’s management style, foreign-policy adventurism, and nominees to the Supreme Court, but on his watch, the economy flourished. Job creation was beyond impressive, inflation was tamed, and household incomes rose substantially. Fiscal hawks, though, worried about deficits. By 1986, Washington was spending $221 billion more than it took in. Recognizing an opportunity, Democrats and their allies in the media attacked. Polls showed that voters were taking notice.

Viewed more broadly, the gap between outlays and receipts wasn’t so scary -- it was even improving. A surging economy had deficits shrinking, if measured in relation to GDP. After peaking at 6.0 percent in 1983, the size of the mismatch plunged to manageable 2.8 percent -- $153 billion -- in 1989.

If Bush had held the line on expenditures, deficits might have taken care of themselves. But as economist Stephen Moore wrote in a 1991 National Review piece, from the get-go, the administration enthusiastically endorsed “dozens” of new initiatives in “education, transportation, energy, space exploration, and drugs.”

The timing was terrible. By the summer of 1990, the economy had slackened. Tighter monetary policy, the S&L crisis, and an oil shock from Iraq’s invasion of Kuwait fostered a recession. With revenue sluggish and spending uncontrolled, deluges of red ink threatened to reappear. A rattled president warned of “a cancer gnawing away at our nation’s health,” and predicted “economic chaos if we fail to reduce the deficit.”

Throughout the year, Beltway groupthink had congealed in favor of a “grand compromise” between Bush and Congress -- one based on what John Podhoretz called “the simple presumption that the nation would have no choice but to accept the purification ritual of higher taxes and fewer services.” The president renounced his read-my-lips pledge, and approved income-tax hikes, as well as boosts in the levies on gasoline, airline tickets, liquor, and cigarettes. In exchange, Bush won Democrats’ commitment to “spending cuts” backed by “enforcement provisions.”

Did the deal fix federal finances? Of course not. Revenue expectations weren’t met, and the budget was not sliced. The deficit for 1990 was $221 billion. The following years yielded little change: 1991, $269 billion; 1992, $290 billion; 1993, $255 billion. In Bill Clinton’s first full year in office, the deficit remained north of $200 billion. The bipartisan “deficit-reduction package” was a grand failure.

Fiscal balance wasn’t restored until the economy got moving again. To this day, the tax hikes pushed by Bush and Bill Clinton garner plenty of praise from liberals, but the “revenue enhancements” were rather meek. The top corporate rate barely budged, and the highest rate for individuals didn’t return to anyplace near its nasty, pre-Reagan bite of 70 percent.

The IT revolution, cheap oil, Boomers entering their prime earning years, sound monetary policy, and freer trade all contributed to making the final two-thirds of the 1990s an economic golden era. (Money flowed into D.C. so fast, fedpols couldn’t find ways to squander the windfall.) The end of the Cold War produced significant savings in “national defense.” And a GOP Congress helped to check Clinton’s appetite for more programs. As a result, surpluses were attained in 1998, 1999, 2000, and 2001.

Past Profile in Courage Award recipients include tax hikers James Florio, Lowell Weicker, and -- this is not a goof -- Ted Kennedy. But there’s a significant difference between them and George H. W. Bush. “Poppy” regretted the decision that earned him a Kennedy commendation.

Desperately seeking reelection, in March 1992, Bush admitted that the budget deal had been a “mistake.” If granted a second chance, he said, “I wouldn’t do what I did then, for a lot of reasons, including political reasons.”

The Washington Post called it a “flip-flop-flip.” All to salvage a career in “public service.”

What courage.

D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska. He lives in Broad Brook, Connecticut.

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