Howard Dean: Fiscal conservative?
by W. James Antle III | Oct 26, 2003 | 12 comments
Now that Democratic presidential candidate Howard Dean has fought his way from darkhorse insurgent to top-tier aspirant, he must make the case that he is not just a far-left fringe favorite but a viable general-election candidate. One of the talking points in favor of his new “centrist” persona is that his tenure as governor of Vermont proved him to be a budget-balancing fiscal conservative.
It’s true of course that Dean was more moderate in his positions when he was an elected official actually accountable to the voters of his state than after he became a presidential candidate when he decided that the most antiwar and George W. Bush-hating elements of the Democratic Party would be his ticket to the nomination. But Dean’s alleged fiscal conservatism is overstated. During the 1990s a growing economy allowed most governors and state legislatures to balance their budgets. The question is what Dean would do with the federal budget during the current fiscal climate.
Dean talks a good game about a balanced budget, but his mechanism for achieving this goal is not reduced federal spending. In fact, he would increase the size and the cost of the federal government with a national health plan likely to rival Hillary Clinton’s. Dean instead believes the best way to balance the budget and to demonstrate fiscal responsibility is to raise taxes. More amazingly, he thinks higher taxes will be good for the economy as if we can tax our way to prosperity.
If you don’t believe me, perhaps you should take Dean’s word for it. As quoted by William Saletan in Slate: “When Ronald Reagan came into office, he cut taxes, we had big deficits, and we lost 2 million jobs. When Bill Clinton came into office, he raised taxes without a single Republican vote; we balanced the budget; we gained 6 and a half million jobs. George Bush has already lost 2 and a half million. I want a balanced budget because that's how you get jobs in this country is to balance the books. … You had better elect a Democrat because the Republicans cannot handle money… We’re the party of responsibility, and they’re not.”
Never have so many fallacies been so neatly packaged into a single quotation. Ronald Reagan’s tax cuts were followed by an historic economic boom. Between 1983 and 1989 the U.S. economy grew by one-third (the equivalent of adding the entire West German economy to our GDP), tax revenues doubled, the rate of manufacturing productivity growth tripled and upwards of 20 million net new jobs were added. Instead of being a bleak period of job loss as Dean claims, the Reagan years were notable for significant job creation. From its peak in the 1982 recession to when Reagan left office in 1989, the unemployment rate fell from 10.8 percent to 5.3 percent.
Although Clinton’s 1993 tax increase is today spun as a major success that ended the recession presided over by the first President Bush, this is not the case. According to the National Bureau of Economic Research, the economy had been in recovery since March 1991 by the time Clinton took office in January 1993. The economy grew just 2.6 percent per annum during his first term. In other words, economic growth actually slowed after the tax-rate hike. Accelerated growth and budget surpluses did not appear until Clinton’s second term. By this time, he was working with a Republican-controlled Congress and even signing some tax cuts—as opposed to tax increases—into law, including a very successful capital gains tax-rate cut.
Dean’s analysis of our current economic situation is similarly inaccurate. He blames the president’s tax cuts for the deficit and anemic growth. Yet he ignores the role increased federal spending and 9/11 have played in the deficit, as well as the fact that the economy began to slow before Bush had even been elected much less had taken office. It is likely that the economy would be in even worse shape without Bush’s truthfully quite modest tax cuts.
Modest or not, Dean wants to take these tax cuts away with an eagerness that has earned him criticism even from his rivals for the Democratic nomination. He would repeal the Bush tax cuts in their entirety on the specious grounds that he could buy national health care by returning to Clinton-era marginal tax rates. Democrats are right to be shocked. Not since Walter Mondale has a presidential candidate tried to win office by proposing an across-the-board tax increase. Clinton at least promised during the campaign to spare the middle class.
Yet perhaps it is unfair to single Dean out. His views are views are in line with the reigning orthodoxy of the Democratic Party: income presumptively belongs to the government, not the individual who earned it. Deficits are bad when caused by tax cuts and balanced budgets are good so long as they are coincide with more taxing and spending. Democrats have come to believe that raising taxes is a positive economic good.
Economic prosperity is not achieved by taking an ever-larger share of producers’ income in taxes. Removing disincentives to work, invest, and take risks by lowering marginal rates is what helps the economy to grow. More importantly, low taxes respect our right to the fruit of our labor. Dean Democrats define fiscal responsibility as the confiscation of as much of our wealth as is necessary to pay for breakneck government growth. In truth, nothing could be more irresponsible and less conducive to a flourishing economy.
W. James Antle III is a senior editor of Enter Stage Right magazine.
Comments
Howard Dean: Fiscal Conservative. Fact.
Check out libertariansfordean.blogspot.com for my rebuttal.
Posted by: Logan Ferree at October 28, 2003 12:16 AM
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Let me say up front that there are two points I agree with in this rebuttal: Ronald Reagan’s record on spending is unsatisfactory to me to say the least and Howard Dean balanced budgets as governor of Vermont. One can quibble with Dean for mentioning that he eliminated an inherited deficit without mentioning that he did so in part through a budget plan he also inherited from his Republican predecessor, the late Richard Snelling, but he does deserve credit for sticking with this plan even in the face of criticism to his left.
However, it is also true that we were on the verge of a national economic recovery when Dean took office unexpectedly in 1991 (though in fairness, that recovery took longer to occur in Vermont than in other parts of the country) and that many states found themselves able to balance their budgets throughout the 1990s. My point: A record of balanced budgets is a good thing, but balancing state budgets in the 1990s might not be the best predictor of what one will do as president. (Remember also that Reagan eliminated an inherited deficit during his tenure as governor of California, but as my critic points out, he ran some pretty substantial deficits as president.)
Which brings me to the core argument of my article: It was not written as an attack on Dean’s record as governor of Vermont, but instead as a criticism of the policies he advocates today as a presidential candidate. The simple fact is that Dean is running for president on a platform that contains a national health care plan and other increases in federal domestic spending, and the centerpiece of his plan to balance the budget is a tax increase in the form of repealing the Bush tax cuts. Libertarian Dean supporters conveniently overlook this contrast: While the 1996 and 2000 Libertarian Party presidential candidate Harry Browne asked voters to give up their favorite federal program in exchange for never having to pay income tax again, Dean is offering them a return to Clinton-era marginal tax rates in exchange for national health care.
Increasing marginal income tax rates is certainly not libertarian, and it is also economically self-defeating. Despite his shortcomings on spending and the deficit, Reagan’s record on economic growth and reducing marginal tax rates is indeed quite impressive. Some critics believe that using 1983 as a starting point for evaluating the growth effect of the Reagan tax cuts is stacking the deck. I disagree. I use 1983 as a benchmark because that is the first year where there was a net tax cut. Reagan’s tax cuts were phased in over three years and had to contend against previously legislated tax increases and inflation-induced bracket creep (income taxes weren’t indexed to inflation until 1985). I don’t see how you can evaluate policies before they have taken effect.
But even if you look at economic growth over the entire eight years of Reagan’s presidency, 1981-89, the 3.2 percent average annual growth rate was an improvement and better than the postwar average. This period includes a major recession in 1982. My critic would have you believe that this growth was inevitable after the economy hit “rock bottom.” But in fact it was a dramatic turnaround from a lengthy period of stagflation that occurred under administrations of both parties. Reagan may not have been as good as he could have been on spending, but he did break with past policies on taxes, price controls and regulations in a way that moved the American economy in a more free-market direction. It should not be surprising to the typical fiscal conservative or libertarian that freer markets produce more impressive economic growth.
Yet it is surprising to Dean, who thinks that you can increase growth by raising taxes. He cloaks his advocacy of increased taxes in the rhetoric of balanced budgets and fiscal conservatism. But this is not some new centrist innovation. So did Walter Mondale in 1984!
Check out Dean’s economic program: deanforamerica.com Aside from rhetoric about balanced budgets and the standard boilerplate about tax simplification and fairness that virtually all presidential candidates promise, what is libertarian or fiscally conservative about it? It is standard tax and spend, just with the promise that he will still be able to balance the budget while doing it.
I understand why libertarians dislike Bush. I have written pretty extensively about the conservative-libertarian split and the foolish abandonment of small-government principles by both the Republican Party and the mainstream conservative movement. But this libertarians for Dean boomlet strikes me as wishful thinking. The libertarian case for Dean seems to boil down to the hope that a Republican Congress will stop all the bad things he wants to do (increased spending, bigger government) while letting him do all the good things (antiwar, hopefully a better civil liberties posture than the Ashcroft Justice Department). This may have largely worked under Clinton and there is a lot to be said for divided government. But it seems to me to be an awfully risky strategy to elect a candidate based on the hope that once in office he will fail to see substantial parts of his agenda enacted.
Some people may think it is libertarian or fiscally conservative to raise taxes and increase spending as long as one also inveighs against deficits and promises to do it for a balanced budget rather than for “the children.” I don’t. Phew, sorry for such a long reply. |
