What Obama Can Learn From Bush 41

In negotiating on the fiscal cliff, President Barack Obama must do what's best for the country, as the first President George Bush did during his budget deal.

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With the presidential seal on the wall behind him, President Barack Obama gestures as he speaks in the Eisenhower Executive Office Building in Washington.

Those of us who were in the Bush 41 White House during the 1990 budget deal recall it well. There was this three-sentence announcement of the bipartisan agreement posted on the wall of the press office on June 26, 1990:

I met this morning with the bipartisan leadership—the Speaker, the Senate majority leader, the Senate Republican leader, the House majority leader, and the House Republican leader—to review the status of the deficit reduction negotiations.

It is clear to me that both the size of the deficit problem and the need for a package that can be enacted require all of the following: entitlement and mandatory program reform, tax revenue increases, growth incentives, discretionary spending reductions, orderly reductions in defense expenditures, and budget process reform to assure that any bipartisan agreement is enforceable and that the deficit problem is brought under responsible control. The bipartisan leadership agree with me on these points.

[See a collection of political cartoons on the budget and deficit.]

At the time, those three words—"tax revenue increases"—were explosive, given the president's famous "read my lips" pledge not to raise taxes. The top marginal rate was raised to 31 percent from 28 percent and conservatives were furious. As Charles Krauthammer wrote this morning, "Bush never recovered."

But what strikes me now, 22 years later, is the rest of the list: The president had gotten congressional Democrats to agree to not only entitlement and mandatory program reforms, but discretionary spending cuts. There were "orderly reductions" in defense spending—not steep cuts—and new reforms to the congressional budget process to assure that the cuts were enforceable. Specifically, these were PAYGO rules requiring that any new spending or tax cuts had to be offset by tax hikes or spending cuts. There were also caps on future discretionary spending that were to be enforced by automatic spending cuts. Looking back on it now, it's hard to believe that Democrats agreed to all that. They certainly wouldn't now.

[See a collection of political cartoons on the Democratic Party.]

And looking back on it now, we know that all those spending rules worked. According to Fiscal Times, the Budget Enforcement Act of 1990, which passed later that fall as the result of the deal, forced the deficit down to 4.7 percent of GDP by 1992; because of its PAYGO rules, the budget came to balance in 1997. We saw budget surpluses from 1998 to 2001, when the 1990 budget rules were abandoned in order to enact the Bush 43 tax cuts—which resulted in budget deficits. Abandoning those budget rules has also allowed President Obama to spend trillions without constraint and drive the federal deficit to 7.3 percent of GDP. According to the Congressional Budget Office, federal debt held by the public now stands at a whopping 73 percent of GDP—the highest level since 1950.

What also strikes me is the reason by the White House given in 1990: that the size of the deficit and "the need for a package that can be enacted"—meaning one that will pass Congress—required the president to agree to the tax revenue increases because he wanted to get a deal passed. President Bush was willing to sacrifice his political future—he later said he knew exactly what price he'd pay when he agreed to the deal—because he thought it would be best for the country. He was right. What he did really was best for the country.

[See a collection of political cartoons on the fiscal cliff.]

Like many Americans, I'm appalled at President Obama's proposal for avoiding the fiscal cliff: $1.6 trillion in tax hikes, $50 billion in new stimulus spending, a one-year postponement of spending cuts, promises of future savings from Medicare and other entitlement programs, and a new presidential power to raise the federal debt limit without congressional approval. No concessions whatsoever to those on the other side of the aisle in order to get the deal passed.

So let's see ... massive tax hikes, no current spending cuts at all, more new stimulus spending, plus the unrestricted ability to keep borrowing. This on top of record deficits. That isn't just feeding the beast, that's forcing the beast to pig out.

[Check out our editorial cartoons on President Obama.]

No wonder both Alan Simpson and Erskine Bowles, whose deficit-reduction recommendations the president has completely ignored, both predicted this week that we'll be going over the fiscal cliff. As some in Congress have pointed out, at least if we go over the fiscal cliff, tax increases are matched by spending cuts.

As it stands now, the president's cowardly and irresponsible package will never pass Congress—because everyone can see it's not what's best for the country. I doubt it would get a single Republican vote, and very few Democratic ones. Just like his last four budgets.

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