America's Fiscal Constitution (76 page)

40
. Ibid., 153.

41
. White and Wildavsky,
The Deficit and Public Interest
, 487–488.

42
. For example, the 2010 National Commission on Fiscal Responsibility and Reform, often referred to as “Simpson-Bowles,” has called for aggressive actions to increase tax revenues by eliminating deductions and exclusions:
http://www.fiscal-commission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf

43
. See Appendix H.

44
. Logan, “Summary of Latest Income Tax Data,” Table 5.

45
. Eugene Steuerle provides an excellent summary of the net effect of all tax changes from 1981 through 1990. According to his calculations, the net effect of Reagan-era changes was to reduce federal taxes from what would have been $1.167 trillion to $1.053 trillion at the end of the decade. However, the effect on federal funds revenues was much greater, because taxes for dedicated trust funds increased. See Steuerle,
The Tax Decade
, 186–187.

46
. Robert Doughton quoted in Kennon and Rogers,
The Committee on Ways and Means
, 311.

47
. Tax Policy Center, “Historical Social Security Tax Rates.”

48
. Smith and Moore,
Medicaid Politics
, 207.

49
. Two other costly mandates had been imposed by fiscally conservative Southern Democrats. Senator David Boren of Oklahoma had authorized a requirement for payments to nursing homes sufficient to allow them to recover the cost of meeting minimum standards, and Senator David Pryor of Arkansas sponsored legislation creating federal standards. As popular governors, both Boren and Pryor learned firsthand the challenge of sustaining life with dignity for many seniors in nursing homes.

50
. Bill Clinton quoted in Starr,
Remedy and Reaction
, 71.

51
. George H. W. Bush quoted in Balz and Brownstein,
Storming the Gates
, 130.

52
. Darman,
Who’s in Control?
, 207.

C
HAPTER
16

1
. Morgan,
The Age of Deficits
, 138.

2
. George H. W. Bush quoted in Rosenthal, “Bush Now Concedes.”

3
. Newt Gingrich quoted in Darman,
Who’s in Control?
, 283.

4
. Pollack,
Refinancing America
, 69.

5
. Steuerle,
The Tax Decade
, Table 11.1 at 177. The balance of the deficit reduction consisted of $57 billion in unspecified other cuts and reduced interest from reduced borrowing. A good summary and analysis can be found in
The Tax Decade
, 177–183. The highest tax rate rose to 31 percent. In reality, the top rate was higher because of the phaseout of deductions for taxpayers in the top bracket.

6
. Clinton for President Committee,
A Plan for America’s Future
.

7
. Also in March 1992, congressional “deficit hawks” flexed their muscles in a vote whose significance was overshadowed by the presidential race. The 1990 Balanced Budget Agreement had created separate annual ceilings on defense and discretionary—non–formula-driven—domestic spending. The Democratic House leadership tried to raise the level of domestic spending above the required ceiling, but Congressman Tim Penny and other Democrats joined with Republicans to defeat the measure.

8
. Perot quoted in Shaviro,
Taxes
, 76.

9
. Perot quoted in Rapoport and Stone,
Three’s a Crowd
, 65.

10
. Hager and Pianin,
Mirage
, 202.

11
. Marmor,
The Politics of Medicare
, 124–125.

12
. Chen, “Perot Quits Presidential Race.”

13
. Perot quoted in Rapoport and Stone,
Three’s a Crowd
, 67.

14
. Bush, “Presidential Debate in East Lansing.”

15
. Toner, “Clinton Captures Presidency.”

16
. Greenspan,
The Age of Turbulence
, 147.

17
. Woodward,
The Agenda
, 71.

18
. Ibid., 113.

19
. Clinton quoted in ibid., 119.

20
. Gingrich, “The Republican Contract with America.”

21
. Norquist,
Leave Us Alone
, 294–295.

22
. Gingrich quoted in Hager and Pianin,
Mirage
, 15.

23
. Gingrich quoted in Morgan,
The Age of Deficits
, 179.

24
. Gingrich quoted in Hager and Pianin,
Mirage
, 15.

25
. The amendment set a low bar for what counted by including trust fund revenues collected as a reserve for the post-2010 retirement of the Baby Boom generation.

26
. Clinton quoted in Morgan,
The Age of Deficits
, 184.

27
. Morgan,
The Age of Deficits
, 182.

28
. Ibid.

29
. Phillips-Fein,
Invisible Hands
, 265.

30
. DeLay quoted in Morgan,
The Age of Deficits
, 186.

31
. Smith,
Entitlement Politics
, 71.

32
. Moon,
Medicare
, 66–67.

33
. Marmor,
The Politics of Medicare
, 139.

34
. Dole quoted in Morgan,
The Age of Deficits
, 183.

35
. Morgan,
The Age of Deficits
, 182–183.

36
. Perot had advocated that premium rates rise from 25 percent to 35 percent of Medicare Part B’s total costs. Clinton’s first budget had raised the contribution rate to 31.5 percent, but that level was set to revert to 25 percent in January 1996. Republican leaders feared that their Medicare plan, with premium rates of 31.5 percent, would encounter greater public resistance if it jumped from a 25 percent base.

37
. The White House and Congressional Republicans had skirmished about the time period for balancing the budget and whether to assume a 2.3 percent or a 2.5 percent rate of economic growth. Eventually Clinton accepted the seven-year timetable and the assumption of the lower rate of economic growth.

38
. Gingrich quoted in “Gingrich Says ‘Snub’ Contributed to Shutdown.”

39
. Balz and Brownstein,
Storming the Gates
, 157.

40
. Gingrich quoted in Morgan,
The Age of Deficits
, 188.

41
. Clinton, “State of the Union.”

42
. Gingrich quoted in Morgan,
The Age of Deficits
, 193.

43
. In Massachusetts Republican governor William Weld and state Democratic leaders had paid for expanded medical coverage with a sharp increase in tobacco taxes. A new federal Children’s Health Insurance Program (CHIP) was based on that precedent. Rather than creating a new “entitlement,” Congress gave the states the option of either incorporating greater coverage for children in Medicaid or crafting their own program with a block grant. The president and others had long feared that poor children would be hurt the most by annual ceilings on Medicaid growth, since no state would be willing to endure the backlash from evicting elderly and disabled Americans from nursing homes.

44
. Joyce,
The Congressional Budget Office
, 75–76.

45
. Hahn and Mulvey, “Medical Physician Payment Updates,” contains an excellent overview of this issue.

46
. Marmor,
The Politics of Medicare
, 150.

47
. Herbert Stein quoted in Pianin, “Seeing Budget in Balance.”

48
. Gillon,
The Pact
, 252.

49
. Gingrich quoted in Seelye, “The Speaker Steps Down.”

50
. Clinton, “Remarks on the Budget Surplus.”

51
. The White House had not
predicted
a federal funds surplus in fiscal 2000. See OMB, Historical Table 1.4 (2000), reprinted in Meyer,
Evolution of United States Budgeting
.

52
. Kliesen and Thorton, “The Expected Federal Budget Surplus.”

53
. That projection showed the first surplus in the unified budget in fiscal year 2001 and continuing deficits of more than $100 billion a year in the federal funds budget. Before 1998, the CBO had routinely projected budget deficits for the next year and rising deficits five years out. The CBO had last predicted large surpluses in 1980, when it estimated a surplus of $578 billion over five years; the actual deficit in the unified budget during those years was $800 billion and over $1 trillion for the federal funds budget. When the books were closed on fiscal year 1999, federal leaders celebrated a $124 billion surplus in the unified budget, up from $69 billion in 1998. The federal funds budget, however, had a deficit of $88 billion, down only slightly from $92 billion the previous year.

54
. OMB, Historical Tables, “Table 1.1–Summary of Receipts, Outlays, and Surpluses or Deficits (-): 1789–2018.”

55
. See Gross Debt in Appendix A.

56
. “Table 13” in
Budget, Fiscal Year 2001
.

57
. CBO,
Budget, Fiscal Years 2001–2010
, Summary Table 6 and xxxiii.

58
. Logan, “Summary of Latest Federal Income Tax Data,” Tables 5 and 6.

59
. In 1998 the White House Council of Economic Advisers had warned that a lower tax rate could prompt a short spurt in revenues as investors rushed to cash in gains and lower long-run revenues as investors depleted the pool of long-term capital gains or the stock market fell. Experts debated just how to estimate the level of future capital gains. See Kasten, Weiner, and Woodward, “What Made Receipts Boom,” and Parcell, “Challenges and Uncertainties.”

60
. Forbes proposed a flat tax rate of 17 percent on all earned income with a standard deduction of $13,000 for each taxpayer and $5,000 for each dependent. Because of the exemption of investment income from taxation, the Forbes plan was essentially a consumption tax.

61
. Compare Table 1.4 with OMB, Historical Tables, Table 1.2.

C
HAPTER
17

1
. The CBO predicted a $5.6 trillion surplus over the next ten years, up $1 trillion from its forecast six months earlier. Nearly half of the CBO’s projected surplus resulted from the practice of including trust fund surplus revenues in the unified budget without accounting for the related liabilities.

2
. Bush, “Address Before a Joint Session.”

3
.
Budget, Fiscal Year 2002
, 7.

4
. OMB Historical Tables, Table 7.1 (FY 2002),
http://www.gpo.gov/fdsys/pkg/BUDGET-2002-TAB/pdf/BUDGET-2002-TAB.pdf
.

5
.
Budget, Fiscal Year 2002
, 7.

6
. Ari Fleischer quoted in Joyce,
The Congressional Budget Office
, 97.

7
. Greenspan,
The Age of Turbulence
, 217.

8
. “H.R. 1836,” 1.

9
. Franklin,
The Way to Wealth
, 13.

10
. OMB Historical Tables, Table 2.1 (FY 2002),
http://www.gpo.gov/fdsys/pkg/BUDGET-2002-TAB/pdf/BUDGET-2002-TAB.pdf
.

11
. OMB, Historical Tables, “Table 2.1, Receipts by Source: 1934–2018.” In future fiscal years revenues would fall even more relative to prior projections. For the next fiscal year, 2002, Clinton’s OMB had projected individual income tax revenues of $1.097 trillion
before
the tax cut. Bush’s budget projected collections of $1.079 trillion
with
a tax cut. In fact, in fiscal year 2002 only $858 billion in personal income taxes were collected. The Clinton and Bush budget offices projected corporate income tax revenues of $214 billion and $218 billion, respectively, for fiscal year 2002. The actual figure would be $148 billion.

12
. McClellan,
What Happened
, 91.

13
. CBO,
Budget: Update
, Table 1–9 and Table 1.3.

14
. In addition to revenues lost from the tax cuts, more than $400 billion resulted from “changed economic conditions” and mistaken assumptions (“technical adjustments”) that had been detected since the preceding May. Another amount, totaling over $400 billion, represented interest on larger debt. See CBO,
Budget: Update
.

15
. Bush quoted in Brownlee,
Federal Taxation
, 227.

16
. Sanger, “President Asserts Shrunken Surplus May Curb Congress.”

17
. Television journalist Brit Hume confronted White House economic advisor Larry Lindsey on the issue by asking, “Isn’t it the case that the [Social Security] money will be very much touched and it will be loaned back to the government? Social Security will get IOUs or government securities and what will happen is the money will be used to pay down other government debt, correct?” Lindsey said, “That’s correct.”