Americans for Tax Reform has been warning for months that the President’s so-called National Commission on Fiscal Responsibility and Reform was fatally flawed by leaving tax hikes on the table, a temptation that would ultimately lead to higher taxes to fund continued government growth. The Commission Co-chairs’ plan, which raises almost $1 trillion in new taxes while ignoring spending reform, is not the first attempt by a bipartisan commission to sell out on taxpayers. History tells us this was sure to happen under any budget “deal:”
The 1990 Budget Deal: In 1990, President George H.W. Bush huddled with Democrat House and Senate members at Andrews Air Force Base.
What was Promised: Congressional Democrats convinced a number of Republicans to join them in a bipartisan deal promising $2 in spending cuts for every $1 in tax increases.
- What Actually Happened: Every penny of the tax increases ($137 billion from 1991-1995) went through. Not only did the Democrats break their promise to cut spending below the CBO baseline—they actually spent $23 billion above CBO’s pre-budget deal spending baseline. 34 House Republicans broke their own Taxpayer Protection Pledges and went along with this one-sided “deal.” As a result, Republicans lost 8 seats in the 1990 Congressional midterms, and President Bush only received 38% of the vote in the 1992 Presidential election.
The 1982 Tax Equity and Fiscal Responsibility Act: Rather than bring spending in line with declining revenues, overspending and the resulting deficit caused widespread hysteria regarding the country’s fiscal health in 1982.
What was Promised: President Reagan agreed to a budget deal with Congressional Democrats that promised $3 in spending cuts for every $1 in tax hikes.
- What Actually Happened: The spending restrain never materialized – instead, the resulting tax hike made up almost 1 percent of GDP ($37.5 billion) and amounted to the largest peacetime tax increase in American history.
In contrast, budget plans brokered by commissions tasked with one goal result in savings for taxpayers. For example, the Defense Base Closure and Realignment Act, passed in 1990, led to the closure of many underused military bases in the wake of the Cold War and streamlined defense spending. The BRAC Commission could not have been successful if it has been asked to multi-task. By focusing on closing under-utilized bases, rather than being responsible for also opening new bases, the commission successfully saved taxpayer money.
Another successful cost-cutting effort was the Byrd Committee, established in 1941, which served as an Anti-Appropriations Committee until 1974, when it was dissolved. The committee was tasked with solely cutting spending and was not able to raise taxes or authorize new outlays. As a result, the committee was able to tamp down on some of the New Deal government growth, resulting in over $38 billion (in 2010 dollars) in real savings.
Moral of the story: When bipartisan deals are struck promising to cut spending and raise taxes, the spending cuts don’t materialize but the tax hikes do.