WSJ Editorial Board, Walker, Rubio Rebuke Jeb Bush's "Grand Bargain" Tax Increase
WASHINGTON, D.C.— Following his recent remarks endorsing a hypothetical 10-1 promised-spending-cuts-to-tax-hikes deal, former Florida Governor Jeb Bush has been cheered by left-of-center editorial pages across the land as well as Democrat elected officials including Senate Majority Leader Harry Reid. Meanwhile, Bush’s tax increase position has been rebuked by, among others, Gov. Scott Walker (R-Wis.), Sen. Marco Rubio (R-Fla.) and the Wall Street Journal editorial board.
On Wednesday, BloombergBusinessweek reported:
Florida Senator Marco Rubio said he wouldn’t accept revenue increases as part of a deficit deal that also cut spending to prevent a U.S. fiscal crisis, saying it’s a “different time” than when former President George H.W. Bush embraced such an agreement in 1990.
The first-term Republican, a prospect to be Mitt Romney’s vice presidential running mate, said he favors a broad agreement to simplify and bring more certainty to the tax code, and argued that it ultimately would bring additional revenue to the government. He ruled out including revenue increases in the plan, saying that would frustrate economic growth.
On Thursday, following Gov. Scott Walker’s appearance at the Monitor Breakfast, Huffington Post reported:
Walker also rejected Bush's statement that presumptive GOP presidential nominee Mitt Romney should accept a plan exchanging $10 in spending cuts for $1 in revenue.
"I just don't believe that the problem in government is that we don't tax enough. I think it's not only that we don't control our spending enough, we don't use our resources appropriately," he told reporters. "I think there's also not enough out there to help the private sector stimulate growth. I think that's one of the big things that's missing in the equation.”
WALL STREET JOURNAL EDITORIAL PAGE:
Today, the Wall Street Journal published an editorial titled “Phony Bush Nostalgia -- Beware liberals bestowing praise 20 years later”:
But other than filial piety, there's no good reason to defend the 1990 budget deal, which cost his father a second term and helped to make voters more cynical about politics.
Democrats loved the 1990 deal because a Republican President repudiated his most memorable campaign pledge: "Read my lips: No new taxes." Democrats ran Congress during the Bush 41 Presidency, and Senate Majority Leader George Mitchell refused any budget deal unless Mr. Bush broke his pledge. Mr. Bush agreed, trading what was claimed to be $1 of tax increases for $2 of spending cuts. In practice the taxes were real but spending increased.
The $137 billion tax increase hit as the economy was weakening and contributed to what was already a recession. Mr. Bush fought for a cut in the capital gains tax to spur investment, and the Senate mustered 51 bipartisan votes for it. But Mr. Mitchell killed it with a filibuster, as he did every other Bush attempt to spur growth. The media never portrayed Mr. Mitchell as an obstructionist.
The tax increase, which raised the top income-tax rate to 31% from 28% (plus the hidden increase from a phase-out of deductions and exemptions), also began the long-unraveling of tax reform. Reagan's 1986 reform passed on the principle of lower rates with fewer loopholes. But once another Republican President agreed to higher rates, Democrats pocketed the concession and demanded more. Bill Clinton campaigned for higher rates and lifted the top rate to 39.6%. The tax code has since only grown more complicated.
The budget deal was disastrous for Republicans because it undermined their main fiscal difference with Democrats. It was also the kind of insider deal that united both parties in conspiring against the voters to increase spending. That painful lesson helps to explain why many Republicans who are old enough to remember don't want to repeat the experience.
Americans for Tax Reform has pointed out the lesson of the 1990 “grand bargain”:
-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. President Bush signed the deal on November 5, 1990.
-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 by $274 billion—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 percent of the vote in the 1992 Presidential election.
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.