Washington, D.C. (Sept. 23, 1999) — Responding to the President's decision to veto the tax cut approved by Congress, National Center for Policy Analysis Senior Fellow Bruce Bartlett issued the following statement:
"In his statement vetoing the congressional tax bill, President Bill Clinton also rewrote economic history. In the world of Bill Clinton, everything was perfect before Ronald Reagan and George Bush became president. Everything went to hell on their watch until Bill Clinton on his white horse came to Washington to save the day. As President Clinton said in his statement:
'In the 12 years before I became President, irresponsible policies in Washington piled deficit upon deficit, quadrupling the national debt, leading to higher interest rates, eventually bringing us the worst recession since the Great Depression.'
Let us examine this statement:
- In 1976, interest rates on 3-month Treasury Bill averaged 4.99%. In 1980, President Jimmy Carter's last year in office, they averaged 11.5%. Never in American history have interest rates risen so much.
- The principal reason for these extraordinarily high interest rates was massive inflation. The CPI averaged 4.9% 1976; by 1980 it reached 12.5%.
- Ronald Reagan was responsible for cleaning up the mess left by the last president of Mr. Clinton's party. The Treasury Bill rate fell to 6.69% in Mr. Reagan's last year in office and continued to fall during President Bush's term to 3.45% in 1992.
- Inflation also fell on the Reagan-Bush watch from double-digits during the Carter years to 4.4% in 1988 and 2.9% in 1992.
Mr. Clinton tells us that the good times on his watch are due solely to fiscal discipline. But in fact, this discipline only began with Republican control of Congress in 1994.
Mr. Clinton warns that discipline will break down if the Republican tax cut is passed, which will raise interest rates for consumers. But in fact, interest rates have been rising steadily for more than a year even as the budget has moved into surplus. The 30-year Treasury bond rate was under 5% a year ago; today it is well above 6%.
The truth is that the tax cut is minuscule, would still leave the budget more than $2 trillion in surplus, and would fix many pressing problems with the tax code that virtually all tax experts support. These include marriage penalty relief, indexation of capital gains, extension of the R&D credit, and reform of the alternative minimum tax, among others."