Magazine article The American Prospect

The Fiscal Guillotine

Magazine article The American Prospect

The Fiscal Guillotine

Article excerpt

SHORTLY AFTER BILL CLINTON WAS ELECTED PRESIDENT, he asked me to head up his economic transition team. He had promised during his campaign to "put people first" by reducing America's two deficits: the yawning budget deficit and the growing deficit of public investment in the nation's schools, health care, infrastructure, and environment.

"To reclaim our future," he intoned over and over again, "we must strive to close both the budget deficit and the investment gap."

But the economic transition team discovered that the budget deficit was so much larger than expected that Clinton would have to put the investment deficit on hold. It remained on hold for the next ... well, it's now been 14 years.

In the late 1990s, when the budget deficit turned into a fat budget surplus, Clinton ignored his original investment agenda. By then Alan Greenspan's interest-rate cuts had buoyed the economy enough for most Americans to forget the long-term problems that lay behind the business cycle. Clinton was worried that Republicans would try to turn the surplus into tax cuts, so he used the ever-reliable scare tactic of telling the nation to "save Social Security first." In 2000, as budget surpluses continued to mount, candidate Al Gore demanded that the money be put in a "lockbox." When the surpluses overflowed even the lockbox, Gore said they should be used to reduce America's national debt.

Thus did Clinton and Gore tee up a $5 trillion surplus for George W. Bush to give away mostly to America's very wealthy--without the nation ever so much as considering that it might be used to finance what Clinton and Gore were elected to do in 1992. While Republicans continued to spout the nonsense of supply-side economics, Democrats became the official party of fiscal austerity. The choice became either trickledown economics or Calvin Coolidge economics.

Fast-forward to the present. The nation's investment deficit is now much larger than it was in 1992. The No Child Left Behind Act has raised school standards but hasn't provided nearly enough money to implement them. Meanwhile, almost all the net growth in the labor force has come from immigrants, many of whom lack the basics. There's less money for job training, and it's harder for families of modest means to afford college for their kids. …

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