![]() ![]() Paul Richards/AFP via Getty Imagesĭefense spending takes up another 14% of taxpayer dollars, greatly exceeding every other item in the so-called discretionary budget, which includes everything else from transportation and energy to airline traffic control and national parks. When Clinton signed the Balanced Budget Act of 1997, it was the first time since 1969 that the U.S. And the population of Americans 65 or older has grown by 32% since 1993, increasing demand for entitlements. Funding for these programs is set by formula, making it difficult to change. On the spending side, so-called entitlements – mandatory programs such as Social Security, Medicare and veterans benefits – now account for almost two-thirds of the federal budget, compared with less than half when Clinton took office. The lesson for Republicans today is that if they are serious about balancing the budget, it will require some very unpalatable choices. ![]() to pay down the national debt by over $450 billion. The surplus – which hasn’t been seen since – allowed the U.S. The surplus peaked in 2000 at $236 billion before falling to $128 billion in 2001. Higher tax rates on the wealthiest Americans, strong economic growth and continued restraint in government spending produced a budget surplus of US$69 billion in 1998. Meanwhile, the economy, fueled by a tech boom, expanded rapidly during Clinton’s second term. Clinton wrangled continually with then-Republican Speaker Newt Gingrich, who forced a government shutdown that same year.Īs part of budget negotiations, Congress eventually passed the Balanced Budget Act of 1997, which retained Clinton’s original tax increases but cut capital gains taxes and reduced spending on Medicare and Medicaid. ![]() The higher taxes invited pushback from Republicans, who gained majorities in the House and Senate in 1995. That’s the smallest it had been in 22 years. ![]() These measures helped slash the overall deficit to 1.3% of GDP by the end of Clinton’s first term. On the spending side, Clinton took advantage of the “ peace dividend” that followed the collapse of the Soviet Union to reduce defense spending from 4.3% of GDP in 1993 to 2.9% by 2000. He introduced higher top personal income tax brackets, raised corporate taxes, increased taxes on Social Security benefits, added 4.3 cents per gallon onto gas taxes and eliminated a number of itemized tax deductions. In his second term, he also negotiated a bipartisan budget deal with Republicans.Īfter campaigning on a pledge to cut the deficit, Clinton raised taxes on the wealthy during his first year in office. When Clinton took office in 1993, the budget deficit in the previous year was just under 5% of gross domestic product, and the nonpartisan Congressional Budget Office predicted a bleak fiscal outlook.Ĭlinton’s balanced-budget recipe was a mixture of higher revenues and lower spending, with help from a booming economy. A quick look back at how we did it, along with how much has changed, shows that Republicans are unlikely to manage a similar performance. As a member of the Clinton administration in the Commerce Department from 1997 to 2001, I participated in achieving that rare balanced budget and understand the obstacles to delivering a repeat performance. ![]()
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