Updated: See below.
You might have seen some news stories suggesting that Bill Clinton had publicly disagreed with Barack Obama on extending the Bush tax cuts for the wealthy, then reversed himself. Except, as Brian Beutler of Talking Points Memo points out, that’s not quite what happened.
In an interview yesterday on CNBC, Clinton spoke of the need to deal with the current fiscal situation with a short-term plan for dealing with the economy and a long-term one for dealing with the debt (as pretty Obama, Congressional Democrats, and even Mitt Romney — pretty much everybody but the more extreme Tea Party Republicans — seems to agree makes sense). Maria Bartiromo then asked, “So does that mean extending the tax cuts?”
Clinton replied, “Well, I think what it means is they will have extend — they will probably have to put everything off until early next year That’s probably the best thing to do right now. But the Republicans don’t want to do that unless he agrees to extend the tax cuts permanently, including for upper income people. And I don’t think the president should do that. That’s going to — that’s what they’re fighting about. I don’t have any problem with extending all of it now, including the current spending level…. The real issue is not whether they should be extended for another few months. The real issue is whether the price the Republican House will put on that extension is the permanent extension of the tax cuts, which I think is an error.”
This is admittedly a little ambiguous, as off-the-cuff answers sometimes are. But read with common sense, it’s obvious that Clinton is agreeing with Obama that the Bush tax cuts on very high-income taxpayers should not be extended except possibly for a few months for pragmatic considerations. It’s true that Obama and other Democrats have called for letting the cuts expire at the end of the current calendar year as they are scheduled to do (which among other things would make life a lot easier for those who prepare tax returns), but everybody recognizes that given the current dysfunctional Congress and the unlikelihood of any final decision of the budget until after the November election, it might not be possible to get all this ironed out in a few weeks.
Beutler’s aforementioned article at TPM goes into more detail.
Let me add a little bit of additonal background: When Clinton came into office in 1993 at the tail end of a recession, he pushed through an increase in taxes on upper-income people that was opposed by every Republican in Congress, who insisted it would choke off the recovery and maybe even send the economy into a nosedive. Instead we got the longest period of economic growth in American history, and Clinton left office at the start of 2001 with a budget in surplus for the first time since the Johnson administration. At the time, the Congressional Budget Office forecasted that under an optimistic economic forecast of continuing moderate growth, the entire national debt would be paid off in as little as ten years.
When George W. Bush took office he pushed for, and got, an income tax cut. It benefitted everyone who paid income tax, but the rich enjoyed the biggest benefit. That tax cut, plus increased spending and a slow-growth economy, quickly put the federal budget back into deficit and sent the national debt climbing.
The most economically significant measure of the national debt is its ratio to the size of the economy. That ratio fell under Truman, Eisenhower, Kennedy, Johnson, Nixon, Carter, and Clinton, and it was close to unchanged during the brief presidency of Gerald Ford. It has risen under only four presidents since the end of World War II: Reagan, the two Bushes, and Obama.
As everyone agrees, we need to get the debt-to-GDP ratio back under control, and realistically that can’t be done without raising taxes on very high income individuals. Nobody is talking about a top rate of 91% as under Eisenhower or even the 50% rate that held for most of Reagan’s presidency. The proposal is to raise it by just a few percentage points from the present 35%.
I previously wrote “Note that this rate would apply only on the portion of an individual’s taxable yearly income in excess of the breakpoint, which under most proposals would be $200,000 for individuals and $250,000 for married couples.” That’s a bit simplified because there would in fact be two tax brackets above those breakpoints. Right now the 35% rate applies only to taxable income over $388,350 on most tax returns. (On income in the range $178,651 through $388,350 a 33% rate currently applies.) Income from most stock dividends and on profits from the sale of assets held over a year are taxed a lower rate, currently a maximum of just 15%.