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Tax and spend

GB Geo-Blog

Tax and spend

The Democrats have been labelled as the tax and spend party in the US. I guess it is hard to lose a label in US politics.

In the play Evita, an elderly gentleman tried to console Evita after she had been slighted, by telling her he was still called admiral even though he had not been out to sea for decades. The label affixed to the Democrats seems to have much in common with the “admiral’s” comments.

Prior to the election of Barack Obama, there have been two Democrat presidents – Jimmy Carter and Bill Clinton – who served for 12 years in total during the 32 years prior to Obama’s election. During this same period there have been three Republican presidents.

During the Carter presidency, both US Government tax revenues and expenditures increased as a proportion of GDP – tax and spend Jimmy. By the end of his presidency, the budget deficit was $74 billion, and the government’s debt was $712 billion.

During Reagan’s two terms, government revenues decreased as a proportion of GDP, although the proportion did increase during his second term. Government expenditures also decreased as a proportion of GDP.  Government debt increased by $1.3 trillion during his two terms to $2.1 trillion by 1988. The debt tripled in eight years.

Reagan became the champion of smaller government even though the average of expenditures to GDP during his eight years has been the highest of all the presidents during the past 32 years. I guess trend/myth matters more than absolute values or reality.

His successor, Bush I, succeeded in increasing the debt by another $900 billion – to $3 trillion – and in only four years. Government revenues did decline relative to GDP, continuing the Reagan “legacy”, but expenditures increased as a proportion of GDP.

The Republicans may not tax, but Bush I showed that they can spend. Albeit, Gulf War I did impact spending during the Bush I presidency.

The along came Clinton. By the time he left office, he had turned a $255 billion deficit into a $236 billion surplus – yes a surplus! The total debt increased a rather modest $400 billion during his eight years and fell from 48% of GDP to 35% – the lowest ratio since 1984.

Clinton was a tax president in true Democrat fashion. Tax revenues increased relative to GDP. Democrats obviously are not averse to raising taxes; unlike their Republican counterparts for whom “thou shalt not raise taxes” seems to be one of their commandments.

However, Clinton definitely was not a spend president. Expenditures dropped sharply as a proportion of GDP during his eight years. The combination of tax increases and spending restraint transformed a deficit into a surplus.

Next we come to Bush II. Following in the Republican tradition, tax revenues declined relative to GDP during his two terms, although like Reagan, revenues as a proportion of GDP did rise during his second term. Like father, like son – under Bush II government expenditures increased relative to GDP, almost completely reversing the efforts of Clinton.

The budget deficit hit $459 billion in 2008 and government debt increased by $2.4 trillion to $5.8 trillion during the Bush II presidency. The three Republican presidents during this 32-year period (actually the last 28 years) accounted for $4.7 trillion of the total $5.8 trillion debt outstanding at the end of 2008 – a remarkable accomplishment or the party of “small” government.

The evidence does not support the tax and spend label stuck to the Democrats. Indeed, the Democrats seem to have been more fiscally prudent than the Republicans. It appears that the Republicans have been the spend and fiscally liberal party.

The opinions expressed in this blog are personal and do not reflect the views of either Global Brief or the Glendon School of Public and International Affairs.


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