StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Newt's Revisionist Budget History

28 Feb 2011
Posted by Stan Collender

I can't really fault former House Speaker Newt Gingrich (R-GA) too much for his attempt in Friday's edition of The Washington Post to revise budget history to match his current political needs. After all, as a potential GOP presidential candidate in the tea party era, saying in an op-ed that you were for spending cuts before spending cuts were cool is the right thing to do even if it isn't true.

And it absolutely isn't true that, as Gingrich now wants us to believe, spending cuts were the reason congressional Republicans shut the government in 1995 and 1996.  The big issue then was tax cuts rather than spending cuts as the GOP desperately tried to get back to what they considered to be the magic issue that propelled Ronald Reagan to two victories and drove George H.W. Bush from the White House (never mind that, as Bruce noted in this post last week, Reagan also agreed to a number of tax increases).

The 95 and 96 shutdowns occurred when Bill Clinton vetoed the reconciliation bill passed by the Republican-controlled Congress that included a tax cut.  Republicans were so angry that they refused to adopt a continuing resolution.  Clinton made a big deal about the fact that he couldn't sign a CR if Congress didn't send him one and the GOP rather than the White House ended up getting blamed for it all.

Gingrich is also wrong about the shutdown being good for Republicans.  The reaction was so bad that it was, in fact, the beginning of the end for Newt as speaker.

Gingrich is also wrong that the ultimate result of the shutdowns "was the first four consecutive balanced budgets since the 1920s."  There were indeed four consecutive surpluses from 1998 to 2001 and that definitely was the first time that happened since 1927-30.  But the surpluses were the result of a perfect storm of positive economic news that included a huge increase in revenues from the tech bubble and the big run up in the stock markets along with low inflation and the political stalemate that made adding new spending or cutting taxes almost impossible.  If you were going to choreograph a way to balance the federal budget, that would have been the way to do it.

The best example of all of how much this piece was written for political reasons is its big wet kiss it has for John Kasich, the chairman of the House Budget Committee in 1995 and 1996 and now the governor of Ohio.  Ohio may not be just a critical state for anyone running for president in 2012, it may well be the critical state.

 

 

Social security also played a

Social security also played a big factor in those surpluses. There was only a on-budget surplus one year, 2000 (.9% of GDP). 1999 was balanced on-budget but the other years had a deficit. Considering Newt has been saying "social security is broke", it's hypocritical of him to use that social security surplus to distort his record.

"Social Security is thus doing the rest of the budget--and President Clinton--a huge favor since, without its loans, the much touted budget surplus would be a triple-digit deficit." - Slate March 27, 1998
http://www.slate.com/id/2497/


Really? Stan, I was THERE,

Really? Stan, I was THERE, in the House, during this period. All anyone talked about was the budget cuts. I'd note there were large tax cuts the next session, and Bill Clinton was still President. This fight wasn't about tax cuts. Further, Gingrich left after (to the GOP) disappointing 1998 congressional election. The notion that this was the "beginning of the end" is pretty tenuous. It was the first time Gingrich told the GOP conference something that turned out to be erroneous (he thought the shutdown would be more popular than it was) but the notion that he was on some sort of inevitable path out is erroneous.




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