That time was August 1993, when, in the midst of economic malaise created by the phenomenal budget deficits of the Reagan/Bush years (economist Paul Krugman called it “The Age of Diminished Expectations”) Bill Clinton and Al Gore twisted arms and cajoled Democratic allies to pass their Budget Act through Congress and the Senate. The Act combined spending cuts with tax increases and set a target for bringing the deficit down and the budget into balance for the first time in 25 years. The bill passed the House by a hair 218-216 and then only went through the Senate when Vice President Gore passed the tie-breaking vote. Republicans, still stuck on the tax-cut-and-spend policies of the Reagan and Bush years that George W. wants to resurrect, were confident that the budget would derail the economy and there wasn’t a single one who voted for the bill. At the time, John Kasich, currently the House budget committee chairman and an advisor to George W, said the Act was “like a snake bite. The venom is going to be injected into the body of this economy, in our judgment, and it’s going to spread throughout the body and it’s going to begin to kill the jobs that Americans have.”
The Republican snake never bit and if you want to look at the one political act of the last decade that turned the wounded economy of the Bush years into the robust boom of the Clinton years, it was that bill. Clinton and Gore took a political hit and there’s no question that the bill helped force the democrats out of Congress. But Clinton and Gore knew that the only way to get the economy back on track was to work in concert with the Federal Reserve and to decrease long-term interest rates by bringing down unstable deficits and reducing fear of future inflation. Government can’t control the economy, but by bringing down interest rates, it can make it easier for people to take out mortgages and for companies to borrow the money they need for the new equipment that will make them boom. This increased economic activity is what ultimately has fed the boom.
Today, we have pretty much the same choice on the table. Gore, who was instrumental in passing Clinton’s plan, wants to pay off the national debt, bringing interest rates down further. George W. Bush has another economic plan, built upon a massive tax-cut and modeled quite like what John Kasich wanted back in ’93. We’re back in a tense battle, just as in ’93. And if Bush wins, there might really be an economic snake-bite.