The Budget, Taxes: Myths about the GOP, Dems, and Taxes and Spending

It is not unusual to hear that the GOP are more conservative on fiscal matters and that Democrats attachment to spending and “big government” has caused their downfall. A corrollary to this is that Bill Clinton gave the Democrats a much needed makeover and remade the Democrats into the party of fiscal responsibility.

On taxes, the GOP is depicted as the party of tax cuts while the Democrats view the term “tax cut” as a four-letter word. Great stories, there’s just one problem: They’re totally wrong.

Quick, name three post-1929 Republican Presidents to balance the budget? Answer: Eisenhower, Nixon (in one year) and…..and…and… uh….. nobody.

Meantime, three Democrats have balanced the budget and two came close. Harry Truman, Lyndon Johnson (in FY1965) and Clinton ran at least one surplus during their terms. John Kennedy ran small deficits (despite the 1960-61 recession). Jimmy Carter reduced the deficit from 1977-1979 and in fact submitted a balanced budget in Spring 1980. It was only the recesion of 1980 that unbalanced the budget that year. The recession of 1980 was also deliberately brought on by Fed Chairman (and Carter, not Reagan appointee) Paul Volcker to bring down inflation. Given that inflation was in double-digits at the end of the 1970s, Carter and/or the Fed can’t really be blamed for not balancing the budget that year.

The only post-Wilson Democrat president to not come close to balancing the budget was Franklin Roosevelt. But for the guy who saved capitalism from itself and democracy from fascism, the failure to balance the budget is easily excused.

What about taxes? Since the imposition of the Progressive Income Tax in 1913 (which was supported by both parties at the time) here’s the record: FDR did raise taxes-to pay for important New Deal programs and (especially) to pay for World War II. Paying for a war? Now there’s a novel idea in Washington DC today.

Harry Truman cut taxes after the end of WWII-before he raised them to pay for the Vietnam War. John Kennedy cut taxes ( it was signed by Lyndon Johnson a couple months after Dallas). The difference between JFK’s tax cut and Reagan’s was that while both cut taxes across the board, most of (though not all) of JFK’s tax cut was aimed at middle to lower income workers who could be counted on to spend most of their tax refund and thereby stimulate demand. Reagan’s tax cut was a bonanza for the six-figure salary crowd, and not many other folks (though Reagan, unlike Dubya, was willing to expand the Earned Income Tax Credit).

Johnson had signed the Tax Cut Act in early 1964. His big mistake tax-wise was that he waited to long to raise taxes to pay for the Vietnam War. (Is there something in the water in Texas that makes Texas politicans think that wars of choice (e.g. Iraq II, Vietnam) don’t need to be paid for?)
Jimmy Carter raised some taxes-namely Social Security and Medicare taxes to preserve those successful programs for future generations. At the same time Carter cut income taxes in 1978. Unfortunately inflation and “bracket creep” eroded those cuts.

Clinton raised taxes on the rich in 1993, but then cut capital gains and other “investment” related taxes in 1997- a move that chagrined Joe Stiglitz from the Clinton Council of Economic Advisers. Clinton also followed the path blazed by all presidents since Gerald Ford and expanded the earned income tax credit.

So why the misconceptions? Sure there’s a right-wing noise machine in this country, but that can’t explain everything. OK so Kerry never promised to balance the budget, but neither did Clinton or most other Democrats (save ironically for FDR in 1932). Still, Kerry promised to reduce the deficit and restart PAYGO. Is the public so concerned about budget balancing that they punished Kerry for that? Sure they did-and if you believe that I have a bridge in Manhattan to sell you. Oh yeah, and George Bush’s iPod is chock full of rap music.

Most likely the misconceptions arise from the view that the only way to balance the budget is raise taxes and or cut spending and each parties’ inhibitions (or lack thereof) about tax and spending. Both parties are wary of raising taxes, though the Democrats are less so than the Republicans (espeically rich folks taxes). Except for some parts of the military (though not Vet Hospitals and body armor) and corporate welfare, the Republicans have no inhibitions about cutting spending-if only politics didn’t get in the way.

While Democrats are certainly willing to admit there is wasteful spending in the budget and are willing to cut those specific items, most Democrat proposals call for expansions in government programs. Not that there’s anything wrong with that– Show me a parent with a college bound child who doesn’t want to expand student loans and Pell Grants and I’ll show you a Wal-Mart that pays a living wage (and respects women and minorities while their at it).

So post-1913 Democrats have a better record of fiscal responsibility than the Republicans-and that record stretches farther back than the lifetimes of most people reading this article.

Next: Balancing the Budget is Great-If It’s Done Correctly

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About Nick

Teacher of Social Studies. Born in the 1970s. History major, music minor. Big Baseball fan. Economic progressive.
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2 Responses to The Budget, Taxes: Myths about the GOP, Dems, and Taxes and Spending

  1. Ron Chusid says:

    Another consideration is that, even if true that your chances are greater for a cut in Federal taxes under Republicans, this isn’t necessarily the best course even if your financial bottom line is motivating your vote.

    When Republicans cut taxes this may just lead to shifting higher local and state taxes as other levels of government must make up revenue to pay for needed services.

    It might cost you more in the long run in some services aren’t provided by government and you have to pay on your own.

    Tax cuts not accompanied by spending cuts increase the deficit which ultimately acts as a hidden tax by decreasing the long term value of savings.

  2. Nick says:

    Oops. Should’ve been “Harry Truman raised taxes to pay for the KOREAN War.”

    A lot of good points Ron. I especially agree that “It might cost you more in the long run in some services aren’t provided by government and you have to pay on your own.” Let’s say you vote for a politican who promises-and does-cut taxes. In the meantime, your local sewage system becomes old and decrepit-so the sewage backs up a and floods your home. “Where was the government while this sewage system was going to hell?” the anti-tax guy asks. Sir, it couldn’t afford to do its job-it was too busy giving you money. Oh well, at least you can take your tax refund-too bad you have to spend it on a new basement.