DURHAM -- As the nation confronts an unprecedented deficit crisis, it would be well to recall the circumstances - and consequences - of how we handled the last such challenge in our history.
It was just 18 years ago. Bill Clinton had been elected president on a platform celebrating the values of "opportunity, responsibility and community," and promising universal health care and welfare reform. Then, a few weeks prior to being sworn in, Clinton was informed by the Bush White House that the nation's annual deficit would be double what had been predicted.
The news immediately transformed the new administration's agenda. The country was still coming out of a national recession. Clinton's economic team - Lloyd Bentsen, Robert Rubin and Leon Panetta, among others - persuaded the new president that he must make a long-range plan for deficit reduction the No. 1 priority for his new administration. A buoyant economy, they argued, required that Wall Street and the nation's investment banks believe in the president's ability to run a tight ship financially. Establishing credibility with the markets was a prerequisite for everything else.
Despite substantial disagreement among other advisers, Clinton bought in. Other priorities would have to wait.
Clinton's deficit-reduction package speaks eerily to the issues being debated today. Entitlements would need to be brought under control, spending curtailed. But revenues would also need to increase.
All during his presidential campaign, Clinton had promised a middle-class tax cut. Now, he chose a different combination: minor tax reductions for the middle class, and a tax increase for those in the top 2 percent of the nation's income earners. Republicans stood as one in opposition. Sen. Robert Dole promised that not a single member of his party would vote yes.
Clinton persisted. In the end, his deficit reduction package passed by one vote in the House. In the Senate, Vice President Al Gore broke a 50-50 tie. Clinton's bill became law. Republicans insisted then, as they do today, that the tax increases would be a "job-killer." Indeed, having control of both houses of Congress after the 1994 elections, they shut down the federal government twice in the winter of 1995-96 over the issue of trying to force even more stringent budget cuts.
What were the results? The nation entered a boom unsurpassed in the entire post-World War II era. In eight years, the Clinton economic plan helped generate 22 million new jobs - an unparalleled expansion of the labor force.
In addition, Clinton presented his own plan for achieving a balanced budget. When he left office, the deficit reduction package had produced a national surplus of more than $200 billion, and experts predicted that under the existing plan, the entire national debt would be erased by 2013.
Of course, that scenario never came to pass. When George W. Bush became president, he initiated massive tax cuts, including elimination of the levies on the rich that had made such a difference in generating the Clinton balanced budget.
Soon thereafter, in the aftermath of 9/11, the nation became involved in foreign wars in Afghanistan and Iraq. No additional revenue was called for to pay for those wars. In addition, the size of government grew at a rate greater than under Clinton. Despite the tax cuts - allegedly a guarantee that more jobs would be forthcoming - employment growth during the eight Bush years was under 3 million, less than 15 percent of the growth that took place during Clinton's comparable eight years in office.
Now, we are told by Republican leaders that there can no tax increases, even for the richest Americans. To raise taxes would be to lose jobs. It is as if the 1990s never happened, or that all those economists who predicted that the national debt would be completely eradicated by 2013 if we maintained the Clinton economic plan were simply blowing smoke.
Where is the logic? Where is the evidence? Where is the reality of our most recent experience with similar questions? History does matter. If only we would remember it.
William Chafe is the Alice Mary Baldwin professor of history at Duke University, and is the former president of the Organization of American Historians.
