But it isn’t quite as easy to tell it like it is about your own record. Just look at Kasich’s oft-repeated claim that he was the "chief architect” of the balanced budgets of the 1990s. That’s only true if by “chief architect,” you mean that he voted against the two bills that did the most to get the government in the black, and sponsored one that sounded like it did a lot but actually didn’t. In other words, it’s much more fiscal fantasy than fact.
Now, there are three things you need to know about the ’90s-era budget battles. The first is that the government went from a deficit of 4.5 percent the size of the economy in 1991 to none at all in 1998. The second is that Kasich wanted to balance the budget with massive spending cuts. And the third is that the balance was not, in fact, balanced with massive spending cuts. Instead, it was a mix of, yes, some spending cuts, but slightly bigger tax hikes, that did the job. But we’re getting a little ahead of ourselves.
Let’s get back to Kasich. Even though he actively gives off the impression of a reasonable Republican or compassionate conservative or whatever other alliterative appellation you want to use, he was more of a proto-Tea Partier than anything else in the 1990s. He didn't want to balance the budget by raising taxes. That was for liberals. Nor did he want to do it by raising taxes a little and cutting spending a little more. That was for moderates. Even doing it by cutting spending alone wasn't enough. That was for conservatives, but not Reagan conservatives. No, what he wanted to do was cut spending so much that he could still balance the budget while also cutting taxes. And that meant getting rid of a lot, lot more than just, say, the National Endowment for the Arts—which, of course, he planned to do as well. What kind of things? Well, for starters, the Departments of Energy, Education, and Commerce.
You might have noticed, though, that the Departments of Energy, Education, and Commerce are still around. So something else must have balanced the budget, and it couldn’t have been other cuts. How can we be so sure? Because the Republican Congress didn’t make many more of them. Sure, welfare reform shrank spending by tightening restrictions on the safety net for the poor, but not as much as you might think. The nonpartisan Congressional Budget Office estimated that it only saved $8 billion — out of a budget of $1,500 billion — when the deficit did turn to a surplus in 1998.
And that brings us to maybe the most misunderstood bill in the history of bills: the Balanced Budget Act of 1997. Now, it’s true that Kasich was the chief architect of this deal, and it’s also true that it has the words “balanced” and “budget” in its title. But it’s not true that it actually had anything to do with, you know, balancing the budget. (If you don't think that’s possible then you probably also think that the Democratic People's Republic of Korea must be democratic). What did it do then? Well, as New York’s Jonathan Chait points out, by 1997 the deficit had fallen so much further than anyone thought it would that people in Washington realized it wouldn’t take much more to get rid of it altogether. That, of course, had been one of the major goals of the Gingrich-era Republicans, and, in an act of co-optation, the Clinton White House as well. So to get the rest of the way there, the two sides agreed to cut Medicare provider payments today and domestic spending tomorrow. In the meantime, though, they decided to celebrate by using some of the money they’d saved to give each other some goodies: Republicans got a capital gains tax cut, and Democrats got a children’s healthcare program.
Then two things happened. First, the budget balanced itself before most of these spending cuts could come into effect, and, second, the Republican Congress stopped the rest of these spending cuts from coming into effect since the budget was already balanced. The result is that, whatever intentions Kasich and company might have had when it was first passed, the Balanced Budget Act did almost nothing of the sort. Indeed, the Congressional Budget Office reported that it actually subtracted $21 billion from the first surplus in 1998. In other words, the budget was balanced in spite, not because, of the Balanced Budget Act. Now, it did save some money after that, around 0.2 percent of GDP, but that’s not saying much.
That still leaves us with the question of how the deficit turned to a surplus. And the answer is the old-fashioned way: with budgets that really did reduce spending and raise taxes. The first of these came in 1990 when President George H.W. Bush broke his “no new taxes” pledge. His lips had no choice. It turned out that tax cuts actually didn’t pay for themselves, so 10 years of them under Reagan and Bush had left a lot of red ink. Not only that, but interest rates were still so high, around 8 percent, that the interest on the debt was at a postwar high as a share of the economy. So Bush made a deal with the Democratic Congress that capped discretionary spending and increased the top marginal tax rate from 28 to 31 percent. In all, this decreased the deficit by about 1.4 percent of GDP by cutting $2 of spending for every $1 of tax increases. Kasich, who joined Congress in 1983, voted against it.
The next one was in 1993 when President Bill Clinton passed his first budget. He continued some of the spending caps that his predecessor had put in place, but also raised taxes on the rich a lot more. The top marginal tax rate went from 31 to 39.6 percent, the 2.9 percent Medicare tax was applied to all income and not just the first $135,000, and the corporate income tax was increased as well. This lowered the deficit another 1.2 percent of GDP by cutting a little less than $1 of spending cuts for every $1 of tax hikes. Kasich not only voted against it — as did every other Republican — but was also so confident that it couldn’t work that he said he’d “have to become a Democrat” if it did.
But even after one of the biggest employment booms in postwar history, Kasich still says the legislation didn’t work. His campaign told me that the budget deal of 1993 couldn’t be responsible for the surplus in 1998, since the CBO thought the deficit was about to go up, not go away, as late as 1997. According to them, something else — i.e., the Balanced Budget Act — must have changed to make the overall fiscal picture change. The campaign asked me to talk to former House speaker Newt Gingrich, who shared the same assessment. He told me that “liberals are lying” about how the budget got balanced, since “we still had a deficit after Clinton’s tax increases.”
The thing is, though, you can look at subsequent CBO reports to see why it went from expecting a deficit to a surplus. And it wasn't the Balanced Budget Act. Instead, it was the booming-to-the-point-of-bubbly economy making revenues come in a lot stronger than anyone thought they would. Consider this: in January 1997, the CBO thought the government would take in $1,567 billion and spend $1,687 billion the next year. But those numbers actually ended up being $1,722 billion and $1,653 billion. So spending was $35 billion lower than they thought it'd be, but revenues were $155 billion higher.
But let's back up a minute. It's easy to get lost in this number or that. What we're really saying is that the 90s economy helped high-earners a lot more than expected, so higher-taxes on high-earners brought in a lot more revenue than expected, too. Gingrich, for his part, thinks that "the capital gains tax cut was a huge part of why we had a second surge of investment"—that is, lower tax rates led to higher tax revenue—and that it was all a part of a "real mood of confidence" as a result of "trying to bring government under control."
“The business community,” he told me, “had a belief that there had been a fundamental change in policy, similar to the one from 1981 to 1985.” That, in turn, “made things get better the more our policies went into effect” — which, the story goes, made revenues do so as well. The only problem with this, other than the fact that tax cuts do not actually pay for themselves, is that the CBO didn’t start underestimating revenue growth after the capital gains tax cut went into effect in 1997. It had been doing so ever since 1994. It even talked about how “revenue growth has consistently outpaced that of GDP by 2 to 3 percentage points” in its September 1997 report. And the biggest reasons for that, it said, were the Clinton tax hikes and the skyrocketing stock market.
Kasich, then, is a funny kind of fiscal conservative. On the one hand, he cared enough about balancing the budget that he helped shut the government down in 1995 to try to force Clinton to accept Medicare cuts, passed the spending cuts we talked about in 1997, and, more than anything else, made it his professed political raison d’être. On the other, he didn’t care about it enough to accept even a dollar of higher taxes if that was the only way to do it — and he still doesn’t. Just last summer, he said that he’d reject a budget deal that had $10 of spending cuts for ever $1 of tax hikes. So it’s no surprise that part of his plan to balance the budget today is cutting the top tax rate from 39.6 to 28 percent. That’s who he’s always been. He cares more about cutting taxes than balancing the budget. If he didn’t, then he wouldn’t have voted against the two bills that really did rein in the red ink in the 1990s.
The only thing Kasich was actually the chief architect of was the myth that he was the chief architect of the balanced budgets of the 1990s.