I signed the legislation on August 10. It reversed twelve years in which the national debt had quadrupled with deficits built on overly optimistic revenue numbers and an almost theological belief that low taxes and high levels of spending would somehow bring enough growth to balance the budget. At the ceremony I specifically acknowledged those senators and representatives whose support never wavered from beginning to end, and who therefore were never mentioned in the news stories. Every yes voter in both houses of the Congress could rightfully say that, but for him or her, we would not be here today. We had come a long way since those heated debates around the dining-room table in Little Rock the previous December. All by themselves, the Democrats had replaced a wrongheaded but deeply embedded economic theory with a sensible one. Our new economic idea had become reality. Unfortunately, the Republicans, whose policies had created the problem in the first place, had done a good job portraying the plan as nothing but a tax increase. It was true that most of the spending cuts kicked in later than the tax increases, but that was also true of the alternative budget offered by Senator Dole. In fact, Dole’s plan had an even higher percentage of its cuts in the last two years of the five-year budget than mine did. It simply takes time to reduce defense and health spending; you can’t slash it all at once. Moreover, our “future” investments in education, training, research, technology, and the environment were already at unacceptably low levels, having been held down in the eighties as tax cuts, defense appropriations, and health costs soared. My budget began to reverse that trend. Predictably, the Republicans said my economic plan would cause the sky to fall in, calling it a “job killer” and a “one-way ticket to recession.” They were wrong. Our bond market gambit would work beyond our wildest dreams, bringing lower interest rates, a soaring stock market, and a booming economy. Just as Lloyd Bentsen had predicted, the wealthiest Americans would get their tax money back, and more, in investment income. The middle class would get their gas-tax money back many times over, in lower home mortgage rates and lower interest costs for car payments, student loans, and credit card purchases. Working families with modest incomes benefited from the Earned Income Tax Credit right away.
In later years I was often asked what great new idea my economic team and I brought to economic policy making. Rather than give a complicated explanation of the bond market/deficit-reduction strategy, I always gave a one-word answer: “arithmetic.” The American people had been told for more than a decade that their government was a gluttonous leviathan swallowing their hard-earned tax dollars to no good end. Then the same politicians who told them that, and served up tax cuts to starve the evil beast, would turn right around and spend themselves to reelection, leaving the false impression that the voters could have programs they didn’t pay for, and that the only reason we had big deficits was wasteful spending on foreign aid, welfare, and other programs for poor people, a tiny fraction of the budget. Spending on “them” was bad; spending and tax cuts for “us” were good. As my fiscally conservative friend Senator Dale Bumpers used to say: “You let me write $200 billion a year in hot checks and I’ll show you a good time, too.”
We had brought arithmetic back to the budget, and broken America of a bad habit. Unfortunately, though the benefits began to accrue right away, the people wouldn’t feel them for some time. In the meantime, my fellow Democrats and I bore the brunt of the public’s withdrawal pains. I couldn’t expect gratitude. Even with an abscessed tooth, nobody likes to go to the dentist. THIRTY-FIVE
A fter the budget passed, Congress went on its August recess and I was eager to take my family on vacation for two much-needed weeks on Martha’s Vineyard. Vernon and Ann Jordan had arranged for us to stay on the edge of Oyster Pond in a cottage that belonged to Robert McNamara. But before I could leave, there was a busy week of work. On the eleventh I nominated Army General John Shalikashvili to succeed Colin Powell as chairman of the Joint Chiefs of Staff when Colin’s term ended in late September. Shali, as everyone called him, had entered the army as a draftee and risen through the ranks to his current position as the commander of NATO and U.S. forces in Europe. He was born in Poland, to a family from Georgia in the former Soviet Union. Before the Russian Revolution, his grandfather had been a general in the czar’s army and his father had been an officer, too. When Shali was sixteen, his family moved to Peoria, Illinois, where he taught himself English by watching John Wayne movies. I thought he was the right man to lead our forces in the post–Cold War world, especially given all the problems in Bosnia.
