March 7, 2008 | By Nathaniel Ward

Three myths about the Clinton tax hikes

	Featured video Kim Holmes explains his new book, Liberty’s Best Hope. More videos »

Out on the campaign trail and in the halls of Congress, liberals are announcing plans to raise taxes—above and beyond the massive hike resulting from the expiration of the 2001 and 2003 tax cuts. They argue that tax hikes can benefit the economy. For evidence, they point to the economic growth in the 1990s after President Clinton’s 1993 tax hike.

» Take our poll: Did the Clinton tax increases boost the economy as liberals claim?

This is bad economics, Heritage tax expert J.D. Foster explains in a new analysis.

There are three myths at the center of the liberal argument for tax hikes.

• Myth 1: The economy recovered from recession because of the 1993 tax increase.
  
  Fact: “The tax increase probably slowed the economy compared to the growth it would have achieved” without the hikes, Foster writes. While the economy did grow after 1993, this was hardly due to the tax increases, since “much in the context of the 1990s was conducive to prosperity.”

• Myth 2: The late-1990s boom resulted from the 1993 tax hikes.
  
  Fact: The 1997 cuts to the capital gains tax rate, not the 1993 tax increases, sparked the strong growth of the late 1990s. After the prolonged recovery from the 1992 recession, Foster concludes “it was not a moment when one would expect growth to accelerate.”

• Myth 3: The 1990s show we can raise taxes today without economic consequence.
  
  Fact: The 1990s demonstrate that tax cuts, not tax hikes, are the key to economic growth. Congress should therefore, at a minimum, not allow the 2001 and 2003 tax cuts to expire. They certainly shouldn’t pile more taxes onto an already struggling economy. “Taxes are now above their historical average as a share of the economy, and are rising,” Foster notes.

Protecting consumer choice in health care

One of the bright spots in the 2003 Medicare reforms was the introduction of Medicare Advantage.

Under this program, reports Heritage health care expert Bob Moffit, “more seniors are getting a wider variety of health plan options with better benefits, lower cost-sharing and more affordable health care coverage, and access to specialized programs that provide care coordination and care management if they suffer chronic or debilitating illnesses.”

In the name of cost savings, though liberals want to cut back on the program, which harnesses free enterprise and competitive forces to provide consumers with expanded choice. Instead, they look to redirect Medicare Advantage funds into the big-government version of Medicare.

This is hardly the approach lawmakers should take to trim Medicare costs, Moffit explains. “Instead of cutting payments to Medicare Advantage, Congress should re-target larger Medicare subsidies to lower-income persons and smaller subsidies to upper-income families.”

Other Heritage work of note

• Entrepreneurship. Bill Beach, director of Heritage’s Center for Data Analysis, takes on liberal critics of the 2001 and 2003 tax cuts. He notes, for example, that tax revenues continued to grow after the cuts and that the wealthy are now paying a greater share of taxes.

• Energy and Environment. Though it has spent billions in taxpayer dollars on the project over two decades, the federal government has decisively failed to develop a strategy for disposal of nuclear waste. It’s time for a real plan—and Heritage’s Jack Spencer outlines one in a thorough new analysis.

• Entrepreneurship. There has been considerable talk in the media about the threat from sovereign wealth funds. But the greater threat, Heritage’s Daniella Markheim explains, is from new government controls on investment that could hamper economic growth.

• Judicial System. “Congress should move swiftly to reject the guidelines that would give duly convicted recidivists and violent felons a ‘Get Out of Jail Free’ card and allow them to re-litigate their sentences,” Heritage legal fellow Cully Stimson writes on FoxNews.com.

In other news

• Municipal courts in New York State have ruled that state agencies can recognize same-sex marriages conducted out of state, even if the legislature has not considered the matter, The New York Times reports.

• “Senate Votes For Safer Products,” reads the Washington Post headline about new consumer products safety legislation. Heritage experts have pointed out, though, that the legislation would do little to improve safety and would instead prove a boon for trial lawyers.

• Palestinian terrorists opened fire on an Israeli seminary Thursday, killing eight people. The terrorist group Hamas, which controls the government in the Palestinian territories, claimed responsibility.

• The economy shed 65,000 jobs in February, according to new government data which also show the unemployment rate dropping.

• A bomb exploded at a military recruiting station in New York’s Times Square on Thursday.

• Al Qaeda terrorists murdered 68 people in Baghdad Thursday in the deadliest such attack in nine months. For the latest on Iraq, visit Heritage’s Progress in Iraq page. Meanwhile, a top military commander warns that al Qaeda terrorists intend to strike the United States in order to demonstrate their credibility.

Coming up at Heritage

To attend these or any other events at Heritage please RSVP at Heritage’s website.  Or you can view these events live online.  All times are Eastern.

• On Tuesday, March 11 at noon, author Don Eberly explains the importance of private civil-society institutions to 21st-century global development.

• On Tuesday, March 11 at 2:00 p.m., a panel of experts looks back on 50 years of Chinese domination of Tibet and China’s continued expansionism.

Nathaniel Ward is the Editor of MyHeritage.org—a website for members and supporters of The Heritage Foundation. Chris Albright contributed to this report.

Sign up to get this e-mail

Fill out the form below to receive this e-mail product and more from MyHeritage.org as soon as it's released

First Name*	Last Name*
Email Address *	Zip Code *
Are you currently a Heritage member?
	* = Required field.