I helped balance the federal budget in the 1990s – here's just how hard it will be for the GOP to achieve that same rare feat

Linda J. Bilmes, Daniel Patrick Moynihan Senior Lecturer in Public Policy and Public Finance, Harvard Kennedy School, The Conversation on

Published in Business News

Kevin McCarthy reportedly promised many things to Republican hardliners en route to clinching his job as speaker of the U.S. House of Representatives. One of them was a “balanced budget” in 10 years.

As part of that plan, Republicans are demanding substantial spending cuts and budget reforms in exchange for lifting the debt ceiling this year – putting the U.S. at risk of default.

But a look at the numbers – and the history – shows just how difficult balancing the budget will be.

Doing so requires the federal government to generate enough income to pay for all its spending. The U.S. has managed this feat only twice in the past 60 years – and both times involved raising taxes, something Republicans are loath to do. President Lyndon B. Johnson managed to do it in 1969, and President Bill Clinton created a surplus that ran from the fiscal years 1998 to 2001, when he left office.

As a member of the Clinton administration in the Commerce Department from 1997 to 2001, I participated in achieving that rare balanced budget and understand the obstacles to delivering a repeat performance. A quick look back at how we did it, along with how much has changed, shows that Republicans are unlikely to manage a similar performance.

When Clinton took office in 1993, the budget deficit in the previous year was just under 5% of gross domestic product, and the nonpartisan Congressional Budget Office predicted a bleak fiscal outlook.


Clinton’s balanced-budget recipe was a mixture of higher revenues and lower spending, with help from a booming economy. In his second term, he also negotiated a bipartisan budget deal with Republicans.

After campaigning on a pledge to cut the deficit, Clinton raised taxes on the wealthy during his first year in office. He introduced higher top personal income tax brackets, raised corporate taxes, increased taxes on Social Security benefits, added 4.3 cents per gallon onto gas taxes and eliminated a number of itemized tax deductions. On the spending side, Clinton took advantage of the “peace dividend” that followed the collapse of the Soviet Union to reduce defense spending from 4.3% of GDP in 1993 to 2.9% by 2000.

These measures helped slash the overall deficit to 1.3% of GDP by the end of Clinton’s first term. That’s the smallest it had been in 22 years.

The higher taxes invited pushback from Republicans, who gained majorities in the House and Senate in 1995. Clinton wrangled continually with then-Republican Speaker Newt Gingrich, who forced a government shutdown that same year.


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