Bill Clinton was elected primarily because he convinced enough American people that this country was in dire economic straits and that he would remedy our problems by implementing "change." I told you in an earlier chapter that George Bush departed so radically from the policies of Ronald Reagan that history books would eventually treat the Reagan and Bush eras as totally different periods. I told you that a more logical pairing, which history will ultimately reflect, would be the Bush/Clinton period. But what I haven't yet told you is that this confusion-about the domestic-policy differences between Bush and Reagan and the domestic-policy similarities between Bush and Clinton-is the result of a calculated strategy of the Clinton campaign. Besides using class warfare in his campaign. Clinton masterfully confused the Bush era with the Reagan era in order to blame the recession caused by the Bush/Democratic Congress 1990 budget deal on Reagan and, ultimately, Reaganomics. Clinton shamelessly characterized the entire twelve-year period, including the Reagan and Bush administrations, as trickle-down, supply-side, and Reaganomics. But we all know that Bush's reign had nothing to do with supply-side. He began to distance himself actively from it immediately upon taking office. As I will document for you in this chapter, the 1990 budget deal, which Bush and Congress agreed to, and Clinton's 1993 budget plan are strikingly similar.

Clinton's scheme was as brilliant as it was duplicitous. It employed age-old strategy whereby you blame something other than that which is responsible for causing the problems. That which is blamed is the straw dog. In this case, Reaganomics became the straw dog. It wend something like this: Clinton first successfully engineered a wholesale history rewrite of the 1980s in order to demonize Reaganomics (which process I described in detail in my earlier chapter about the 1980s); then he disingenuously accused George Bush of continuing the policies of Reaganomics, when he hadn't. Having set up Reaganomics as the straw dog, he was then able to argue, once elected, that he had a mandate to change course from the path of Reaganomics-even though this country hadn't been on that prudent course since the 1990 budget deal. This is how Clinton has proceeded to implement a sequel to the 1990 plan under the rubric of change.

With that background, you might be interested in what Bill Clinton himself has said on the subject of someone who keeps trying the same failed policies: "My wife, Hillary, gave me a book about a year ago in which the author defined insanity as just doing the same thing over and over again and expecting a different result." Clinton offered this statement in one of the presidential debates in October 1992. Interesting, huh?

Clinton has touted his 1993 budget plan as the bill that will correct the mistakes of the last twelve years by reducing the deficit by $500 billion over the next five years. This was exactly the goal of Bush and the Democratic Congress in 1990. Here is how President Bush explained it on September 30, 1990: "The bipartisan leaders and I have reached agreement on the federal budget. Over five years it would reduce the projected deficit by $500 billion; that is half a trillion dollars." With these words began the unraveling of George Bush's presidency.

Bush would still be president had he never uttered those words, had he never agreed to forge a bipartisan coalition with the Democrats. Once the budget deal was signed, the Democrats backed away from it, denied all responsibility for it, and, in fact, attached Bush for breaking his "no new taxes" pledge. Worst of all, they got away with completely escaping accountability for it by scapegoating George Bush. In a word, they Bushwhacked Bush.

This should anger the average American, because the Democrats who engineered the 1990 budget deal are the same architects of Clinton's plan today. At that time, they also promised a $500 billion reduction in the budget deficit, claiming that the largest tax increase in history (at that time, at least) would bring the deficit down to $60 billion by 1995. Now, barely three years later, the Democrats have done it all over again, passing the largest tax increase in history, a hike dwarfing that of 1990. Believe me, I would not harp on this but for the fact that no one else in the major media is calling your attention to it.

The dirty little secret of Clinton's "deficit reduction" scheme is this: Though it has been billed as the first meaningful effort at deficit reduction, it's not deficit reduction at all. The administration's own projections show that under the plan the total debt will increase more in four years than it did in any four-year period in the 1980s. Does this seem possible based on what you have heard Clinton and most media analysts say? Yet, it's undeniably true. The deficit inherited by Bill Clinton from George Bush was somewhere around $240 billion. Under Clinton's plan it's going to exceed $300 billion-yet it is called "deficit reduction."

The real problem is not the budget deficit, but rampant federal spending. The deficit is the result of that spending. In the fiscal year 1993, federal spending was $332 billion greater, for instance, than it was the year Gero9ge Bush was sworn into office. That means that we spent 29 percent more in 1993 than we did in 1989. Consumer prices, by comparison, rose during that period at a rate of 16 percent. However, the economy for that period grew by only 6.6 percent. By 2003, according to The New York Times, the federal budget deficit will be nearly $700 billion-including all of the optimistic projections of the Clinton plan. If you believe the Clinton rhetoric, you would think the Democrats are somehow addressing the issue of out-of-control spending. They are not. Rather, Clinton and the congressional leadership are brazenly using the deficit as an excuse to raise taxes and increase spending even more. The maddening thing is that in a few years, when it becomes clear that Clinton's plan has not reduced the deficit, he and his congressional conspirators will simply say that if they hadn't done something, the deficit would have been worse (as if there is some supernatural force driving the deficit inexorably out of control). This is exactly the line that Tom Foley used to blame the failure of their 1900 plan to reduce the deficit. In other words, they're trying to set up a plan that can't fail. Whatever happens with the deficit-no matter how much it grows-they will say their plan was successful because the deficit would have grown even more had they not enacted it.

You must understand that when the Democrats use the term "cuts," they do not mean real reductions. (See the discussion of baseline budgeting in Chapter 11: The Decade of Fraud and Deceit.) When Congress claims that it has cut the budget, it is never talking about actually spending less than in the previous year. What is means by a budget cut is a reduction in the projected increase. In other words, the government is still spending more money-just less than it had planned to. So, if Congress plans to increase the budget by 10 percent, but then increases it by "only" 5 percent, it congratulates itself for having "cut" the budget by 5 percent.

Am I engaging in hyperbole when I say that the 1990 and 1993 acts are virtually identical in substance? As discriminating readers, you are certainly bound to wonder. Well, let's take a peek. The 1990 budget deal had the official name of "1990 Budget Deficit Reduction Act," and it imposed tax increases on the "rich," raising the top marginal rate from 28 percent to 31 percent so the "rich" would have to "pay their fair share." Supposedly, only those making $200,000 or more would be taxed more heavily. Déjà vu! The 1993 plan calls for even steeper marginal income-tax rate increases on the "wealthy" by raising the top rates from 31 percent to 36 percent for all those married couples earning more than $140,000; and a punitive 10 percent surtax on income above $250,000, which effectively raises the marginal rate to 39.6 percent. The top corporate income-tax rate will increase from 34 percent to 35 percent.

The 1990 budget deal also increased the beer tax from $9 to $18 a barrel, and this tax is going even higher in 1993. Taxes on table wine, which were increased 629 percent in 1990, went from 17 cents to $1.07 per gallon. The gasoline tax was raised 5 cents per gallon in 1990, and not it is being raised at least another 4.3 cents; and the tax on cigarettes was raised in 1990 by 4 cents a pack in 1991. Admittedly, the 1993 budget deal does not raise taxes on alcohol and tobacco, but I will wager any one of you that Clinton will try to increase either or both of these taxes again to help subsidize the national healthcare plan, which, we have been assured, will contain no new taxes despite the projected $100 billion to $150 billion price tag. Any takers?

In terms of the basic numbers, the Democrats are repeating the 1990 budget deal, policy for policy, idea for idea, and approach for approach; it's almost the same plan that was implemented to fix the last twelve years. Even The New York Times (another opinion-leading publication for the liberal media) has admitted this. The only differences in the plans is that Clinton's 1993 plan is even worse, in terms of higher and more progressive taxes, and it has spending cuts that are even more illusory. Congress has also managed to sneak other confiscatory measures into the 1993 bill, such as an increase in the estate tax rates, more-restrictive limitation son deductions for personal retirement plans (which will deter savings and thrift, promote dependency on Social Security for requirement, and give Congress even more of our money to spend-all of which expands and escalates the dependency cycle), and the elimination of any ceiling (formerly $135,000 per year) on income subject to the 2.9 percent Medicare payroll tax, effectively raising the top marginal rate to 42.5 percent.

On my radio and TV shows, I played portions of statements made by the central players in 1990, then juxtaposed those with their statements in 1993. The statements speak for themselves. Leon Panetta, Clinton's director of the Office of Management and Budget (OMB), was a ranking member of the House of Representatives in October 1990. Today, he conveniently forgets about his key role in the passage of the 1990 budget deal. He has adopted the class-warfare rhetoric of the Clinton administration and claims no one did anything about the deficit for the twelve years before his team took over the White House. But let's go back and listen to what he was saying in pushing through the deficit plan signed by President Bush in 1990.

"Is there sacrifice involved?" he asked in a fiery speech on the Hill. "You bet there is! You can't develop a deficit-reduction package that doesn't involve sacrifice on the part of everyone. The economy is in desperate straits, and the questions we have to ask tonight is 'What happens if we fail?' That's the question you have to ask. What happens to this economy if we fail to adopt a serous deficit-reduction package for this country?! The answer to that is that if we fail, it is almost comparable to an act of irresponsibility because we know if we fail we doom our economy to a deep recession." (At least he was right in forecasting a recession. Too bad he forgot to place the blame where it truly belongs: the 1990 budget deal.) Mr. Panetta's rhetoric in 1993, this time as a member of the administration, was the same.

Representative Richard Gephardt (D-Missouri), Majority Leader in the House of Representatives, was one of the impassioned proponents of the 1990 budget deal. Here's what he said on September 30, 1990: "What we can produce [is] a reconciliation bill in ten days or two weeks that we can bring out here, and get 218 votes, half of this side and half of this side, so we can address this deficit problem that everybody in this room knows has to be solved for the future of this country, and I would even say for the future of the world."

On October 27, 1990, Thomas Foley, Speaker of the House then and Speaker of the House now, said: "We said at the beginning of the process that we are going to be concerned that any of the burdens we are asking the American people to bear to bring down the deficit would be borne fairly and equitably, and based on the ability to pay. That's exactly what happened in the final product. What the Senate adopted tonight, what the House adopted at seven a.m. this morning, reflects a very strong and progressive proposal in terms of ability to pay. Those who earn less than $20,000 actually have their tax burden reduced. Those in the middle-income areas carry only the responsibility for increased levies on beer and wine and cigarettes which are largely voluntary taxes in a sense, plus a five-cent gasoline tax. The income-tax effects are totally on those with higher income levels, mostly areas over $200,000 a year. So the progressivity of this package has been achieved. There are savings in the proposals as well-two times the amount of tax revenues are achieved in savings, domestic entitlement savings, and defense discretionary savings." In 1993, Foley and Senate Majority Leader Mitchell stood together after passage of the 1993 bill and proclaimed it as the most progressive bill in years. Senator Jim Sasser (D-Tennessee, ad chairman of the Senate Finance Committee) was downright boastful about his role in the 1990 budget deal at the time and now seems to have plumb forgotten about that plan to reduce what he calls "the daficit." Here's Sasser in September 1990: "At the risk of sounding immodest, we are on the verge of getting the largest daficit-reduction package in the history of this republic, putting that daficit-reduction package into law."

Now here's Sasser in June 1993: "Now let's bear in mind, while we're being critical of this administration and this president, he didn't create these daficits. These daficits are the result of twelve years of the most irresponsible fiscal policy in the history of the United Sates." (Note that Sasser conveniently omits the fact that 1990 was in that twelve-year period he vilifies.)

In trashing the 1980s, Clinton has focused on the increase in the deficit, which he says was caused by unconscionable tax breaks for the rich. The reason Clinton singles out the deficit is that there is virtually nothing else that happened during the eighties that can be attached on economic grounds. But Clinton and the press have obscured the truth about the deficit in the 1980s. From 1985 to 1989, the deficit was being reduced via an expanding economy, growing taxpayer base, and lower taxes. The chart on page 339, from the March 19, 1993, issue of The New York Times, shows that after the Reagan tax cuts really kicked in (1985-89), the deficit began to decrease dramatically, despite unchecked, spiraling Democrat congressional spending. This occurred precisely because the tax-rate reductions-as I pointed out in the 1980s chapter-caused almost a doubling of revenue, a fact you'll never hear from the major media.

In addition, the chart compares the Congressional Budget Office projections for the years 1994 through 1998 with the revenue and deficit figures for both the Reagan and Bush periods. In the chart, the projections used by the Clinton administration are those of the Congressional Budget Office, just as he promised he would do during his State of the Union address on February 17,1993. (You may remember that he drew loud cheers from the Democrats when he proclaimed the CBO numbers to be more accurate and realistic than the OMB numbers used by the Bush administration in 1990. Using the CBO numbers is also one way the Clintonites justify their assertion that the problem is being tackled seriously for the first time since 1981. Bush, you see, didn't really mean to support deficit reduction in the 1990 deal because he refused to use the projections of CBO. Neat little trick, isn't it?)

Clinton's deficit projections for the years 1994 through 1998, which are optimistic and Clinton-favoring to say the least, are mind-blowing when compared to Reagan's. Notice how Reagan's deficit shrank from $221 billion in 1986 to $152 billion in 1989, when gross-revenue receipts were $991 billion. Now, let's take a gander at the part of the chart showing Clinton's own projections about his plan. For 1998 he projects revenues of $1,481 billion-that's almost $1.5 trillion-and his projected deficit is nevertheless $361 billion-almost 2.5 times the $152 billion deficit of 1989, despite 50 percent more revenues (from $991 billion to $1,481 billion). And, even worse, his projected deficit will be 19.6 percent of total spending, compared to Reagan's 13.3 percent in 1989.

I simply cannot emphasize enough that these CBO numbers are Clinton's own figures. This is how he plans to "reduce" the deficit by raising taxes. And also keep in mind that his optimistic projections assume that his promised spending cuts in the out years come to fruition and that the tax increases don't shut down the economy and reduce the tax base. This stuff is amazing, folks! Clinton's deficit reductions are going to be increases, even compared to this year's figures. The budget deficit will be less than $300 billion in 1994, and up to $361 billion in 1998. But in Clintonspeak, this is the first meaningful deficit-reduction package in recent history. Yeah, just as night is day. Welcome to the "politics of meaning."

Furthermore, the "spending cuts" that were a part of the 1990 budget deal proved to be just as elusive as the higher tax revenues. The first "out" year after the 1990 deal was 1993, and the spending cuts that were part of the program never materialized. According to the 1990 budget deal, total spending for 1993 would be $1.381 trillion. However, Clinton's 1993 budget is $1.466 trillion, or about $85 billion more. This illustrates that these "budget deals" and compromises are meaningless when it comes to actual budget projections. The tax increases are always put into effect, but the reductions in spending never are.

Similarly, the 1990 budget deal projected that total expenditures for 1994 would be $1.343 trillion, but President Clinton's own budget shows that the government will spend $1.513 trillion in 1994. Thus, about $170 billion more will be spent in 1994 than what was promised in 1990. The government is-surprise, surprise-spending far more than what the Democrats promised back in 1990. Why should these people be trusted again? Why should they be believed?

But even if we could believe them, is there any real likelihood that Clinton's program can work? I must tell you that I am confident that the plan will not work, for a number of reasons. As I said, tax increases retard economic growth and, other things being equal, accentuate the deficit problem. No country has ever taxed itself out of a deficit or into prosperity. But also, I know the history of Democratic Congresses. As I have told you, they do not follow through on their promises to cut spending.

Now, here is my point. In 1990, George Bush was president and was enjoying a 90 percent-plus approval rating on the strength of our victories in the Persian Gulf war and Cold War. The Democrats had every reason to sabotage George Bush by orchestrating the budget deal, then distancing themselves from it when the economy began to falter. They know the president, rather than Congress, would be held accountable. Thus, they had no incentive to fulfill their promises to cut spending. George Bush took the full heat for that budget fiasco, even though it was the Democrats who initiated it and were principally responsible for its passage.

The difference this time, and the reason my well-publicized bet against the plan is arguably quite risky, is that the Democrats now have a vested interest in making this plan work. They control both the Executive and Legislative branches of the federal government. So, is it not reasonable to conclude that this time, in order to save their own political skins, they will follow through on the promised spending cuts? Otherwise, the deficit will continue to soar off the charts. Not to worry. A little-known fact is that the Democrats summarily rejected a Republican proposal to enact legislation that would have made these cuts mandatory. They didn't want to hem themselves in. Why should they? Spending cuts are against their religion, and term-limit proposals that would apply to most of them have not yet been passed into law. So they can continue to use the power of incumbency to confiscate our wealth and use it to buy votes to perpetuate their terms in office.

But aside from the promised spending cuts, what about the revenue side? Will their tax increases dramatically raise revenues, as promised? Better yet, will more revenues be generated from the rich? And less from the poor? Let's look at what happened in 1990, when the top income-tax rate was raised from 28 percent to 31 percent. The total income-tax receipts in 1991, the first year after the 1990 budget deal was signed, fell-the first decline since 1983, because the wealth found tax shelters, stopped investing, decided not to put their money at risk, and curtailed other activities that would increase their tax burden.

U.S. Treasury figures on income-tax receipts in 1991 show that the wealthy (defined as the 850,000 people who earn $200,000 a year or more) paid substantially less in actual tax dollars than they did the year before. In 1990, the rich paid $106.1 billion in income taxes, but in 1991, after the tax increase, they paid $99.6 billion. Did you get that? Though their tax rate went up, from 28 percent to 31 percent, the "rich" paid $6 billion-plus less in revenues. And it wasn't because of a weak economy. In fact, total income for 1991 rose 3.3 percent.

> But following the 1990 budget deal, non-rich Americans paid $3.3 billion more in taxes, a 1 percent increase, even though their tax rates stayed the same. The bottom line is this-the Clintonomic approach to tax rates doesn't hurt the rich nearly as much as it hurts those trying to become rich.

So why are Clinton and Congress pushing through a plan that won't work? Why are they intent on raising your taxes? To reiterate, it is because Clinton's political party, which controls both houses of Congress and the White House and, therefore, all federal expenditures, wants to drive a wedge between the middle and upper classes in this country, pitting the lower classes against the upper classes. As the spending mounts, so does the dependency of those receiving it, which the Democrats hope will translate into more and more appreciation of them by more and more voters. Do you get the drift? Simply put, what is going on here is an attempt by the Democratic Party to transfer to the left as much as it can of the wealth, power, and culture of America.

It's bad enough that Clinton's tax plan won't work in economic terms. But what may be even worse is that it is an assault on the American Dream. This tax bill constitutes a breach by federal government of its compact with the American people to ensure them maximum freedoms and to protect their private-property rights. This plan is antithetical to capitalism in that it punishes competition, productivity, and success. This is a critically important point that I very much want you to understand. Clinton talks about raising the rates on the rich, when in fact he is raising rates on the high-income producers. Though there is some overlap, there is a world of difference. I think of the rich as those who have already accumulated or amassed a great amount of wealth. Those people have their funds invested in various things, many of which are tax-exempt, such as municipal bonds. Thus, much of the earnings on their already-amassed wealth will escape all taxation and certainly won't be affected by the increase in marginal tax rates. Many high-income producers have not yet amassed substantial estates, but, for the first time in their lives, they have reached their maximum earning potential. Many of them doubtlessly planned for years that they would use their increased earnings in their peak years to retire debt from leaner years (when their living expenses were higher, such as the cost of their children's education), and to begin to build a nest egg for their eventual retirement. The primary onus of these marginal tax increases, therefore, is going to fall unfairly on those who have busted their tails all of their lives to finally arrive at their most productive level. Their reward for working hard, for savings and thrift, for believing in the American Dream, in America's promise to them, and in the full faith and credit of the United States government to honor its social contract with them, is punitive taxation. Their reward is outright theft from a president who has always fed from the government trough, and outright theft from an arrogant body of lawmakers who raise their salaries by legislative fiat; who write checks out of thin air and vacation at the expense of lobbyists who represent anyone but the congressmen's constituents; who exempt themselves from their own laws; who self-legislated retirement funds are at an unconscionable level relative to the private sector; and who obviously don't give a damn about the will of the people. But they transparently seek to pacify us by their insistence that the tax hikes and the retroactivity fall only on the top 1 or 1.5 percent. Americans know better and will make that abundantly clear the next opportunity they have to vote for term limits, or for their particular congressman.

The naysayers claim that the country can't grow itself out of its economic problems. Why not? I agree that we mustn't ignore the spending side of the equation and that we must curb discretionary and mandatory spending. I've never advocated the myopic approach that focuses solely on the growth side. But, what's wrong with growth? The only thing wrong with a growing and expanding economy is that it empowers individuals and weans them from the nipples of a pervasive and all-encompassing government. The point is that we need to tackle our fiscal problems with a sensible, balanced, two-pronged approach, which focuses on cutting spending.

An equally important step toward deficit reduction and a growing economy would be to scrap the capital-gains tax, or, at the very least, to index it to inflation. This would release a massive tidal wave of funds that would sweep across the country and revitalize the economy. Larry Kudlow, chief economist at Bear Stearns in New York City, estimates that a federal spending freeze coupled with indexing of capital gains to inflation would reduce the deficit to $60 billion in five years. Who needs tax increases? Only those who want to have control over more of our private lives.

I sincerely don't want Bill Clinton to fail, unless failure is defined as the defeat of his current economic policies. But this is not about Bill Clinton. It is about America and Americans. I want America to remain the freest nation on Earth-and I want everyone to prosper, including Bill Clinton. So let's look forward to 1994 and 1996, when we can elect people who believe in the American Dream and will do everything in their power to promote it, so that all Americans, including Bill Clinton and his family, can prosper.