"Its the Congress, stupid"

The Democrats make much of the good years when Clinton "ran the country", and this is a good thing and not to be discouraged.  Yet few on the left or the right actually understand why things were "good" for the most of us and those on the right certainly do not want to discuss it.  The story was not really the "Clinton story" so much as it was the story of the Democratic Congress.  

The benefits that come with adjustments to tax policy can take more than a year to have any real effect and in some cases you are looking at two. In 1986 the Democrats regained control of the Senate having never lost the House to the Republicans. Thus in 1988 they were able to make some minor adjustments to a tax code that had been totally destroyed by the Reagan power machine, and in 1990 they were able to push a progressive tax adjustment past the "read my lips" of Daddy Bush.  Capital gains rates were set at 28% while the top income tax rates were increased.  Then in 1992 Bush was removed and Clinton was inserted.  That did away with the Republican veto pen and allowed the top income tax rate to be increased again in 1993 to 39.5%.  As a matter of fact the bill was pushed through as a (thou can't filibuster) bill and Al Gore cast the tie breaking vote.  In neither of these adjustments were taxes increases on the wage earning median income folks or the real small business people (the real small business people are the sole proprietors and the sub S corps). The result of these progressive tax actions was the best economy since the 1950's.

When the Republican talks about tax cuts being the proper stimulus for the economy we know it is blindered binary stupidity because of the 1990's.  We know that what matters is the SHAPE of the tax system as opposed to the simple minded increase or decrease of overall income taxes.  When taxes on high ordinary income are progressive as they were prior to Reagan, then suitable LOOPHOLES (a bad mistake is special tax treatment for real estate) can be carved out for such things as investment in alternative fuels.  And most certainly the special treatment of REAL capital gains (please exclude real estate) directs a flow of funds into actual real capital investments as opposed to just buying T-Bills and receiving interest income taxed at the normal top rate.  This is what actually happened with the tax adjustments of 1990 and 1993. The capital gains rate was held at 28% while other income was taxed at the higher rates.  There was a movement of money from bonds (an interest bearing mattress) to equities/stocks, and the real economy thrived without a war and without a bubble.  In 1994 the Gingrich Republicans took the Congress. And the deregulation and tax cutting Republican Congress ruined the world again.

But such intricacies as capital gains rates compared to ordinary income taxation and certainly the more obscure preferential treatment of real estate gains are not the stuff of winning politics.  Joe Sixpack and Mary Moonbat only play checkers and such nuance merely glazes the eyes.  The Republicans and the right wing noise machine had a field day calling the 1993 adjustment "The largest tax increase in history", and predicting a recession while Clinton attempted "Gays in the military" (a rather pronounced exercise in foot shooting). Those who believe that "The Contract with America" was anything other than a backdrop to the fear of gays and the right wing noise about tax and spend Democrats are simply not eating right.  The Republican orchestration of righteousness and fear was masterful and it was aimed at the big belly of the electorate who vote in large numbers when the testosterone kicks in.  Thus Clinton lost the Congress.

The first meaningful salvo of the 1995 Republican Congress had little to do with the supposed "Contract With America".  The first major legislation was concerned with making it much more difficult for corporate stockholders to sue the managers.  The bill was vetoed by Clinton but the Congress overrode it.  And this set the tone for the rest of the "Clinton years".  It was "let's make a deal" from there on in. Still the economy was rocking along just super fine with unemployment falling and wages increasing.  The stock market was rising with perhaps the bare beginnings of a possible overheat until 1997 when the tax code was again assaulted by the Republicans. The beginnings of the original overheat was based on the falsified earnings of a corporate management that knew they were safe from government regulation and shareholder suits.  But in 1997 the real bubble blowing stuff was added.  The capital gains tax was reduced from 28% to 20%, Glass-Steagall was repealed (that silly law that kept security companies (e.g. Merill Lynch) from acting as their own bank (creating money from nothing)), and the tax on gains from the sale of private homes was set to zero.  There was also the additional bubble makins of H1B indentured servant wage killing visas which tended to really juice the tech companies.  Here again, the H1B system was not a big factor until Phil Graham and the Republican Congress upped the quotas.  Imagine owning a tech company and being able to show reduced R&D costs as well as being able to lie with impunity about the profits and projections. Oh such a deal.

The Republicans are the worlds biggest bubble blowers.  The did it on the 20's, the 80's, the 90's and with the help of Bush they did it again in 2000-2006 with the housing bubble. It is said that the 2007 Democratic Congress has done nothing.  I'll take "nothing" over what the stinking Republicans have done any day of the week.