Mr President: Yes We Can Cut Our Way to Prosperity – That’s Exactly What President Clinton Did

‘we can’t just cut our way to prosperity’… President Obama State of the Union Address Feb. 12, 2013Mr. President: After two years in office, President Clinton battled with, then eventually reached a compromise with, Newt Gingrich under the Contract with America. That effort led to the biggest cut in federal spending since the end of World War 2. In President Clinton’s first four years in office, spending was cut from 21.4% of GDP to 20.2% and he was just getting started. The result for those first four years? 8 million jobs were created and economic activity steadily improved.Conversely, in your first year in office, spending increased from 20.8% the previous year to 25.2% in 2009. Four years later, three million jobs have been lost and the number of potential workers not in the workforce has increased from 80.5 million to 89 million.President Clinton–at the beginning of his second term–announced: “the era of big government is over” and just kept cutting and cutting and cutting, including, cutting the capital gains rate giving us continued spectacular growth. As spending decreased, revenues increased, resulting in even lower spending as a percent of GDP.When President Clinton left office, spending had been cut from that initial 21.4% figure to 18.2% of GDP and an additional 10 million jobs had been created, making the total jobs created during his two terms–18 million. Disposable personal income had increased by $4800, for every man, woman and child and the increase in the national debt had slowed dramatically. For a household of 3 that averaged out to an increase of $14,400 in clear earnings.During your term household income has dropped $2,544 since the recession ended when most of the negatives were flushed out of the economy. Unfortunately, most projections are for a continuation of a serious under performance by the economy, every one citing the need to get spending under control, including the Government Accountability office. At the end of the recession in June 2009, household income was $53,508, it now stands at $50,964.As a matter of fact Mr. President, the first time we dramatically shrank the government-back in the 1920’s–an even larger decrease in spending took place and the positive results were just about twice as spectacular as they were in the 1990’s. In those years we did not allow the federal government to increase spending for 6 straight years, not by 1 penny, in fact in 1929 it was less than in 1924.As all that financial capital circulated in the private sector, we saw sensational results in job growth, economic growth, a shorter work week with large gains in per capita income, with large revenue flows to the Treasury and vastly improved living standards. In fact the National Income increased by 7% every year from 1923 to 1929. Back then it was called GNP-Gross National ProductIn your first full term sir, since the recession ended, GDP growth has averaged just 2.1%. No recovery since World War Two has been as sluggish.The specific numbers of the 1920’s cut? Per capita income increased 30%, wage earners increased wages over 20%, inflation was essentially non-existent, as was unemployment at 3.3%. Those facts also show that the gains to the middle class were within a tick of the wealthiest group, totally refuting the mainstream media’s bias, then and now, always ignoring the 3 big government initiatives that gave us the Great Depression. The media did this then and does it now, in order to blame it on the free market.In the nation’s other two major tax cuts, those named after JFK and those of George W. Bush, the growth results were also spectacular but neither one had the necessary spending restraints for lasting growth.The huge spending measures under LBJ–the Vietnam War and The Great Society (Guns and Butter) and those under George Bush stopped economic growth in its tracks. The sub-prime mortgage scandal collapsed the economy under President Bush. War costs were significant but were dwarfed by huge costs in welfare spending and the Medicare Prescription plan.The dual benefit of spending, that is, properly allocated spending, which then retains sufficient financial capital in the private sector–has always spurred sensational growth, not just in the U.S but in all nations where those two factors were present. Restrained, properly allocated spending, has always been the key.Considering this data Mr. President, all from appropriate government sources, wouldn’t cutting spending as a percent of GDP at least be worth examining?Respectfully,Mick McNesby