By Kevin McNabola
Orange Board of Finance
Kevin McNabola
The Federal Reserve this month cut interest rates. With consumer prices rising 2.5 percent in August, and with interest rates and mortgage rates still at elevated levels the time is now for the Federal Reserve to cut rates in order to obtain a soft landing as the economy heads into what many economist believe will be a modest recession.
The big elephant in the room, however, continues to be the fact that no president since Bill Clinton has seemed to be serious about addressing the national debt, which now stands at $35.3 trillion. Congress took steps last year to create the Fiscal Stability Act, which would create a bipartisan, bicameral fiscal commission tasked with finding legislative solutions to stabilize and decrease our national debt. But no commission has been established. We can no longer have a wait-and-see attitude with respect to our national debt.
The US now pays over $2 billion a day in interest on our existing $35.3 trillion national debt. Over $3 trillion of federal funding was recently injected into the economy with green energy initiatives and the American Rescue Plan Act. These drove inflation to its highest level in 40 years to 9.1 percent. It’s time for the next president and Congress to work together and dust off Clinton’s economic playbook for the future fiscal sustainability of America.
Clinton’s policies from 1992 established fiscal discipline, eliminated the budget deficit, kept interest rates low and generated private-sector investment within science, research and technology. The objective of Clinton’s economic policy was to make government smaller, more efficient and more agile in a free market globalized era.
As a result of his economic policies and with the passage of the 1993 Deficit Reduction Act and the 1997 Balanced Budget Act, the US stabilized its financial footing and significantly grew the economy, generating over 22 million new jobs and higher family income. Clinton’s policies also generated average GDP growth of 3.8 percent from 1992 to 2000 and reduced the national debt by $363 billion (the largest three-year debt reduction in American history).
Clinton is also the last president to have a balanced budget (in 1998) and reduced the poverty rate from 15.1 percent in 1992 to 11.8 percent by 2000. Under Clinton, federal government spending as a share of the economy decreased from 22.2 percent to 18.5 percent, the lowest since 1966. Clinton enacted targeted tax cuts, such as the Earned Income Tax Credit expansion, a $500 child tax credit, and the HOPE Scholarship and Lifetime Learning Tax Credits. Federal income taxes as a percentage of income for the typical American family dropped to their lowest level in 35 years.
Another key initiative which also generated economic results – albeit indirectly – was the 1994 crime bill, which enacted a new initiative to fund 100,000 community police officers and included sweeping gun safety legislation by signing into law the Brady bill in 1993. This bill stopped more than 600,000 felons, fugitives and other prohibited persons from buying guns. Gun crime declined 40 percent from 1992-2000 which had a positive impact on an already growing economy.
Surprisingly there has been little discussion from either of the presidential candidates on the elephant in the room, the $35.3 trillion national debt. I believe the American people deserve a plan of action from the president and the Congress on how they plan to lower and fix National debt so that our children and grandchildren are not shouldered with the burden of paying for it in the future.
Kevin McNabola is the chief financial officer for the city of Meriden and a member of the Orange Board of Finance.