page_title: Fiscal conservatism
section_title: Clinton era
hierarchical_section_title: Fiscal conservatism / History / Clinton era
caption_attribution_description: English: December 2013 Chart from the US Congressional Budget Office depicting tax rates by income group from 1979 to 2010, and implications for tax rates based on 2013 law.
context_page_description: Fiscal conservatism is a political and economic philosophy regarding fiscal policy and fiscal responsibility advocating low taxes, reduced government spending and minimal government debt. Deregulation, free trade, privatization and tax cuts are its defining qualities. Fiscal conservatism follows the same philosophical outlook of classical liberalism and economic liberalism.
  The term has its origins in the era of the New Deal during the 1930s as a result of the policies initiated by social liberals, when many classical liberals started calling themselves conservatives as they did not wish to be identified with what was passing for liberalism in the United States. In the United States, the term liberalism has become associated with the welfare state and expanded regulatory policies created as a result of the New Deal and its offshoots from the 1930s onwards.
  Fiscal conservatives form one of the three legs of the traditional conservative movement that emerged during the 1950s together with social conservatism and national defense conservatism.
context_section_description: While the mantle of fiscal conservatism is most commonly claimed by Republicans and libertarians, it is also claimed in some ways by many centrist or moderate Democrats who often refer to themselves as New Democrats. Although not supportive of the wide range tax cut policies that were often enacted during the Reagan and Bush administrations, the New Democrat coalition's primary economic agenda differed from the traditional philosophy held by liberal Democrats and sided with the fiscal conservative belief that a balanced federal budget should take precedence over some spending programs.
  Former President Bill Clinton, who was a New Democrat and part of the somewhat fiscally conservative Third Way advocating Democratic Leadership Council, is a prime example of this as his administration along with the Democratic-majority congress of 1993 passed on a party-line vote the Omnibus Budget Reconciliation Act of 1993 which cut government spending, created a 36% individual income tax bracket, raised the top tax bracket which encompassed the top 1.2% earning taxpayers from 31% to 39.6% and created a 35% income tax rate for corporations. The 1993 Budget Act also cut taxes for fifteen million low-income families and 90% of small businesses. Additionally during the Clinton years, the PAYGO (pay-as-you-go) system originally introduced with the passing of the Budget Enforcement Act of 1990 (which required that all increases in direct spending or revenue decreases be offset by other spending decreases or revenue increases and was very popular with deficit hawks) had gone into effect and was used regularly until the system's expiration in 2002.
  In the 1994 midterm elections, Republicans ran on a platform that included fiscal responsibility drafted by then-Congressman Newt Gingrich called the Contract with America which advocated such things as balancing the budget, providing the President with a line-item veto and welfare reform. After the elections gave the Republicans a majority in the House of Representatives, newly minted Speaker of the House Gingrich pushed aggressively for reduced government spending which created a confrontation with the White House that climaxed in the 1995–1996 government shutdown. After Clinton's re-election in 1996, they were able to cooperate and pass the Taxpayer Relief Act of 1997 which lowered the top capital gains tax rate from 28% to 20% and the 15% rate to 10%.
  After this combination of tax hikes and spending reductions, the United States was able to create budget surpluses from fiscal years 1998–2001 (the first time since 1969) and the longest period of sustained economic growth in United States history.
caption: This table shows that Bill Clinton's Omnibus Budget Reconciliation Act of 1993 which increased the average federal tax rates for the top 1% while lowering average tax rates for the middle class was followed by President Barack Obama starting in 2013 through the partial expiration of the Bush tax cuts and that both tax increases lowered deficits relative to Congressional Budget Office policy baselines without them
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