American Pie: How Not to Slice It

Thinking wistfully back to the Clinton presidency, columnist Paul Krugman used the term "tax take" to describe the government's revenues as a share of the economy.  He was lamenting how small it is now, compared to what it was during the Clinton years:

According to the administration's own estimates, Mr. Bush's second term will see the lowest tax take as a percentage of G.D.P. since the Truman administration. And don't forget that President Clinton's 1993 tax increase ushered in an economic boom. [emphasis mine]

He was saying that today's taxtakers are being far too generous to today's taxpayers.  What was my initial reaction to that?  More-than-mild disagreement. 

However, remembering that I've been wrong before, I remained calm, looked up some numbers, and created a few pie charts—each pie corresponding to the size of our economy.  Then I examined the charts, and pondered what they were telling me about the priorities of the Clinton years.  As a result, I changed my reaction to Krugman's nostalgia.  I now feel like putting my fist through a wall. 

Click on the chart to enlarge it.

What happened during Clinton's eight years?  The economy grew, no question.  (Did it grow because of Clinton's tax increase?  I'm saving that subject for another article soon to come.) 

But notice what else happened.  The "tax take" was a larger share of that larger economy; not only was it a larger bite than in 1992, but it was the largest tax bite in fifty-six years.  It was a dead heat with 1944, the climax of WW-II.  In short, compared to 1992, the 2000 tax take was a much wider slice of a much thicker pie. 

Lastly, notice the military budget:  it went in the opposite direction.  Not only was it allocated a smaller slice versus 1992, it was the smallest slice in sixty years, since before WW-II.

Here's a table that summarizes the constant-dollar comparison between 1992 and 2000:

In summary: During the Clinton years for which Krugman is so nostalgic, the administration increased the tax take to a fifty-year high, and reduced the military's allocation to a sixty-year low. 

That tells me a lot about the priorities of the Clinton years.  In my judgment, it was gross mismanagement.  Why?  Because the first priority in national security, as Reagan knew, is war-prevention (...notwithstanding the Limbaugh-Hannity rhetoric that the military's primary purpose is to "kill people and break things"; that's second priority, implemented when deterrence fails).  National security has four essential components: intelligence, diplomacy, military force potential, and the will to use that force if necessary.  A weakened military means weakened national security.  (For a different angle on this subject, see Clinton's Military.)

In any case, for anyone who would like to try a cognitive-dissonance exercise, here's a brain-teaser: If the Clinton adminstration had consistently allocated a mere 4% slice to the military instead of cutting it to 2.9%, could we have prevented the subsequent wars we've been waging?  We'll never know, will we?  All we can do is speculate. 

I hope it is clear that, for a number of reasons, I do not share Krugman's nostalgia for the Clinton years.  Look for more on this subject in the near future.