If only we could party like it was 1999.
That was the year in which the last great wave of conservative domestic-policy reforms was fully in place, but before renewed spending indiscipline wreaked havoc. It was a year in which the economy boomed (4.7 percent growth, 4.2 percent unemployment) with low inflation (2.2 percent), poverty rates (under 12 percent) nearing historic lows and the federal government running a $126 billion annual surplus.
And it all came about specifically because of a conservative Congress’s reforms from 1995 through 1997 — reforms that perhaps can’t be perfectly copied 20 years later, but from which lessons and examples can be re-applied for today’s circumstances.
As this cycle’s presidential campaign moves from the entertainment phase to the serious season, the candidate who can most excite voters about making conservative ideas actually work in practice could be the one who catches fire. Herewith, then, a reminder of why conservative policies in the 1990s created such great economic success.
First, welfare reform actually works. The 1996 overhaul of the program formerly known as Aid to Families with Dependent Children (AFDC) gave states block grants rather than open-ended financing; provided states leeway to experiment; put time limits on the assistance provided; required beneficiaries to participate in work, education, or training; and gave incentives to keep families together rather than split them apart. Results: beneficiary rolls eventually cut by more than half; millions of Americans finding jobs or educational advancement; the poverty rate slashed; and tens of billions of tax dollars saved.
AFDC was only one among dozens of welfare or welfare-like programs. Similar reforms in about four-dozen other such programs, especially food stamps, could produce similarly good effects today. So, too, would block-granting Medicaid to the states, while giving them similar inducements to innovation.
One of the main achievements of the conservative Congress in the 1990s was getting Bill Clinton to sign welfare reform that put the money back in the hands of the states. Pictured: Gingrich, Clinton, and Senate Majority Leader Trent Lott (R-Miss.) | Photo: AP
Second, spending restraint stimulates, rather than hampers, private-sector job growth —and cuts poverty. For fiscal years 1995 through 1997, Congress cut a total of $50 billion in actual dollars in domestic discretionary spending (and almost exactly $100 billion from “projected” spending), while implementing minor reforms that mildly restrained Medicare and other entitlement spending. Naysayers, led by the media, howled that orphans would starve and little old ladies would freeze in the streets; instead, the poverty rate fell in five years from 14.5 percent to 11.8 percent, while unemployment fell in those same years from 6.1 percent to 4.2 percent.
Third, broad-based reductions in taxes on investment help the middle class. In 1997, the conservative Congress reduced the top rate on capital gains taxes from 29 to 20 percent, significantly cut inheritance (death) taxes, and created Roth IRAs and IRAs for education expenses. Result: Not only did unemployment fall (as described above), but real wages grew an astonishing 6.5 percent from 1997 to 2000.
If Congress and the president now would likewise cut corporate income taxes substantially (while eliminating special-interest deductions), similar results could accrue.
Meanwhile, conservative reforms from other eras teach other lessons of success.
For example, even though conservatives rightly opposed (for numerous reasons) the overall Medicare prescription drug program passed in 2003, it did contain two significant conservative reforms that have proved highly beneficial. First, it greatly expanded the availability of Health Savings Accounts — which now are offered as an option by 31 percent of American businesses, with 14.5 million Americans holding $28.4 billion in such accounts.
Second, rather than having government operate the program directly or dictate its prices, conservatives won the battle to insist that insurance companies should be able to compete for the business of the tens of millions of seniors affected.
The results have been spectacular.
Liberals failed to impose price controls and, lo and behold, the market worked better than the controls
Consider: Liberals in Congress were so sure that private greed would drive premium prices through the roof that they proposed setting by law a base price, for 2006, of nearly $36 per month, rising subsequently with inflation. They failed to impose those price controls — and, lo and behold, the market worked better than the controls. A full 10 years later, the average premium for a basic plan in 2016 will be $32.50 — not only still $3.50 below what the Left wanted to impose a decade ago, but $9.11 below what the cost would be if adjusted for inflation. More amazingly, Medicare’s own trustees had predicted that the average premium by now would be a whopping $61 — nearly twice the low prices produced by the magic of competition.
Meanwhile, the Congressional Budget Office in 2003 predicted that the government (meaning taxpayers) would be shelling out $99 billion a year for its part of the program by 2013; instead, in 2013, the cost was just $50 billion.
Another conservative success, now little remembered, came with the Reagan administration’s efforts in the 1980s to streamline the federal bureaucracy. Under the direction of conservative stalwart Donald Devine, Reaganites succeeded in eliminating more than 100,000 unnecessary bureaucratic positions government-wide. A conservative administration elected in 2016 would be wise to consult with Devine about how to do it again.
Those items are just a start. The list of potential conservative reforms, most of them already proven successful by forerunners in the 1990s, the 1980s, or under conservative governors, is long. Conservative leaders should chomp at the bit to promote them on the campaign trail — to set the tone for implementing them once in office.
Quin Hillyer is a contributor for Opportunity Lives. He is a 40-year veteran of conservative journalism and activism, now living in Mobile, Alabama. You can follow him on Twitter .