Clinton inherited major budget deficits left over from the Reagan and Bush administrations; fiscal year 1992 had seen a $290 billion deficit. In order to cut the deficit, Bentsen, Panetta, and Rubin urged Clinton to pursue both tax increases and spending cuts. They argued that by taming the deficit, Clinton would encourage Federal Reserve Chairman Alan Greenspan to lower interest rates, which, along with increased confidence among investors, would lead to an economic boom. Some of Clinton's advisers also believed that a focus on cutting the deficit would be politically beneficial since it would potentially help Democrats shed their supposed "tax and spend" reputation. Though Secretary of Labor Robert Reich argued that stagnant earnings represented a bigger economic issue than the deficits, Clinton decided to pursue deficit reduction as the major economic priority of his first year in office. In doing so, he reluctantly abandoned a middle-class tax cut that he had championed during the campaign.
