Rich Lowry has a devastating takedown of the idea that Clinton was responsible for the economy of the 1990s. As Lowry puts it:
Now, that said, Gephardt’s “great story” — which is just a version of Clinton’s “great story” — depends on two big lies. The first is the dishonest picture Clinton painted of the American economy in 1992. He called it “the worst economy in 50 years,” a transparently false claim. The 1990-91 recession was relatively mild, especially compared with the downturn of the early 1980s. The recession Clinton ran against officially ended in March 1991, several months before he even announced his candidacy premised on battling the Second Great Depression.
The other lie is that Clinton’s 1993 economic package transformed the federal budget, and hence the American economy. In fact, his plan was insignificant, a flea on the raging bull economy of the 1990s; and his plan failed in its three specific aims: It didn’t cause interest rates to fall, it didn’t significantly reduce the deficit, and it didn’t cause the economy to grow. It was a trifecta of failure.
Since most economists would think the last thing that you should do when economy is just starting to recover is to raise taxes, the Clinton team had to come up with an elaborate explanation for why its proposed tax increase in 1993 made sense. So, it latched onto the argument — bear with me here, it gets a little complicated — that by lowering the deficit, it would lower interest rates, and thus stimulate the economy by reducing the cost of borrowing for consumers and businesses.
Hmmm. It sounds like it might make sense — except for one minor detail. As former Clinton labor secretary Robert Reich has noted, “This theory is easy to state with conviction, but it is impossible to prove. Look back several decades and you see no direct relationship between deficits and interest rates.” Uh, that’s because none exists. Check out Alan Reynolds on the topic.
In other words, the economy was already in recovery long before Clinton took office, and his economic package of 1993 had a negligable effect on the economy overall. The real story of the 1990s was a massive increase in productivity and the rise of the Internet economy that fundamentally transformed the US economy. Neither of those factors had anything to do with Clinton Administration policies.
What did help the economy is that Clinton largely didn’t do anything for it. As Lowry puts it:
Where Clinton should get credit is basically for getting out of the way of the free market: He was generally free trade; he let Alan Greenspan keep inflation in check; he signed a “tax cut for the rich” in 1997; he signed various deregulatory bills; and his administration adopted a hands-off policy for the Internet (crafted by, of all people, former health-care guru Ira Magaziner).
So, to the extent that Clinton made it possible for people to live like Republicans, it was by accommodating Republican policies. If Gephardt wants to tout this Clinton legacy, great: Let’s get the memo out to all Democratic leaders as soon as possible, and get them all to endorse Alan Greenspan, deregulation, and capital gains tax cuts. Hurrah!
Somehow I wouldn’t be holding my breath for that to happen.
“So, to the extent that Clinton made it possible for people to live like Republicans, it was by accommodating Republican policies.”
So, if the Clinton-era policies were working, and he raised the top level, AND we didn’t have an enormous deficit…what was broke that Bush had to fix with his tax cut?
Your point seems to be that Clinton’s tactics worked, so it’s good that Bush II changed them, leading us into the red from that dangerous land of the surpluses.
As they say in Miami: “que?”
Let’s see:
* A post-inflationary recession in 2001.
* The biggest terrorist attack in history which drained over a trillion dollars from the economy.
* Several major corporate scandals including the 7th largest corporation in the country becoming insolvent
* An attack on Washington with biological weapons.
* A war in Afghanistan
* Terrorist actions in the Middle East
* A war in Iraq
* Decline consumer confidence because of the above
* A series of policies that penalized economic investment
* The bursting of the dot com bubble.
All of these had a downward stimulus on the economy, which is why it was necessary to craft policies that created a positive stimulus by spurring consumer spending and capital investment. The very last thing that anyone should ever do is raise taxes in a recession, which is exactly what the Democrats would have done – a policy that would have put this country into a depression rather than a slow recovery.
“Let’s see:
* A post-inflationary recession in 2001.
* The biggest terrorist attack in history which drained over a trillion dollars from the economy.
* Several major corporate scandals including the 7th largest corporation in the country becoming insolvent
* An attack on Washington with biological weapons.
* A war in Afghanistan
* Terrorist actions in the Middle East
* A war in Iraq
* Decline consumer confidence because of the above
* A series of policies that penalized economic investment
* The bursting of the dot com bubble.”
And these happened during the campaign season when Bush was arguing for a tax cut? EX POST FACTO, Mr. Reding.