Rebuking the Economic Legend of Bill Clinton

How many of you have experienced an macro-economic conversation with a “liberal” and when they quickly find themselves unable to justify their positions they pull out what in their mind is the ultimate trump card, Bill Clinton? Obviously since I’m asking, I encounter this phenomenon often.

Then next exchange is typical, expected, and boring.  

I’ll ask, “Why was President Clinton so great for the economy?”

Blank Stare followed by……”He balanced the budget, he gave us a surplus”

My next questions will be “What did he do that gave us those surplus?”   (After recovering from the shock that I would ask such a question, blank stares and chorus of uhs and ums are sure to follow)

Then I’ll point out that deficits are increasing at record rates and throw out a simple lob-ball for them  like, If surpluses (like the Clinton years) are good, then what the current administration is doing much be bad.

Then they will be so excited to be able to go to the other only tool they have in the toolbox and say every unfortunate event in human history is the fault of George Bush.

Yawn.

Let’s actually look at President Clinton and see if he deserves all this reverie. Will copying him in every respect bring us the prosperity and economic expansion we saw in the late 90s?

Other than being there while all of this economic expansion was going on, if you look at what was going on at the time, he didn’t really play much part in it. It really looks to me like President Clinton had several things going for him.

The main three things would be:

1) Low inflation/commodity prices

2) The end of the cold war and the subsequent reductions in defense spending

3) The Internet

Unfortunately, Bill can’t claim credit for any of these things.

As far as major legislation goes, President Clinton signed very little due to gridlock. (Which is probably a good thing) The one thing he made a large push for was universal heath care, which congress shot down. This defeat was probably pro-economy.

In 1993,  the Democratic controlled congress passed a large tax increase with no republican support. Clinton signed OBRA-93 into law and the economy continued to be in recession and deficits increased. This helped launched the Republican Party to retake congress for the first time in 40 years. The Republicans, lead by Newt Gringwich, vowed to balance the budget. Balanced budget after balanced budget was sent to President Clinton’s desk, after 5 were rejected, finally the President relented and he passed a balanced budget.

Hundreds of millions in proposed social spending by President Clinton was shoved aside by congress.

In his second term, he did sign some pro-growth acts sent to him by the Republican Congress. The Personal Responsibly and Work Reconciliation Act in 1996 was part of the Republicans’ “Contract with American” and essentially fundamentally altered our welfare system ending welfare entitlements by placing time limits on funds. Then taxes on capital gains were cut by the bipartisan Taxpayer Relief Act of 1997.

One of the key sparks of economic growth is technological development. The Internet changed the way we work and the way we live. It was the main engine behind the 1990s economy. This entire new industry allowed for new business not before conceived  to sprout out. Since it was new and the government hadn’t moved to regulate and control it, entrepreneurship was free to flourish and jobs and wealth were created.

The Internet deserves the majority of the credit for the Late 90s economic boom, not President Clinton. I’d give second place the the conservatives in congress. Unfortunately it didn’t take long for the Republicans to abandon the “Contract with America” and become big spenders themselves.

So, Clinton worshipers, let me know what you got.

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2 Responses to Rebuking the Economic Legend of Bill Clinton

  1. bingsearchdaily says:

    Important to note that although Clinton had little to do with the Internet revolution and resulting economic boom (outside of his VP inventing the Internet).

    To be fair Reagan did a great job, but he also had the benefit of the PC/database revolution in the 80s.

    Clinton did one thing right. He stayed out of it! Yes, he did not regulate the Internet, he did not Tax the Internet and for the most part let it grow like a Conservative would.. Naturally, organically, free market! The 90’s is a good example of how our country can operate successfully. No the Dems didn’t cooperate with the Repubs, but since there was a balance between the Pres, Senate and house everyone needed to bargain with each other. Today, that is not the case and terrible legislation is beeing passed/forced upon us.

    GW had the worst of luck of all. Tsunami’s, Hurricanes, floods, 911, China, Iraq. Not saying I’m his biggest fan, but he had more thrown at him, FASTER than any president in history.

    Now that BHO is in the house I kind of miss Slick Willy.

  2. Len Rothman says:

    bingsearch,

    Not to be unkind, but how did Bush have Iraq, China and Tsunamis thrown at him?

    Iraq did nothing. China lent him all the money he wanted to give tax cuts AND go to war. Very few Americans died in the Tsunami that I can recall.

    9/11 was tough, to be sure, and any president would have had his work cut out for him.

    Katrina was the kind of major national disaster that the Feds should be called in to. And he had so little regard for FEMA that he decimated the experienced leadership and the Gulf Coast paid dearly.

    Rich,

    Evidently the tax increase that Clinton passed did not affect the tech investment boom in the mid to late nineties. And when the economy did turn around, the revenue increase helped balance the budget.

    Unfortunately, the tech bubble burst since so much was dependent upon “the new business model” of no sales, no assets, just a promise and a lot of stock issues.

    The subsequent turnaround after the turn of the century was funded mainly by the middle class credit card, home equity and mortgage scams. Not much in the way of investment in manufacture or products and services for export, even with the new found money from China (actually the tax cuts, but they were paid by loans).

    We reached a GDP that was 70% retail on credit cards. It was one of the greatest transfers of wealth from the working and middle class to the upper income levels in history.
    And not much was done with that money except to send it overseas or gamble it away on worthless and abstruse “investments”.

    The rest, as we say, is history.

    I think the moral of this tale as regards to Clinton, is that investors don’t really care about taxes unless they are exorbitant (like before Reagan, when the top rates were close to 90%). If an investment can make money, investors will be drawn. Entrepreneurs are like that.

    A reminder of that is Germany. In 2008 they were the largest exporter of goods in the world. More than China or us.

    And they did that with a tax system that is higher on income, with universal health care, and additional taxes to support municipalities and the reunification costs of East and West.

    Oh, and they have only about 90 million people.

    As a Democrat and Clinton voter, I am still angered by his inability to keep his zipper closed. But not nearly as angered as I, and most of the country, was when 50 million dollars was spent by Starr to confirm his relationship with a stained dress.

    But, I digress.

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