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Was the 1990s Clinton Economy Really That Good?
I was on Bill Bennett’s always-excellent “Morning in America” radio program today, and a caller asked me — basically — to provide talking points on why the 1990s Clinton economic boom “wasn’t really that good.” (The caller probably wanted ammo against liberal coworkers or relatives when they used Bill Clinton’s economic record as reason to support Hillary Clinton.) My response was, “Well, the Clinton years really were pretty good!”
How could I say otherwise? Why would I say otherwise? The economy grew by nearly 4% annually during the Clinton years, creating 24 million jobs and driving the unemployment rate to a superlow 3.9%. Incomes and stocks were way up, inflation and interest rates were way down. Budget deficit? What budget deficit?
Perhaps the most common criticism of the Clinton boom, at least on the right, is that it was a “bubble economy” inflated by easy money and irrational enthusiasm for technology stocks. Even as Clinton was leaving office, the bubble was popping. Clinton inherited an expansion from Bush I, and bequeathed a recession to Bush II. The problem with that line of criticism is that, despite bear market and recession, the productivity boom kept booming from 1996 through 2005. And the tech craze left us some pretty important companies, including Google and Amazon. Beneath the froth, some really lasting and important stuff was happening.
But there is more to the story, of course. A few things comes to mind: First, income inequality soared, and the”financial industry exploded,” as the Washington Post puts it. Two WaPo charts:
Kind of ironic given the emerging themes of Hillary Clinton’s candidacy. Certainly there is an argument that some seeds of the financial crisis were sown during the Clinton years.
Second, Bill Clinton’s “bond market strategy” to boost growth didn’t really seem to click until the GOP took over Congress.
Third, Reaganomics arguable deserves some share of the credit for Clintonomics. Economist Michael Mandel has written that “the impact of the policies Reagan set out in the 1980s, which slowly worked their way through the economy, helped lay the groundwork for the Information Revolution of the 1990s.” And a Brookings study recently noted that “income progress was broad and robust through the Reagan and Clinton years.”
Fourth, Bill Clinton had policies — NAFTA, welfare reform, financial deregulation, capital gains tax cuts, the idea of investing Social Security surpluses into the stock market — that might seem a misfit for the Obama-era Democratic Party.
Now I don’t know if any of that stuff works as anti-Hillary talking points. Don’t really care. But it does provide a more nuanced view of Bill Clinton’s economic record, a record sure to be discussed and examined as the 2016 presidential campaign heats up.
Published in Economics
I’ve become increasingly convinced that, just as it was possible for Obama to win re-election in spite of a bad economy, it’s quite possible for Hillary to LOSE inspite of an economy that husband Bill would crave. It’s mainly because I think the source of our national/social angst has moved on from the economy to “what is our nation’s place in our world?”
And it’s a source of angst that is slapping us in the face.
Could it be that an active Republican congress pushed Clinton toward policies that led to, or preserved economic prosperity? What if we had a Gingrich-type speaker of the House today who could better maintain the Legislative-Executive balance of power?
It’s also ironic that it appears finance’s share of the economy fell during Bush 2, and only began to rise again during Obama.
If Wall Street is “bad”, it seems that Bush 2 was its most formidable opponent.
One could also argue that the deregulation policies of the Carter administration helped serve as a model for later administrations’ emphasis on entrepreneurialism, deregulation, and trade.
Negotiating and signing trade agreements was a priority during Reagan, Bush 1, and Clinton. That spirit seemed to grind to a halt during Bush 2 while protectionism made a bit of a come-back.
Perhaps the Republican and Democrats can agree to roll all regulations and laws back to where they were at the end of the Clinton Administration.
JoelB got it right in comment #2. It should be called the Gingrich economy, not the Clinton economy.
Hmm… if there were no budget deficits, someone forgot to tell the people who “manage” the national debt. Behold:
From: http://www.treasurydirect.gov/
Adding 40% to the federal debt ($1,609,557,554,365.20) from 9/30/92 to 9/30/00 while running budget “surpluses” is nothing to sneeze at. Say, when was the Clinton Foundation formed again?
Yes, of course, this is the case. Why do no conservatives fight this revisionism? I know James won’t respond on his posts but I would like to hear him address this.
The essential things were 1) Republican Congress for the first time in 40 years and mostly for 60 years and 2) the unique leadership that Gingrich gave the House.
Why are the only years of surplus overlaid right exactly on the years of Gingrich’s most effective influence on the country? Hastert and W didn’t even try to extend what Gingrich had given us.
This is much like the liberals insisting that Reagan had no influence on the Cold War nor in the collapse of the Soviet Union.
Mr. Pethokoukis notes elsewhere that the “seeds” of the Great Recession were sown during the Clinton Administration.
I’ll take it one step further: it can be persuasively argued that the Community Reinvestment Act — created by Carter, expanded by Clinton — was the primary cause of the Great Recession. Lenders were forced by the feds to make bad mortgage loans to poor risk borrowers. The lenders saw a way to make boodles of money on it and got greedy, bundling and selling and trading these loans like a kid’s bag of marbles. Millions bought homes they couldn’t afford (because a house is a “right”) . . . and the rest is history.
Clinton never submitted a balanced budget to Congress in eight years but is giving credit for balancing it.
For those who know more about the details than I, I’ve always wanted to ask: If the Community Reinvestment Act had been left alone, would it still have been a causal factor?
In other words, was it the CRA itself or rather the amendments/expansions made during the Clinton/Bush2 years that are (more) to blame?
(Remember, Bush2 also talked a lot about using the power of the federal government to “create” homeowners.)
In the areas of sound money, government spending and regulation, the Reagan/Clinton years had much better policies than the Bush/Obama years. So much so that you would think that Reagan and Clinton were from one party and Bush and Obama were from the other.
But the revisionists praising Clinton overlook one thing. Reagan did the right things in spite of an opposition congress. Clinton did the right things because of an opposition congress.
Nice.
Economies are organic things, if not stomped on they grow. Moreover if they are left alone, i.e. good laws, very little regulations, they can grow faster and the people can flourish. Clinton didn’t do much to harm things because he lost Congress and photo ops, his priority, were enough in those good times. There was a cold war bonus, and momentum from 80’s tax and regulatory reform but the crony deals behind the scenes continued to grow as they are the guts of the regulatory state. Those crony deals, the K street mob, the regulatory capture, the tax tweak capture are bi-partisan and expand and deepen through time. The point is, the population can flourish and decay reverse if we vigorously undo stuff. If the new leaders just drift and give us good sound bites and photo ops the economy may still expand and perhaps new technologies will erode the dead weight of government but it’d be dangerous to count on it.
Reagan, H.W. Bush, and Bill Clinton all were beneficiaries of a huge boost in American productivity. Computers hit the business world. Over a 20-year run, the productivity of the American worker rose steadily, and the computer also enabled the number of workers (lots of lower-pay clerical positions and middling-pay tech positions) to be dropped from the employment rolls. This increased profits but set us up for the worsening unemployment and income inequalities.
In engineering, in 1980 our office had five non-engineers for each engineer. By 2001 this was down to about one non-engineer to each engineer. The trend is not continuing, and these amazing gains in productivity are nearing the end of a run. And, we have not figured out how to employ all those folk who previously had those clerical and technical positions, and we aren’t even seriously discussing the problem.
Keep this in mind when considering the Clinton economy.
I remember the campaign of 1992. It was back before Fox News, when most Americans had not yet figured out how far to the left our mass media had lurched. There was a huge clamor in the news every day about how ‘the economy was not improving, the economy was terrible, we needed big government programs to save us.’
Bill Clinton (and his primary opponents) campaigned on a plan to roll out a huge government jobs program to get the economy back on its feet.
George H.W. Bush campaigned on an economic policy that said “stay the course, the worst is over, and our economy is well-positioned for good days ahead.” He could get no traction against the media drumbeat about the poor economy.
After Ross Perot threw the election to Clinton, Bob Dole made sure to spike his jobs plan dead, dead, dead.
Subsequently it was reported that economists were figuring that the trough of the recession had been in March of the previous year.
(It was during the campaign of 1992 that my friend Ali Mustafa told me about a radio program that actually told how things really are, and not the awful misinformation that came from all other sources. That was my first time to listen to Rush Limbaugh. The campaign of 1992 made Rush Limbaugh into a superstar.)
MJB: Excellent points.
Bush 41 made a huge mistake to treat Perot with respect and to let him be on the debate stage with him and Clinton. And when you think about the fact that earlier as Clinton’s numbers improved Perot dropped out and then came back into the race when Bush’s numbers got better! How could this be allowed? Where was Lee Atwater? (Well, he died, didn’t he?) And then to allow Perot on that stage when it was clear that Perot’s only strategy was to damage Bush ?? What a foolish bunch of strategists were with Bush. Or was it Bush himself? Who knows?
Clinton’s first 2 years were not very good, despite an economic soft-landing by Bush I. The economy was flat. After Republicans took over both houses, locking out Socialist programs like Hillary-Care, people took a deep breath and the economy took off.
Clinton hit the Presidency just at the right time: as I said before, an economic soft-landing, bail out of the S&L’s ended, the military was shrunk thanks to the Cold-War ending and First Iraq war draw down, $30 Billion from mobile phone frequency auctions, just to name a positives.
Only an idiot could have screwed up.
Yes. Clinton campaigned against G.H.W. Bush’s economic policies, but all of Clinton’s economic initiatives were killed. What Clinton then did was live with the continuation of Bush policies, and took a bow every time the economic news was good. The “Clinton economy” was produced by the combination of Bush I policy combined with a GOP congress on duty to keep Clinton from screwing it up.
Clinton is still taking bows for the great economy that he watched due to Bush policies.
I think the only thing that could be attributed to Clinton was the banking reform that was pushed through by Barney Frank. It allowed the housing boom to accelerate throughout the 1990s, right up to the crisis of 2007. Also, Clinton was a cheerleader for Greenspan’s continuation of low interest rates. (Greenspan knew it was a bad idea (“irrational exuberance”) but he was enjoying the good times like Wall Street was.)