Contributor Post Created with Sketch. How Reagan and Bush I Helped Give Us the 1990s Clinton Boom

 

George H.W. Bush and Bill ClintonHillary Clinton will be the only Democratic 2016er debating tonight with a realistic shot of being the party’s presidential nominee. Betting markets give her about a 70 percent chance. But if she does poorly, maybe Joe Biden gets in and gives her a run. Bernie “I’m a democratic socialist, not a capitalist” may pull Clinton to the left. but he’s not going to get the nod.

Yet one wonders what Hillary’s odds would be if voters thought hubby Bill was a lousy president. What if we had a 1990s Clinton Bust rather than Boom? Who knows? Maybe she still would have been a US senator from New York and thus a plausible presidential contender. But without the reflected glory of The Greatest Decade Ever, it’s hard to imagine the notion of second Clinton presidency would be as appealing. Given the importance, then, of the Clinton Boom in the case for Hillary, how should one think about those go-go years? A couple of thoughts:

First, the 1980s and 1990s were part of an economic continuum where supply-side reforms dovetailed with technological change. Economist Michael Mandel:

In a way that few have realized, Reagan’s economic legacy is inextricably interwoven with the Information Revolution that the IBM PC helped kick off. His message of competitive markets, entrepreneurial vigor, and minimal regulation found a willing audience in an era of rapid technological change, where innovation was opening new opportunities seemingly every day. Reagan’s first term saw the creation of such future giants as Sun Microsystems, Compaq Computer, Dell, and Cisco Systems (CSCO) — the greatest entrepreneurial burst of new companies since the early 20th century. … Taken together, the changes Reagan championed in the tax system fostered innovation and entrepreneurialism even as they encouraged the development of venture capital and investment in human capital. And Reagan’s willingness to push for more flexible labor markets and less regulation helped companies react faster to economic changes, including new technologies. As a result, 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.

Second, as the economy roared, income inequality soared. The share of income going to the top 1% rose from 13.2% in Bill Clinton’s first year in office to 21.5% in his final year. But when a rising tide is lifting all boats, the 99% don’t mind as much. As Brookings scholar Rob Shapiro wrote recently about the last two decades of the 20th century: “households of virtually every type experienced large, steady income gains, whether they were headed by men or women, by blacks, whites or Hispanics, or by people with high school diplomas or college degrees.” Maybe a lesson there for today’s Democrats and their “middle out” economic theories.

I also urge you to check out this 1999 analysis by my late AEI colleague John Makin, “The Myth of Clintonomics,” which argues that the Bush I administration really deserves some credit for the Clinton Boom: “the Bush team successfully designed the spending caps–successors to the Gramm-Rudman deficit reduction measures that held down the growth of government spending. The capped low rate of government spending growth in a decade of great wealth-generation made possible the elimination of the budget deficit by 1997 and is set to create a trillion dollars in cumulative surpluses over the first decade of the new millennium.”

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  1. tigerlily Member

    I guess I don’t really understand why Bernie couldn’t win the Dem nomination. He calls himself a democratic socialist and with the extinction of the Blue Dog Democrat he’s really only a few degrees (at most) to the left of the new far left center of the Democratic party. Plus, I expect Hillary with all her scandals will implode at some point before the nomination leaving little time for the Dems to find another plausible candidate.

    • #1
    • October 13, 2015, at 3:21 PM PDT
    • 1 like
  2. Manny Member

    This is absolutely spot on. The Bush 41 recession was one of the mildest and was brought about by inevitable the economic cycle. I’ve argued that Clinton didn’t do anything for the economy. The seeds of its success was sown before he got into office.

    • #2
    • October 13, 2015, at 6:08 PM PDT
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  3. aardo vozz Member

    Manny:This is absolutely spot on. The Bush 41 recession was one of the mildest and was brought about by inevitable the economic cycle. I’ve argued that Clinton didn’t do anything for the economy. The seeds of its success was sown before he got into office.

    And after the 1994 elections, he was somewhat constrained by a Republican House and Senate.

    • #3
    • October 14, 2015, at 12:57 AM PDT
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  4. Polyphemus Inactive

    After his election, Clinton said that the economy was worse than he had been led to believe and he would not be able to implement the middle class tax cuts he had campaigned on. Instead he urged that we needed a stimulus package to jump start the economy. His stimulus failed to pass congress. The economy, of course, continued the rebound that he wanted to deny was under way. Yet he took credit for it anyway.
    When a doctor misdiagnoses and prescribes a treatment that the patient refuses, does he get to claim that he healed the patient when they recover?
    I guess he does if he is a Democrat.

    • #4
    • October 14, 2015, at 1:25 AM PDT
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  5. The Reticulator Member

    Polyphemus:After his election, Clinton said that the economy was worse than he had been led to believe and he would not be able to implement the middle class tax cuts he had campaigned on.

    Thanks for the reminder. I had almost forgotten that one.

    • #5
    • October 14, 2015, at 3:18 AM PDT
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  6. James Madison Member

    In addition, what is often overlooked is the economy Clinton left to his successor. It was hyper-inflated by the dot.com boom which melted away. Underneath, things started to tilt downward and the promise of the dot.com revolution was overstated. So, he rode in on a wave and left with a hole in our pocket book.

    • #6
    • October 14, 2015, at 2:51 PM PDT
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  7. The Reticulator Member

    Don’t forget that Clinton spent the Reagan/Bush peace dividend.

    • #7
    • October 14, 2015, at 4:13 PM PDT
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