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It's still the economy, stupid!

Posted By Harry Browne On 01/23/2001 @ 1:00 am In Commentary | Comments Disabled

Now that Bill Clinton is no longer our president, does this mean we’ve heard the last of the Clinton myths about the economy? Probably not.

I’m talking about those great legends, told and retold by the Clintonites and the press, of the wondrous savior who rescued the U.S. economy from depression, enacted a courageous budget plan, brought down interest rates, ended the deficits, and put us on the road to paying off the federal debt.

According to the legends, whatever you think of Clinton personally, you must agree that his reign was good for the economy.

But the legends are as fictitious as the one about George Washington and the cherry tree. And if the press and public continue to recirculate the legends, they will make it more likely that the Bush administration will pursue the wrong economic policies.

Rising/falling interest rates

Take interest rates, for example. The legend says Clinton’s tax increase ended the budget deficits, bringing to an end 12 years of high interest rates. But it doesn’t happen to be true.

When Ronald Reagan was elected in 1980, the interest rate on short-term Treasury bills was 11.4 percent. By the end of his presidency in 1988, the rate was down to 6.7 percent. It continued downward to 3.4 percent in 1992, when George I lost the presidency.

As soon as Bill Clinton sewed up the election, interest rates started moving upward — and they never returned to the low levels Clinton inherited. In fact, the average Treasury bill rate in 2000 was 5.8 percent — two thirds higher than when Clinton was elected.

Despite the legend, Bill Clinton didn’t bring down interest rates. If he had any influence on them at all (which he probably didn’t), he pushed them upward.

The legendary surpluses

Then there’s the federal budget.

The good news: The politicians say we have big budget surpluses.

The bad news: They’re lying.

The first surplus supposedly occurred in 1999, but the federal debt actually rose that year by $127 billion. They tell us we had a surplus of $87 billion in 2000, but the debt went up by $23 billion. And this year the surplus is supposed to be $68 billion, but the government estimates the debt will increase by $82 billion. How can the debt rise when you’re running a surplus? Anyone with a family budget knows it is a deficit, not a surplus, that causes debt to increase.

Every year the politicians take money from the Social Security trust fund (you know, the fund in the lock box), and issue new government bonds to replace the money. The politicians count the money they take as revenue, making possible a budget “surplus” — even as they go deeper in debt. So the surpluses are just another myth, and the U.S. government is still the world’s largest deadbeat.

A debt-free America?

And that brings us to the most outrageous myth of all. In his farewell address Thursday evening, Mr. Clinton once again said, “we’re on a path to pay off the entire debt by the end of the decade.”

The current federal debt is $5.7 trillion. To pay it off by 2010 would require an average surplus of over $600 billion a year for the next nine years. Since there isn’t a current surplus of even 98 cents, and since the politicians absolutely will not reduce government spending, such surpluses would require raising every American’s taxes by one third. How likely is that?

One other myth should be noted: Bill Clinton and the Republicans argue over who’s responsible for the reform that supposedly “ended welfare as we know it.” But did you know that federal welfare spending has continued to rise every year — and is now 33 percent higher than in 1993? That’s some reform.

They tell us there are fewer people on welfare now, but they don’t explain why that costs us so much more. Lets hope they don’t get everyone off welfare — as that might increase welfare spending to $1 trillion a year or more.

Are you better off?

Returning to the Clintonian saga, if he hasn’t brought down interest rates, and if there are no budget surpluses, why is the economy doing so well?

Maybe it isn’t.

For the first 70 years of the 20th century, the yearly economic growth rate — averaging in good times, depressions, and wars — was 3.5 percent. From 1947 through 1970, the growth rate was even better — averaging 3.9 percent a year. Then the big-government Great Society programs and regulations kicked in — and economic growth has been anemic ever since.

For the first seven years of the Clinton administration (the only figures available now), the growth rate was only 3.0 percent. But Mr. Clinton claims we have the greatest economic growth in American history.

If you’re so much better off now than you were eight years ago, why was it necessary for Mr. Clinton to spend 45 minutes at the Democratic convention trying to convince you of that idea? He went on and on with statistics and anecdotes. But if you were significantly better off, you’d know it without him telling you so.

If a Libertarian had completed only one term as president, you’d know the difference without prodding. His farewell address would take a mere two minutes. He’d have to say only, “Do you remember when the government was so large that you had to pay income tax? Remember when Social Security was eating up your retirement funds, and they wouldn’t let you out of it? Remember when the drug war was tearing up your city? I rest my case. I’m going home now and watch TV.”

But since Mr. Clinton never even considered improving the economy by making you free and unleashing the productive talents of the American people, we’ve had to settle for a basket of Clintonian myths.

And they aren’t likely to go away, I’m afraid — even with Bill Clinton out of the White House. By maintaining the legend of Savior Bill, the Democrats and the press can make George Bush seem a failure by comparison — and keep the pressure on him to emulate the Clinton economic policies.

Where’s the opposition?

Unfortunately, we don’t have a major opposition party in America. The Republicans don’t debunk the fanciful tales about the “booming” economy, about interest rates, about the fictitious surpluses, or about welfare reform — because they are co-conspirators in maintaining these illusions. They play the same games, and so they jumped on Bill Clinton only for doing things they hadn’t gotten around to yet.

Thus the Republicans impeached Bill Clinton for lying about having sex “with that woman,” but not for lying about the economy — which is a lot more important to you. The Republicans didn’t try to impeach him when he stood behind Janet Reno as she took responsibility for incinerating 85 men, women, and children at Waco — or when he bombed innocent people in the Sudan and Afghanistan to divert attention from his legal problems — or when he confiscated millions of acres of Western lands “without due process of law,” in violation of the Constitution’s Fifth Amendment.

The Republicans aren’t interested in debunking legends because they have some fantastic stories in their own repertoire — including some incredible myths about Reaganomics and Republicans standing for smaller government. But we’ll leave those for another time.

Suffice to say that, while Bill Clinton is perhaps the most engaging and talented liar ever to occupy the White House, he doesn’t have that field all to himself.

And if we let the lies go unchallenged, we are setting ourselves up to have the chains of taxation and regulation made ever tighter around us in the name of fictitious economic achievements.


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