By John Griffing
President Clinton has taken to the stage for years laying hold to claims of economic competence. The ’90s are portrayed as a golden era, resulting from the successful and uncompromising implementation of a liberal tax-and-spend model that punished “the rich” and empowered the poor.
Clinton is credited with the longest boom on record, eclipsing the Reagan years. Unemployment dropped to under 4 percent during his tenure. The stock market topped 10,000 for the first time. Single, working mothers went back to work. The poverty rate declined. Incomes were up. “Saturday Night Live” was actually funny. And America became proficient at bombing aspirin factories. In short, the Clinton era, we are told, was paradise. Only, much like President Clinton’s definition of “legitimate rape” – tested repeatedly in the Oval Office – this narrative is entirely fabricated. The ’90s happened in spite of and not because of anything Bill Clinton had done.
In 1993, shortly after Clinton was elected (in the midst of the S&L crisis), he reworked the tax code, rolling back the Reagan tax cuts and increasing the top rate for joint filers to over 50 percent of income when state income taxes were included. The cap on Medicare taxes was removed. The U.S. corporate tax rate became the highest in the world. And seniors saw a larger portion of their Social Security retirement income confiscated. And, we are to believe that Paul Ryan is supposedly lacking in empathy?
The results: Revenues stagnated, unemployment remained comparatively high, and stock market utilization was low by historical standards.
So, what changed? Answer: the 1994 sweep of Congress by Republicans and the resulting “Contract with America.” President Clinton was forced to compromise – on everything. Legislation cutting the capital gains rate, which encouraged investors to invest, welfare reform, the virtual elimination of the immoral death tax, all crossed President Clinton’s desk.
A categorical comparison of the Reagan and Clinton economies will reveal weaknesses during the Clinton years in areas where the Reagan economy was strong. On job creation, for example, the mid-boom years of the Reagan expansion witnessed stronger levels of job growth than the comparable years for Clinton. The unemployment rate also had farther to fall from the year 1983 (when the Reagan tax reform package was passed) to 1990 (when President “Read my lips” increased marginal tax rates). Unemployment under Reagan fell from over 10 percent when he took office to approximately 5 percent before he left. A drop in unemployment this dramatic is truly significant from a historical perspective.
If we begin the Clinton expansion in 1997, when growth picked up and market capitalization jumped from 80 to 101 percent, then the unemployment rate only fell a couple percentage points as a result of items directly advanced and enacted by the Clinton administration. It is doubtful whether the recovery in the early ’90s can be counted, since the economy was simply again reaching its natural equilibrium in the wake of a mild recession. It is plausible that the Clinton tax hikes in 1993 may have slowed recovery.
Despite the lack of causal evidence, and in the face stark statistical contradictions, liberal economists consistently tout the Clinton years as a successful example of tax-and-spend economics.
As evidenced above, and contrary to popular mythology, the revered expansion of the 1990s was built on tried-and-tested conservative economic principles. Additionally, much of the growth in the Clinton years was attributable to the widely acknowledged “dot-com boom,” in which speculators and venture capitalists enriched themselves by investing in Internet start-up companies. Other financial and service industries experienced similar growth during this time.
This growth was arguably influenced by the Republican capital gains tax cut of 1997, which President Clinton signed into law after much complaint. Few remember that Newt Gingrich allowed a government shutdown before President Clinton would even come to the negotiating table. Federal agencies temporarily went without funding. If only modern conservatives were as courageous in dealing with President Obama, the credit downgrade may never have occurred.
Therefore, any growth during the Clinton years can be traced to conservative economic policies.
President George W. Bush, in the wake of a devastating terrorist attack, managed a return to 4 percent unemployment in 2006. He did so using conservative tax policies. Interestingly, it is Clinton-era regulatory requirements (combined with the Carter-era Community Reinvestment Act) that forced lenders to create housing loans for families with high-credit risk, arguably creating the conditions for the 2008 meltdown. Maybe Bush will be judged less harshly by future generations with access to the complete linear timeline.
Even the Clinton budget “surplus” is a farce. The national debt, and subsequently the deficit, went up every single year of the Clinton presidency. Where, then, is the surplus so widely attributed to the former president? The answer lies in an accounting discrepancy. By excluding “intragovernmental holdings,” Clinton was able to claim a budget surplus over the period of several years. He did so by borrowing money from intergovernmental holdings, i.e. Social Security. In other words, American retirements were raided so that President Clinton could cook the books and claim a “surplus.”
In short, without Newt Gingrich, the dot-com bubble and a lot of luck, President Clinton may be remembered less favorably than at present. A thunderstorm is always preferable to a hurricane.
John Griffing is a frequent contributor to American Thinker and is published across an array of conservative media, both in the realm of commentary and research.