President Clinton presided over the longest period of peacetime economic expansion in American history.

But who really deserves the credit?

, Clinton's Economic miracle : mostly luck The implosion of the tech bubble came only after Clinton left office

Bill chased the girls (& they chased him back)
Bill & Monica
The lucky redneck - 'Bubba Bill' Clinton

"It's the economy, stupid"

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Lovable, cuddly with the girls, a teddy bear to some - but all too often getting caught
Bill Clinton somehow pulled off some rather considerable economic 'accomplishments'

Charles R. Morris, a sober economist slash Wall-Streeter, tries to explain the astounding economic success of the Clinton years. Bill Clinton, dogged by image problems throughout both terms yet still somehow broadly liked, came across as a little bit redneck, a little bit country bumpkin, yet in fact he was highly educated. He seemed like a good ol boy, sort of happy-go-lucky yet beset by Republican hostility that only seemed to grow with every success. Republicans grabbed power, appointed a special prosecutor whom they voted unlimited funding and as big a staff as he wanted, then the Republicans promptly went on vacation for the next six years.

And Clinton's image problems never let up. The rumors of his fondness for young secretaries and interns continued to be whispered. And the special prosecutors inquisitions went through numerous incarnations. What began as whitewater (lack of evidence) eventually transformed into Filegate (lack of evidence) and eventually into Travelgate (lack of evidence), etc, etc. Finally (after six years of striking out) along came Linda Tripp and Monica Lewinsky. PAYDIRT for the dogs of God. Good ol boy Bubba Bill, he may have been president but he could also be an adolescent goof-off -- and a rather thoughtless husband.

Morris notes that Clinton

left office with a gaudy set of economic accomplishments. Over his entire administration, real growth had averaged 3.7 percent, the best post-war record except for the Kennedy/Johnson years. The inflation record, at an average of 2.8 percent, was the best since Eisenhower's. Long bond rates hovered in the mid-5 percent range through most of 1998 and 1999, the lowest levels since the 1960s. And during Clinton's last three years in office, the government ran surpluses in excess of $300 billion, the best performance in the postwar era.

How did he do it? The official line, pushed especially hard by Rubin, is that it was through the application of Rubinomics – cutting deficits to lower interest rates. It is the same order of nonsense as the supply-siders insistence that all booms are rooted in tax-cuts. Rafts of studies by both liberal and conservative economists show that big deficit reductions move long-term interest rates by a few tenths of a percent, if at all. The deficit-cutting effect of Clinton's tax increase, in any case, was overwhelmed by the upsurge in gains taxes from the riotous stock market.

The 1990s boom, in fact, was rooted in the confluence of a host of much-broader forces that almost ensured solid growth. [NOTE: Clinton's fiscal penny-pinching got a jump start from his predecessor, HW Bush 41.] The baby boomers, the generation that had so decisively stamped its imprint on every decade since the 1950s, were entering their forties and fifties – the years of greatest work output and savings. There was a productivity boom in American factories. The boomer generation of managers not only absorbed Japanese practices but also drew on uniquely American developments in distributed computing and digital communications that were just coming into full flower. After a decade of overinvestment in real estate, the vast flow of liquidity in pension and mutual funds was shifting back to stocks and bonds. The senior population was flat, military spending was falling, and new surpluses form a 1983 Social Security tax increase were cutting into the big Reagan-era deficits. Put all that together, and falling interest rates and strongly rising financial markets looked inevitable.

Then there were the forty years of government investment that designed and implemented the Internet, including most of its core technologies, built into a working worldwide system, and developed the strategy and organizational model for shifting the Internet from government to private-sector control in 1995. Compared to such tidal developments, the Rubin tax increase was background static.

The Bush years which followed
Republicans took the largest surplus ever
and turned it into the largest deficit ever
see GOP missed opportunity

Yes there was a SURPLUS, but the credit must be shared
The Congressional Budget Office (CBO) documented budget surpluses of $69 billion in 1998, $126 billion in 1999, and $236 billion in 2000, during the last three years of Clinton's presidency. When he left office, he bequeathed his successor administration the largest surplus in American history.

Bloomberg Business and Finance reports President Bill Clinton left office in 2001 with a federal budget surplus of $127 billion, which was larger than any other president has left an incoming president.

It was not till 2005 that Rush Limbaugh became the first to claim there never was a Clinton surplus. Prior to the 2005 "discovery" by Limbaugh, Republicans claimed either (1) Clinton's fiscal conservatism built upon the cost-cutting and efficiency attained under his predecessor the first Pres. Bush (who also modestly increased tax revenues). Or (2) Republicans claimed, also quite plausibly, that Gingrich and the Republicans deserved as much credit for keeping expenditures and allocations down, as Rubin and Clinton did. Limbaugh often injects into his spiels the phrase, "I'm not making this up, folks." (He obviously did 'make that up' -- that time.)

Bill Clinton himself says ALL Democrats are better at growing Middle Class
In the 51 years since President Kennedy took the oath of office, Republicans have had 28 years in the White house; Democrats have had 23. In the same half century, the economy has produced 66 million private-sector jobs -- 42 million of them under the Democrats, 24 million under the Republicans. “No one states these facts,” Clinton asserts.

“When President Obama took office, it was four months after we suffered the biggest financial crash since the Great Depression,” he says. “The depth of it continued to persist through the first six or seven months of the president’s term.

“Then he passed his legislation, and it began to have an effect. In the last three or four months, the private sector has produced 4.3 million new jobs. That is 40 percent more than the 2.6 million jobs produced by the private sector in the seven years of the Bush administration before the financial meltdown. That’s another relevant fact that hardly anybody knows.”

Clinton the Blue Dog
Did Clinton use Republican Wisdom to achieve his economic miracle?
Clinton's Economic Legacy

Mark Weisbrot

America' 42nd President, William Jefferson Clinton, is likely to be remembered for the longest- running business cycle expansion in American history, which coincided with his two terms. A fair assessment of his legacy should therefore begin by asking what, if anything, the President had to do with the economic growth of the last nine and a half years. The answer is: well, nothing really.

It is often maintained, by people who have not looked at the economics, that balancing the federal budget and moving it to surplus were responsible for the economic boom that followed.

But there is no foundation for this claim. The underlying theory is that these budget changes lead to lower long-term interest rates, because the government is borrowing less. The lower interest rates then stimulate more investment and therefore growth.

Even if one accepts the theory-- which is quite a stretch-- the facts don't fit the case. This was not an investment-led upswing. And the effects of the post- 1992 budget changes on interest rates are much too small to have had any noticeable positive impact on growth, according to any standard model used by economists.

How then to explain the boom? While any business cycle expansion has multiple causes, two stand out here. The first, and most important, was a change in policy at the Federal Reserve about five and a half years ago. The Fed, which had previously operated under the theory that six percent unemployment was the best that the economy could do without accelerating inflation, abandoned that view. Unemployment was allowed to fall to its current 4 percent, and growth continued beyond the point at which the Fed, in the past, would have pulled the plug.

The second was the stock market bubble: a 14 trillion increase in stock holdings over the last decade caused many upper income households to spend freely. This spending, even if it was based on paper increases in wealth that are now disappearing, provided a considerable stimulus to the economy-- much the same as we would get from a large increase in deficit spending by the federal government.

Mr. Clinton cannot claim credit for the stock market bubble, nor would he necessarily want to. Nor did he have anything to do with the Fed's policy shift, which was probably the most important positive change in economic policy in the last 20 years.

The economic policies for which the President can honestly claim responsibility-- e.g., NAFTA, the creation and expansion of the World Trade Organization-- served primarily to prevent the majority of Americans from sharing in the gains from economic growth. And then there was welfare reform, which threw millions of poor single mothers at the mercy of one of the lowest-wage labor markets in the industrialized world.

In short, Clinton's policies continued the upward redistribution of income and wealth, and punishment for the poor, that were the hallmarks of the Reagan era. It was not until 1999 that the median real wage reached its pre-1990 level, and it remains anchored today at about where it was 27 years ago.

Clinton's foreign economic policy was similar, although more devastating. His administration, together with its allies at the IMF and the World Bank, presided over the destruction of the Russian economy, helped to cause and worsen the Asian economic crisis, and squeezed billions in debt service from the poorest countries in Africa. Not to mention racking up a record, economically unsustainable trade deficit for the United States.

Clinton's legacy is by no means an academic question. If the economy fares badly over the next few years, the Clinton era will look quite good by comparison. The "New Democrat" strategy of abandoning core constituencies-- especially working Americans-- in favor of big business and the rich will be judged an economic and political success.

In reality it was neither: Clinton's fight for NAFTA cost his party the House in 1994, and the New Democrats' long-term strategy to win back the South could hardly have failed more miserably: Gore did not carry a single Southern state, not even his home state of Tennessee. So long as Democrats continue to offer the average American nothing to improve his or her economic situation, many voters-- and not only in the South-- will continue to vote against them on the basis of issues that are irrelevant to their economic well- being.

George W. Bush may well hand the White House back to the Democrats in 2004, if his extremist cabinet nominations are any indication of his political judgment. But if Bush's successor is to do any good for America or the world, we will first need an honest evaluation of the Clinton years.

published January 9, 2001

A New Generation

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