A Few Thoughts on Clinton @ the DNC
By James Pethokoukis @ AEI (September 5, 2012)
Bill Clinton will make the case here tonight that Obamanomics is just an updated version of 1990s Clintonomics. President Obama frequently suggests much the same thing. What’s funny strange, of course, is that the only part of Clintonomics that Obama seems to really like is the tax hikes. Certainly not the welfare reform or the lower government spending. You never hear much about that stuff — or how Clinton deregulated the banks.
And what about those Clinton tax hikes? Here is why the 1990s boom occurred despite them, not because of them:
1. When Clinton signed that tax hike bill in August 1993, the economy had been growing for 9 straight quarters, including by 3.4% annually over the previous six quarters. So the economy had built up a head of steam. Today’s economy, by contrast, rose less by less than 2% last year and may end up doing no better that this this year or next.
2. The decade saw a big drop in oil prices, from $23 a barrel in 1991 to $12 in 1998, boosting real disposable incomes.
3. Government spending declined — meaning fewer resources as a share of the economy were being used unproductively by Washington — from 22.3% in 1991 to 18.2% in 2000.
4. There were really two 1990s. After the 1990-91 recession, the economy grew by an average of 3.1% a year from 1992 through 1995. That’s exactly how fast the economy grew from 1965-1991.
But from from 1996-2000, the economy grew by a spectacular 4.4% a year. This is the period that defines the decade in the mind of many people. Those years saw…
– a big tax cut, lowering the top capital gains tax rate to 20% from 28%;
– a big surge in private investment, particularly in the software and business equipment category which contributed a full point to GDP during those years. Did the Clinton tax hikes cause that or was it a combo of the Internet Bubble, Year 2000 preparations, the cap gains cut, and the beginning of a computer networking and communications revolution?
I guess I look at this issue holistically. The U.S economy entered the 1990s after undergoing a huge revamp in the 1980s: marginal tax rates were lowered from 70% to 28%, the inflation menace slayed, regulations reduced, and businesses got restructured and way more efficient. Then in the 1990s, government spending and debt were reduced, investment taxes cut, and a technological revolution kicked into high gear. Plus the Soviet Empire collapsed and the cloud of possible nuclear holocaust was lifted. Market capitalism was on the march. People were optimistic as heck about the future. Recall that The Matrix came out in 1999 and call the era “the peak” of human civilization.
Given the head of steam Reagan gave the 1990s, plus the fall of the Soviet Union and the Internet boom and declining energy prices, it may have been impossible to mess up that decade — even with tax hikes.
By Mona Charen @ Townhall (September 4, 2012)
A swing voter could well glance at the screen and recall that Clinton heeded the voters, whereas Obama thumbed his nose. After suffering a rebuke in 1994, Clinton backed away from Hillarycare, tax increases, opposition to welfare reform and huge increases in federal spending. With Republicans controlling the Congress, Bill Clinton — after some resistance and after insisting it couldn’t be done — signed a balanced budget.
The combination of the end of the Cold War and the dot.com bubble gave Clinton’s first term respectable economic growth of 3.2 percent. But the real boom came toward the latter half of his second term, after Clinton (reluctantly) signed welfare reform, a dramatic cut in the capital gains tax from 28 percent to 20 percent, and a phased-in reduction in the estate (or death) tax, which exempted estates up to $1 million from $600,000. Clinton lobbied for and got the North American Free Trade Agreement and maintained a strong dollar. With Republicans in Congress demanding spending restraint, the federal government — younger readers may be incredulous — ran a surplus.
The results, as Charles Kadlec recalls in Forbes, were impressive. Economic growth jumped to 4.2 percent. Unemployment fell from 5.4 to 4 percent. Average real wages improved. Millions of Americans shared in the general prosperity as their 401(k)s swelled with the rising stock market. Investors responded with enthusiasm to the sense that America was a business-friendly country. Venture capital exploded.
Obama has chosen the exact opposite response to voter disaffection. Unlike Clinton, Obama is a committed leftist. He doubled down on Obamacare, ramming it through in an ugly, totally partisan vote. He refuses to budge on his insistence on tax increases — though he has himself acknowledged that tax hikes are counterproductive in a weak economy. He has attempted to undo the key feature of welfare reform, the work requirement. And he has presided over the downgrading of America’s AAA credit rating as he races heedlessly into crippling levels of federal debt.
Bill Clinton can attempt to perfume Obama’s record — but the truth is that Obama has chosen the exact opposite policies. The results speak more eloquently than either man can.
By The Editors @ National Review (September 4, 2012)
…It is certainly true that we had both stronger economic growth and higher tax rates in the 1990s. It does not follow that the higher tax rates contributed to that growth then, or that they would do no damage now. The country enjoyed favorable circumstances in the ’90s — technological, demographic, and geopolitical — that we do not now enjoy and cannot replicate. Hiking taxes would likely lead to worse results today than it did then.
The argument for Clintonomics was that raising taxes would lower the deficit, a lower deficit would bring down interest rates, and lower interest rates would bring economic growth. It didn’t actually work that way in the ’90s: Interest rates fell only when Republicans took control of Congress. The logic is in any case inapplicable now, because interest rates are already very low.
Clinton knows, we suspect, that higher taxes will not bring back the economy of the 1990s. He knows too that Obama has not governed — has never had any interest in governing — as Clinton did…
By Mona Charen @ Creative (2011)
As for Clinton’s fiscal record, well, everyone remembers the surpluses, but no one seems to recall the etiology. Like Obama, Clinton came to town with a Democratic Congress. Like Obama (though not at the same reckless level), he introduced budgets that gave no thought to balance. He introduced a form of nationalized health care (which would have included increased taxes of $1.5 trillion over five years) and a stimulus bill. He also promised to reform Social Security (nothing happened) and vowed to reduce the growth in Medicare and Medicaid spending (on the contrary, spending shot up).
But Clinton was lucky. His health care bill failed. Congress tossed his stimulus bill into the trash, as well. And when the voters delivered a head smack in the form of handing Congress to the Republicans in 1994, Clinton began to veer away from the policies that would have damaged the economy and the country.
Everyone now recalls Clinton as the victor in the great budget wars of 1995. And while it’s true that public opinion backed Clinton over Newt Gingrich in the confrontation that led to the temporary government shutdown, it was ultimately Clinton who changed course.
It was Republicans in Congress who insisted upon balanced budgets. After protesting that a balanced budget was out of the question, Clinton was finally forced, by Republican pressure, to produce one (it was his fifth budget of the year). That’s how Clinton arrived at spending restraint. Clinton also reversed himself on welfare reform, finally signing (after two vetoes) a Republican reform in 1996.
Those Democrats who get goose bumps remembering the Clinton tax hike of 1993 are forgetting a lot. Those tax increases failed to yield the kind of revenue the Clinton administration had advertised. While the economy expanded during the first years of the Clinton presidency, it really took off only after Congress passed and the president reluctantly signed the capital gains tax cut in 1997.
So by all means praise Clinton — the later Clinton, the Clinton who did many of the right things because Republicans had him in a half nelson.