Contrary to Hillary Clinton’s claim that Bill engineered the 1990s boom, the performance of the economy is only partly the product of the president’s policies.
Bill Clinton and ‘revitalizing’ the U.S. economy The most enduring and destructive superstition about American politics is that the president is “in charge of” the economy, and so it was no surprise to hear Hillary Rodham Clinton yesterday say that she’d put her husband “in charge of revitalizing the economy.” As my colleague Charles C. W. Cooke points out, this is an example of “talismanic” thinking, that what makes the world go ’round is having the tribal chieftain do that voodoo that he does so well. There are some obvious problems with this line of thinking, the main one being that it is complete and utter undiluted poppycock.
It is true that the U.S. economy performed to general satisfaction during Bill Clinton’s presidency. But most of the big economic news of the 1990s had little or nothing to do with Bill Clinton, with government policies that were uniquely or mainly the work of Bill Clinton, or with the day-to-day management of public resources by the Clinton administration. The Clinton-era boom was in no small part a continuation of the Reagan-era boom, which was, like the performance of the economy under previous and subsequent presidents, only partly a product of the president’s economic philosophy and policies. Two of the great economic-policy successes of the Reagan era — the taming of inflation and the bundle of reforms generally described as “deregulation” — were rooted in Carter-era policies. Ronald Reagan knew enough to understand that enduring the recession engineered by Paul Volcker and the Fed was necessary to wring inflation out of the economy, but he wasn’t terribly happy about it, and neither were voters: Reagan’s approval ratings were at 41 percent at the end of 1982, and his unpopularity cost Republicans a couple seats in the House. At the beginning of 1983, Reagan’s job-approval number was down to 35 percent. But in May of 1980, inflation had been 14.4 percent; in May of 1986, it was 1.5 percent, and Reagan’s approval number roughly doubled.
Was taming inflation Reagan’s doing? Volcker’s doing? Do we give Carter credit for choosing Volcker, or do we penalize him, knowing that he hadn’t wanted to do so but was pressured into it? Robert J. Samuelson and Paul Krugman have argued that out at some length, and the answer is inconclusive.
“Inconclusive” is the conclusion more often than not in these kinds of debates. The federal budget was in surplus (“primary surplus”) toward the end of the Clinton administration, as Mrs. Clinton points out. Why? Partly because of tax increases that Republicans fought vigorously against; partly because of spending controls that Democrats fought vigorously against; partly because of a stock-market bubble that liberated both the Clinton administration and congressional Republicans from making some really tough decisions. Mere coincidence doesn’t actually tell a very good story for the Clinton administration: During the last quarter of his predecessor’s presidency, real GDP growth was 4.33 percent; during the last quarter of Clinton’s presidency, it was down to 2.89 percent and plunging. By September 2001, U.S. GDP growth was down to less than one-half of one percent and by the end of the year growth was only 0.21 percent. Maybe you think that was the lingering effect of Clinton policies; maybe you think Bush policies took an immediate effect; maybe you think it was other events (there was some economic disruption in September of 2001). In general, the people who know the most about these issues have the least certain opinions on that.
There were two big economic events during the Clinton administration that had profound effects on the world economy. One was the emergence of the web as an important cultural and economic phenomenon, a blessing for which we may thank, among others, Tim Berners-Lee and Marc Andreessen (and a whole lot of taxpayers from around the world) and which the Clinton administration had effectively nothing to do with. The other, which seems to be largely forgotten in the English-speaking world, was the 1997 Asian financial crisis, which was a catastrophe but one that spurred important corporate and banking reforms (especially in the Republic of Korea) that helped lay the foundations for much of the prosperity of developed Asia today. That has profound effects on the U.S. economy, too, which are not mainly the result of policies pursued by the Clinton administration or any other administration.
Still, Mrs. Clinton insists that when it comes to revitalizing a national economy, her husband is the man who “knows how to do it.” Certainty in these matters is always suspect: It wasn’t long ago that David Sirota and the geniuses at Salon were hailing “Hugo Chavez’s economic miracle” in Venezuela, which has been reduced to utter primitivism by socialism. And the Right is vulnerable to this kind of thinking, too: When challenged about the difficulty of achieving sustained real GDP growth comparable to that of the Reagan era, my friend Larry Kudlow declared: “I did it before, and I’ll do it again.” He was being funny — a little bit funny — but he and others who share his views do assume a rather more linear and immediate connection between policy changes and broad economic outcomes than seems to be warranted by the facts.
Those ideological positions may be unnecessarily narrow and oversimplified, but they are magnificent intellectual achievements compared with the magic-fetish view put forward by Mrs. Clinton and other practitioners of her simpleton politics. And there are more of them than you’d think: Those who obsess over marginal tax rates point to top income-tax brackets during the Eisenhower administration (91 percent!) and declare that that was the key to the golden postwar era. (Which looks a good deal less golden the more you know about it.) Their opposite numbers point to the fact that while theoretical top marginal rates were higher, actual taxes collected were lower and spending as a share of GDP was lower, too — a-ha! It wasn’t big taxes, it was small government! Some of my hawkish friends will note that between 1950 and 1957 we doubled military spending (from 4.9 percent of GDP to 9.8 percent of GDP) and ran a budget surplus. So maybe the key to national happiness is doubling military spending to the exclusion of most everything else in the federal budget — or, maybe, 2016 isn’t very much like 1957. Maybe you think that Bill Clinton can turn around the U.S. economy because, as Mrs. Clinton insists, “he knows how to do it.” If he does, why didn’t he tell President Obama?