Pethokoukis

The bad arithmetic of Bill Clinton’s Democrat-Republican ‘job score’

Math is hard. Just ask Bill Clinton.

Here’s one of the more memorable lines from his Democratic National Convention address: “What new ideas did we bring to Washington? I always give a one-word answer: Arithmetic.”

But Clinton’s speech last night really didn’t add up. Take this Clinton claim:

Well, since 1961, for 52 years now, the Republicans have held the White House 28 years, the Democrats 24. In those 52 years, our private economy has produced 66 million private- sector jobs. So what’s the job score? Republicans: twenty-four million. Democrats: forty-two.

Why would we analyze the effectiveness of economic approaches by using party labels rather than looking at the actual policies? For instance, about 10 million net new private jobs were created during the Nixon-Ford years vs 21 million under Clinton.

But which administration generally followed conservative policies of shrinking government (spending fell to 18% of GDP under Clinton from 21%), welfare reform, and cutting taxes on capital … and which administration expanded government (spending rose to 21% of GDP under Nixon-Ford from 19%), increased regulation (the pages in the Federal Register by grew by 185% under Nixon and Ford vs. 7% under Clinton) and presided over a confiscatory tax code?

And was JFK or George H. W. Bush the more conservative president? The former cut taxes — even for the richest Americans — while the other raised them.

If you look at job growth under right-of-center economic policies (putting Clinton and JFK in this category) vs. left-of-center economic policies (swapping in Nixon, Ford, and Bush I), the “job score” looks a lot different.

Conservative economic policies win 40 million jobs to 26 million jobs

13 thoughts on “The bad arithmetic of Bill Clinton’s Democrat-Republican ‘job score’

  1. The old data shell game. Comparing spending as a “percentage of GDP” after GDP takes off thanks to policies Mr. Pethokoukis despises are implemented.

    And this gem: “And was JFK or George H. W. Bush the more conservative president? The former cut taxes — even for the richest Americans — while the other raised them.”

    Never mind that JFK brought the top rate down to a “reasonable” 65%, from the Eisenhower era 90%. Its a “cut” and that’s all that matters. Doesn’t matter what the rate is, a cut is a cut is a cut, and we have to cut no matter what the circumstance. Maybe Mr. Pethokoukis wishes to emulate JFK, and bring the top rate BACK to 65%. Hey, it worked for HIM, right?

    Do you people really take this stuff seriously? Does anyone of serious intent consider this to be genuine economic scholarship?

    • Do you really take ANYTHING Billl Clinton says seriously? Let alone Bill Clinton of “genuine economic scholarship”?

      Marginal tax rates dropped in early 20′s by Coolidge and Melon—economy takes off and revenues to the government increase.
      JFK….economy takes off and revenues to the government increase.
      Reagan… same story in a really big way.
      Marginal tax rates cut in states across the country and economies improve and revenues increase.

      Are tax rates the only variable? Of course not…moronic liberals and big government republicans can kill thigs with legislatitve control and devaluing the dollar.

      But Max, I’m sure I wast my breath with these data points…Let’s ask you the important question Max: Why are liberals such hatefulled bags of venemous pus? That is the question of our time. Can you help us Max?

      • “But Max, I’m sure I wast my breath with these data points…Let’s ask you the important question Max: Why are liberals such hatefulled bags of venemous pus? That is the question of our time. Can you help us Max?”

        Aside from your flawed narrative, I will let the quote I pasted stand as an example of the character of the person who wrote it.

        Good day.

  2. Yes, it’s clear that Mr. Pethokoukis passed elementary school math and knows that 65% is less than 90%. Can’t say the same of the pretentious Mr. Planck.

  3. Perhaps a little real data would help.

    Tax Cuts and National Income
    Contrasting the size of the tax cuts with national income shows that the Kennedy tax cut, representing 1.9 percent of income, was the single largest first-year tax-cut of the post-WW II era. The Reagan tax cuts represented 1.4 percent of income while none of the Bush tax cut even breaks 1 percent of income. The Kennedy tax cuts would only have been surpassed in size by combining all three Bush tax cuts into a single package.
    Tax Cuts and Budget Resources
    Comparing the size of these tax cuts with the federal budget shows that the Kennedy’s tax cuts represented 8.8 percent of the budget. In 1981, Reagan’s tax cuts represented 5.3 percent of the budget. Each of Bush’s tax cuts are smaller than Reagan’s—EGTRRA (3.8 percent), JCWA (2.5 percent) and the 2003 Tax Cut (1.8 percent). When the Bush tax cuts are combined (8.1 percent), they would be larger than Reagan’s tax cut, yet smaller than Kennedy’s tax cut.

  4. Max,

    Your entire rant has nothing whatsoever to do with economics. As you are aware, it is a change in rate, not the absolute rate, that results in changes in behavior. If you cut a rate, then you will see a corresponding increase in activity, holding everything else equal. If you increase a rate, you will see a decrease in activity, holding everything else equal. While the absolute rate is important, both in terms of the overall impact of the change (where on the curve we are).

    Your comment, in fact, is absolutely idiotic. The notion that Clinton’s tax policies were the primary cause the economic boom in the 90′s, or JFKs in the 60′s, is ludicrous.

    While cuts in tax rates (or reduction in regulatory costs) are generally stimulative for economic growth (including in JFK’s time and in Reagans), and lower absolute rates (or regulatory costs) better than higher, those forces only are primary when you “hold everything else equal.” However, in the real world we can’t hold everything else equal, so we know that while absolute tax rates impact behavior, they alone are not responsible for overall economic health. For example, Ike, Kennedy and Johnson all benefited from a US without major economic competitors, because of the devestation in Europe and Asia that took decades to build, as well as booming US domestic energy production. We had the luxury of not having to have an economically competitive environment. That went away with Europe and Japan’s rise in the 70′s as well as the end of the Texas oil boom and the rise of OPEC, leading to Carter’s malaise.

    Similarly, Clinton was well served by the efforts of his predecessor. The fall of the Soviet Union caused significant energy competition, keeping oil costs very low and thus substantially reducing costs to the US economy. He also presided over the dot.com bubble, which while it also exagerrated wealth, did reflect massive gains to productivity made in the US with the rapid widespread adoptation of the PC and the internet -huge performance boosters. Japan and the UK had stalled, Germany was unifying, and China had yet to rise.

    Since then, however, we’ve had a return to high oil prices (for many reasons, including the weak dollar policy started under Bush to counteract the monetary gamesmanship of other nations, as well as Russia coordinating with OPEC, and massive new demand from formerlly third world nations). We’ve had the rise of competitor economies in China, India, Brazil, South Korea, Germany along with the continued competition for Japan, France, the UK, etc.

    Anyways, that’s beside the point. What is not beside the point is that the conclusions that you draw are baseless and, frankly, silly.

    • No, sir, they are NOT silly, and in fact, you are agreeing with me in large measure. Time precludes me from correcting all of the factual errors in your post but a few points to be made:

      For one, the fetish over marginal tax rates held by Mr. Pethokoukis and media clowns like Larry Kudlow is well overdone, which you seem to agree with.

      The very idea that America’s economic welfare rotates on the axis of its marginal tax rates is ludicrous, as there are over a hundred dynamics pulling the economy and its various sectors up and down at any given moment, including commodity prices (and not just oil), interest rates, war and peace, wages, tax revenues, even the weather.

      So when you say “However, in the real world we can’t hold everything else equal, so we know that while absolute tax rates impact behavior, they alone are not responsible for overall economic health,” I agree with you wholheartedly, but unfortunately, it sunders your own argument.

      Having said that, it doesn’t mean that taxes MUST be fated to move in only one direction for all time to assure prosperity, nor does it mean there is never a time when it is prudent to pay down the debts we have from cutting off revenues in the belief that it ALWAYS juices the economy.

      It doesn’t, and all history argues for that.

      Moreover, these “cuts” in marginal rates are not what they appear to be. If, as in TEFRA 1982, when the top rate was cut from 70% to 50%, the federal tax rate was reduced, it would seem to be a dramatic cut. But the LOCAL tax rate (State, Property Tax, Sales Tax) and the value of a mortgage interest deduction was slashed. If I am in a 70% tax bracket, and I have $20,000 in combined deductions to itemize, those deductions are worth $14,000 to me under Carter-era taxes. They are worth only $10,000 to me after Reagan got TEFRA 1982 enacted.

      That is a tax HIKE, my friend, which offsets the Federal cut to a considerable amount. Which is why the marginal tax rate debate is so illusory anyway.

      But wait, there’s more: figuring that cutting to 50% was good, Reagan and faux economist Arthur Laffer rolled out TEFRA 1986, which cut the top rate to a mere 28%. What Laffer has never acknowledged for his entire professional life is that his theories never did have as much effect on the economy (if at all) as Volcker’s massive cratering of interest rates, but the fairy tale had to be kept alive. By 1985, GDP had slowed, and it was time for another sprinkling of Laffer’s pixie dust. TEFRA 1986 was a disaster. 1987 gave us a market crash, and Mr. Laffer, thanks to severing mortgage interest deductibilty, became the inventor of the see-through office building, and one horrid real estate crash.

      GDP eventually went negative by 1991. (The mantra is because Bush Sr. raised marginal rates, but it was only to 31%, lower than today) So how do tax cuts provide us with perpetual prosperity? Negative GDP with a 31% top tax rate! Go figure.

      Oh, and by the way. Oil was only around a measly $20 bbl while the economy was sinking at that time. I believe you had factored the price of oil into your calculations.

      So much for theories. But even Mr. Pethokoukis has some difficulty finding correlation.

      That’s also what makes Romney/Hubbard so dangerous. Not only will they repeat the mistake of TEFRA 1986, they ALSO INTEND TO DELIBERATELY CURTAIL DEDUCTIONS ON TOP OF IT EVEN THOUGH REDUCING MARGINAL RATES ACCOMPLISHES THAT ON IT OWN!

      Are you guys REALLY sure you want to do this after a housing meltdown?

      The best course here is to RAISE MARGINAL RATES as the President has proposed. Raising the top rate to 39.6% costs someone who earns $300,000 a year all of $38 per week, and that is WITHOUT FIGURING IN THE OFFSET FROM LOCAL DEDUCTIONS.

      There are people who call themselves serious economists who think that figure will somehow affect the economy.

      Not only will this curtail deficit growth, it was also give states and localities that have been hit hard, some much needed respite. It also incentives housing purchases, which we could use right now.

      This is a far better, more transparent, and more effective way to handle our tax issues than any of Mr. Hubbard’s shell games. Wouldn’t you agree?

  5. “…the conclusions that you draw are baseless and, frankly, silly.”

    That’s what you have?

    So disappointing. I thought you might actually have a retort to his statement.

  6. Max,

    Your response did not address my point, and instead went off on strawmen.

    First, let’s talk oil prices in the 90′s:
    (From http://www.indexmundi.com/commodities/?commodity=crude-oil-brent&months=300)

    1/1993 – 17.35
    1/1994 – 14.22
    1/1995 – 16.55
    1/1996 – 17.94
    1/1997 – 23.47
    1/1998 – 15.09

    Second,

    The strawman – that tax rates are the most important thing in an economy. Who exactly said that? Meanwhile, you attach a real economist in Laffer, based on … because you say so. In other words – nothing – no logic, no facts.

    You make a bunch of baseless assertions/implications as to causation of the 1987 market crash, etc. You ingore the fact that TEFRA 1982 was a “repeal” of tax cuts that largely hadn’t taken effect (e.g. no impact on behavior other than those who had made decisions based primarily on the expectation of those exact future tax rates, notwithstanding political uncertainty). Your market crash theory seems to ignore the fact that the market ended positive for the year, and the impact of (then fairly new) program trading. Even the loss of passive tax shelters in the 1986 tax reform act doesn’t truly explain the real estate market problem that occurred, as opposed to the more rational explanation that, similar to the most current housing bubble, there was overbuilding based on too many people trying to take advantage of the same trend, by doing so leading to oversupply which ended the trend — an issue of market information and over-optimism.

    As for you assertion that the 1986 tax reform was “a disaster” – this is, like your criticism of laffer – supported by absolutely nothing other than your say so. Not even a reasoned argument behind it.

    Third, let’s get back on point- the impact of rate cuts.

    The reason a rate increase or cut has a measurable effect is that, at the moment that the rate is cut, “all is is pretty close to equal.” By being very close in time, and thus circumstances, you see an effect on behavior driven by the change in tax rates.

    Absolute tax rates also matter. But their impact is hard to directly define because they do not exist in a vacuum. “Ceteris paribus” does not exist, and you are making a classical fallacy in your prior argument that high absolute tax rates are good for the economy because, in making that argument, you must make the ceteris paribus assumption, but we know that the assumption is FALSE.

    We know, as a basic principle of economics, that higher taxation on an activity, in general, reduces the activity. People will substitute an untaxed activity, including leisure… which itself includes doing nothing at all – no spending, no nothing. We know that tax cuts tend to be followed by economic growth where all other things are held equal, and tax hikes – including, btw, Clinton’s initial tax hikes – reduce growth (see: http://www.heritage.org/research/reports/2012/09/clinton-tax-hikes-slowed-growth).

    Basically, Max (and your empty commenting friend) – you just made a whole bunch of assertions with pretty much nothing behind them, and are passing that off as, for whatever reason, having weight.

    They don’t. Your follow up post, like your original post, is idiotic.

  7. Interesting facts: Acutally counts of which party controlled what Branch and for how long. Time period – From 1933-Current Day: a period of 80 years

    Democratic House = 64 years Republican House: 16 years = 80
    House of Representatives: Democrats have controlled the House and Presidency for a total of 34 years Vs Republicans having controlled the House and Presidency for a total of 6 years = 40

    Democrats Senate: 60 years Republican Senate: 20 years = 80
    Senate: Democrats have controlled the Senate and Presidency for a total of 34 years Vs Republicans having controlled the Senate and Presidency for a total of 6 years. = 40

    Democratic Presidency: 44 years Republican Presidency: 36 years = 80
    **Presidency: Democrats have controlled BOTH the House and Senate for a total of 34 years Vs Republicans having controlled BOTH the House and Senate for a total of 6 years = 40

    The blame game is alive and well. It’s obvious to most that all anyone has to do is have an open mind and revisit the past and examine all the legislation, executive orders, rules/regulations, US and world history and you will find that history does repeat itself and all forms of “legislation” and goverments have consequences.

    Over the years, more and more power has been given to the Executive Branch (i.e. New Health Care Law) as well as limiting transparency, accountability and the checks/balances that were made a part of our Constitution. Eastwood was right as well as our founding fathers: we the people should be very suspicious of attorneys running for office.

    I think they were right after reading some of the legislation passed over the years as well as the most recent ones. I’m on the way out, but sad to say that our generation failed to pay attention to what was going on in DC. An occasional post here and there is about all I am able to muster these days but here are a couple of interesting facts that can be found in Obamacare.

    1) Funds have been taken out of the Medicare “hospital and supplemental trust funds” to pay for several new “programs” found in this piece of legislation, including the one offering all the “freebies” and “preventive health care.” Oh did I tell you that this money will be used for people between the ages of 55 but under the age of 65?

    2) The “Medical Board” that everyone talks about is under the control of the Executive Branch, which includes the same payscale, as well as the Section controlling all the “grants” appropriated for those want to enter the health care field, etc.

    There’s more, but limited space you know.

    Check out the “antitrust” laws, Sherman and Clayton acts, which have allowed all these super conglomerates to come into existance. Who actually controls the media? How many have read all the rules/regulations coming out of all the governmental agencies? Most have no idea that the very freedoms, liberties, unalienable rights, basically everything our foregathers fought for are slowly being eroded.

    One only needs to examine the definition of all the terms used to describe various forms of government that exist today throughout the world and then ask yourself “where are we headed” and if this is what we want for future generations? Go back in time, study a little US and World hisotry to find out the consequences that will ensue if “we the people” fail to do what is best and right for all living in this country and not a select few. J. Edgar Hoover was right as well as those involved in the German resistence during WWII.

    With respect to the above breakdown by party another question to ask is whose policies seem to have affected and/or created many of the issues and/or problems we have faced throughtout this time period up to the present. The choice is yours.

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