Democratic National Convention – Charlotte, North Carolina
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.
Moreover, Obama has criticized the pro-market turn in U.S. economic policy that begun under Reagan and continued under Clinton. Here a key bit from Obama’s speech late last year in Osawatomie, Kansas:
… there is a certain crowd in Washington who, for the last few decades, have said, let’s respond to this economic challenge with the same old tune. “The market will take care of everything,” they tell us. If we just cut more regulations and cut more taxes—especially for the wealthy—our economy will grow stronger. … But here’s the problem: It doesn’t work. It has never worked. … In the last few decades, the average income of the top 1 percent has gone up by more than 250 percent to $1.2 million per year. … And if the trend of rising inequality over the last few decades continues, it’s estimated that a child born today will only have a one-in-three chance of making it to the middle class—33 percent. … And yet, over the last few decades, the rungs on the ladder of opportunity have grown farther and farther apart, and the middle class has shrunk. … This is about the nation’s welfare. It’s about making choices that benefit not just the people who’ve done fantastically well over the last few decades, but that benefits the middle class, and those fighting to get into the middle class, and the economy as a whole.
That sure seems like a rebuke of Clintonomics as much as Reaganomics and Bushonomics.
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.
“That sure seems like a rebuke of Clintonomics as much as Reaganomics and Bushonomics.”
Maybe it is, especially since Mr. Clinton himself has expressed remorse over the repeal of Glass Steagall and the castration of the CFTC at Greenspan’s, Rubin’s and Arthur Levitt’s hands. Mr. Levitt has also apologized for his actions towards Ms. Brooksley Born in this matter.
This quote is partcularly devoid of logic in it’s false narrative:
“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.”
The “head of steam” (sic) Reagan built up through tripling the deficit, and a 1300 basis point drop in the overnight funds rate courtesy of Mr. Volcker, was exhausted by the time George Bush Sr. headed into office. Unfortunately, the ill conceived TEFRA 1986 had caused several problems in many sectors, and that was to make Bush, Sr. a one term President .
The “internet boom” meme is a common one used in conservative circles as metaphorical catch basin for Clinton’s economic record. There are two flaws with this myth:
1) Tech only accounted for 8% of job creation during the Clinton boom
2) Technology is just as liable to COST jobs as well as create them. We see this even today.
Lastly, the “tech boom” meme doesn’t explain the employment picture throughout the entire economy. Even McDonald’s had to hike wages to compete for workers because it was one of the few times the employee was in the catbird seat. Labor demand was so brisk, “NAIRU” was on everyone’s lips.
You can’t assign that to the “tech boom.”
Moreover, a simple check on item #2, the “big drop” in oil prices (Gulf War hangover) which culminated in 1998, doesn’t explain the sharp drop in unemployment PRIOR to that year. There’s no correlation for Mr. Pethokoukis to hang his hat on here.
I find these folk tales highly amusing. They are designed to comfort the reader and further esconsce him in his comfy bassinet of warmed over prejudices, reinforcing false certainties.
Foolish mortal. The tech boom was huge, and – heh – it had huge trickle down impacts. And because Clinton’s wife’s agenda was blocked in 1994.
But silly me. It was more likely because the tax increases were just so good for everyone. Just ask the French as they flee France. And ask Californians if Moonbat Jerry’s tax hike goes through in November…
The increase in productivity during the tech boom was astounding. (And producutivity is the be all and end all of rising living standards in an economy). It also allowed for much greater levels of globalization to occur at cost effective prices. We are now experiencing the downside of globalization, but there is no question that it was a huge positive for economic activity in the 1990′s.
Again, you miss the point. In terms of EMPLOYMENT, this is simply not so. Technology enables fewer people to do the same job, whether its robotic welders in an auto plant or computer software that replaces human analysts. Technology replaces human participation in many industries and that has come to bite us on our collective asses.
Yet technology opens up entire new realms of employment. Your argument is one with those who wish to turn back the tide. The best that can be done is to make it easier for that tide to raise all boats.
An excellent example was how long it took Walt Disney to create Disneyland. Barely two years. Try to do that now. Part of our problem is that although our technological development has allowed greater growth and productivity, there is a proclivity of govt to put the brake on that through taxes and regulations that stifle development. It is estimated that up to 1.75 trillion. http://online.wsj.com/article/SB10001424052748703860104575508122499819564.html
I know several engineers in the manufacturing fields whose companies have moved overseas – first to China, and then when the corruption and ineptitude there became to much, to Ireland or Eastern Europe. I’m not convinced we need new tax cuts to stimulate the economy. We do have a large debt. But getting rid of the zero baseline budget rule (that actually increases each Department’s budget each year, and calls a cut any decrease in the automatic increase) and streamlining regulations will have a huge impact. And this includes eliminating Dodd Franck and Sarbanes Oxley (yes, it really helped send Senator Jon Corzine, who helped author SO, to jail – oh wait, it didn’t… And if it didn’t, it obviously is useless). It would be much preferable to break up the banks and eliminate too big to fail, give the banks competition (ala the Ma Bell break up) and by making them small, making it much more difficult for them to create special rules that benefit only them….)
Or, if that doesn’t satisfy you, lets go for my back up. Time to split the china, and let the red states follow the constitution, and the blue states follow Marx.
Your rant doesn’t even touch on the issue we’re discussing here. Technology has the ability to eliminate jobs, and it is done because the human component is the most costly aspect of production. Machines don’t need health benefits or pensions funded.
The “government regulation” meme is rubbish, and always was. No doubt roads would be cheaper without stop lights and guard rails, but I’m not sure if the results would be desirable.
Lastly, it is the Blue States that supply this country with wealth, while the Red States drain it. Almost every Red State takes money AWAY from the Federal government, while Blue states contribute more than they get. Fetid, impoverished swamps- like Alabama, Mississippi, and Louisiana, for example, are giant welfare states incapable of creating wealth for themselves. And all three have more in common with Haiti than they do a First World power.
See here:
http://voices.washingtonpost.com/ezra-klein/2010/04/the_red_state_ripoff.html
http://www.idahoconservation.org/blog/2010-blog-archive/red-state-ripoff
Let’s stay on topic, shall we?
Doesn’t NASDAQ 5000 enter into this equation? Granted it’s the smaller of the two, but that’s probably another $1.5 trillion in wealth that around back then (I can’t find the number, but that’s an educated guess). I would say almost all of that is internet-bubble related and nothing to do with the Vice President that invented it.
I think it also needs to be mentioned that the major reason why the government spending decreased was the gutting of the defense budget.
“You can’t assign that to the ‘tech boom.’”
Yes, you can. Technology makes all workers more productive, not just the ones who are directly involved in IT. Just think of how computers have made it possible for you to do more, and you don’t have to be a tech wiz to use them. When was the last time you spent your Friday night in a bank line? And the more productive a worker, the more valuable she is to an employer, and the better she is paid.
You do, of course, have to be a tech wiz to reply to the right post. Above comment was in reply to Max Planck.
But you’re missing the point here- the reason why Mr. Pethokoukis uses GDP numbers is that technology indeed increases gross output.
It does NOT, however, mean increased employment. One of the poignant lessons I saw in this personally was when I started as a muni bond broker and I cold called businesses. I made over 17,000 dials in my first year.
Every travel agent had a disconnected number. Orbitz and the like had run them out of business.
Most tragic is your last point: “And the more productive a worker, the more valuable she is to an employer, and the better she is paid.”
Unfortunately, there is probably no time in human history where a person is paid so little compared to what they produce.
http://www.epi.org/publication/ib330-productivity-vs-compensation/
I remember the early computer ads on television, offering the promise of people leaving the office a little earlier. Today’s employee works no set hours and is tied to a device seven days a week without respite. Profits are up, and compensation has declined.
“The private sector is doing well.”
Claiming that the Clinton tax hikes didn’t cause the 1990′s boom is a straw man and not a particularly good one. The point here is that Clinton era rates are not incompatible with a growing economy which is something that the GOP cannot admit since their entire narrative is based on the assumption that tax rates even at the smallest of margins have huge effects on the economy as a whole.
The point is that Clinton era rates are not incompatiible with a growing economy – all else equal. That is the point here, it isn’t. Technology, newly emerging globalization and the impact of the peace dividend are not the environment we are in today.
You could also mention the fall of the Berlin Wall in 1989 and the collapse of the Soiet Union, which opened up markets all over the world for a contingency of U.S. multi-naitonals that were prepared to go after new business to an extent unmatched by any other country’s economic base.
Just to clarify, RED states are Republican; whereas BLUE states are Democrat. Illinois California and New York for instance, being a blue states are like most other blue states, extremely high in taxes, welfare recipients, and very deep in debt. Though in the past, many manufacturing companies were based in
those states along coastal
areas of the country fir ease of distribution and large population center made for a large employee pool, policies of the pandering left have left those states wondering “whad-I-do?” while watching the mass exodus of large scale companies unwilling to hand over much of THEIR EARNED PROFIT to the moronic lampooning ideologues of the entitlement meme’.
New York is a red state. While it has a higher population of Democrats, they are clustered in a relatively few districts so the state assembly is generally led by Republicans.
Too much credit goes to the Clinton tax hikes on the top rate.Historically they are average rates for the US tax code,both sides use them to defend their claim to the roaring nineties.The true reason the nineties were prosperous was the fact that the Baby Boom generation were entering their peek consumption years (30-50 years of age).The nineties were a perfect storm for growth, and now were paying the price for all that credit & debt fueled boom.The boom is all fun & games for all,but oh the payback hurts.