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The Case For Clintonism

skews13

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The case for Clintonism​

Conversations with people involved in making economic policy during the Clinton years make a case that they deserve credit for the strong growth that is a little too nuanced for a stump speech. The basic idea is that intelligent countercyclical budgeting creating the space for monetary policy to work as intended, generating an investment boom and full employment, both of which spurred productivity growth and broad prosperity.

To understand this, you need to understand the context of economic history as it looked in the mid-1990s.

The past two American recessions started around the time of the popping of an asset bubble — stocks in 2001 and houses in 2007. This also happened way back in 1929, but when Clinton was in office it hadn't happened since the end of World War II. Recessions happened in the back half of the 20th century because the Federal Reserve raised interest rates to slow investment and the economy to keep inflation in check. In the 1950s and '60s this had worked well, but over the course of the 1970s inflation got out of control even as unemployment stayed stubbornly high.

Ronald Reagan and Federal Reserve Chair Paul Volcker succeeded in taming inflation with a brief but vicious recession in 1982.

But Reagan's "supply-side" revolution focused on tax cuts, and rolling back elements of the Great Society did not succeed in bringing back the high growth rates that prevailed before the 1970s. The economy shrugged off a huge stock market crash in 1987, but inflation reared its head in the early 1990s, prompting interest rate hikes and a new recession.

The Clinton team took action to reverse the structural budget deficits that Reagan had created. This, they believed, would give Volcker's successor, Alan Greenspan, the running room he needed to keep interest rates low and encourage unemployment to fall. At the same time, by reducing the amount of private sector savings that was channeled into buying federal debt, it would increase the amount of private sector savings that was channeled into private sector investment.

And, in fact, both of these things happened. Greenspan allowed unemployment to keep falling, and private business investment soared. Increased private investment helped push labor productivity up, which, combined with labor scarcity, pushed wages up. Median incomes rose, and poverty fell. Deficit reduction isn't always the right economic strategy, but it appeared to be the right economic strategy for the circumstances of the time.

The Greenspan factor​

One prominent line of argument offered by conservatives at the time was to give all the credit to Greenspan, as then-Sen. Phil Graham did in a typical February 2000 speech. Indeed, the partisan imperative to find someone other than Clinton to credit with the strong economy of the 1990s is one of the main reasons Greenspan's reputation was so high around the turn of the century.

One can make simpler or more complicated versions of this case, but a nice simple version is this. Back in 1996, current Fed Chair Janet Yellen was serving on the Federal Reserve Board of Governors, and so was Larry Meyer. Meyer recalls that at one point during that year, he and Yellen went into Greenspan's office and "told the Chairman that we loved him but could not remain at his side much longer if he continued, as he had been doing for some time, to push the next tightening action into the next meeting, and then not follow through."

Greenspan resisted this pressure from inside the Fed to raise rates early, and that's why unemployment got so low in the 1990s.

Be all this as it may, it amounts to a strange argument against Clinton. Greenspan endorsed the 1993 deficit-reducing budget proposal that Clinton championed and Democrats passed over unanimous GOP objections. The proposal was intended to induce the Fed to maintain a low interest rate policy, which is what happened. And Clinton reappointed Greenspan as Fed chair twice.

Republicans claimed credit for themselves​

Lawrence Kudlow and Stephen Moore, in a op-ed for the Washington Times and the Cato Institute, say the credit truly belongs to Ronald Reagan, whose "supply-side economic ideas ... unleashed a great wave of entrepreneurial-technological innovation that transformed and restructured the economy, resulting in a long boom prosperity that continues to throw off economic benefits to this day."

This aligns well with partisan politics but accords poorly with the chronology.

Clinton raised marginal tax rates on the highest-income Americans, in a move that was roundly denounced by supply-siders as economically ruinous and was uniformly opposed by Republicans in Congress. But the economy was much more prosperous after this happened than it was during the years Reagan was actually in office and taxes were lower.

A more chronologically plausible version of events notes that the economy was doing nothing special in 1993 and 1994 and only really took off after Republicans took Congress in the midterms. Defenders of this theory struggle, however, to name exactly what it is that they did that sparked growth.

Part of Ohio Gov. John Kasich's 2016 campaign says that "[a]s chairman of the U.S. House Budget Committee, John Kasich led the historic effort to balance the federal budget for the first time in a generation," referring to a 1997 budget deal that he was a key player in. But this mischaracterizes the events surrounding the deal.

What happened is that because the economy was growing faster than expected, the deficit was smaller than expected, which led Republicans to push for enormous tax cuts. Clinton forced them to settle for small ones and got them to agree to some modest new spending commitments. Republicans of the 1990s, in short, took advantage of the fruits of prosperity more than they contributed to it.

The mixed legacy of Clinton-era economic management​

Even if you accept the pro-Clinton narrative on the '90s economy, it's a somewhat ambiguous narrative that has had two different main interpretations:

  1. The 1990s show that maintaining appropriate Keynesian countercyclical fiscal and monetary policies is very important.
  2. The 1990s show that deficit reduction is very important and/or that budget deficits are very bad.
In terms of their specific applications to the period between 1982 and 2001, these two ideas support the same conclusion: Reagan should not have cut taxes so deeply as to create a large structural budget deficit, and Clinton and congressional Democrats were right to push for deficit reduction.


And what follows is George W Bush committing the same economic malfeasance of cutting taxes for the rich, putting two wars on n the country’s credit card, exploding debt and deficit, and creating the worst recession since 1929.

No matter how many times Democrats fix these Republican disasters, they repeat themselves time and time again.
 

jbrownson0831

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Messages
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The case for Clintonism​

Conversations with people involved in making economic policy during the Clinton years make a case that they deserve credit for the strong growth that is a little too nuanced for a stump speech. The basic idea is that intelligent countercyclical budgeting creating the space for monetary policy to work as intended, generating an investment boom and full employment, both of which spurred productivity growth and broad prosperity.

To understand this, you need to understand the context of economic history as it looked in the mid-1990s.

The past two American recessions started around the time of the popping of an asset bubble — stocks in 2001 and houses in 2007. This also happened way back in 1929, but when Clinton was in office it hadn't happened since the end of World War II. Recessions happened in the back half of the 20th century because the Federal Reserve raised interest rates to slow investment and the economy to keep inflation in check. In the 1950s and '60s this had worked well, but over the course of the 1970s inflation got out of control even as unemployment stayed stubbornly high.

Ronald Reagan and Federal Reserve Chair Paul Volcker succeeded in taming inflation with a brief but vicious recession in 1982.

But Reagan's "supply-side" revolution focused on tax cuts, and rolling back elements of the Great Society did not succeed in bringing back the high growth rates that prevailed before the 1970s. The economy shrugged off a huge stock market crash in 1987, but inflation reared its head in the early 1990s, prompting interest rate hikes and a new recession.

The Clinton team took action to reverse the structural budget deficits that Reagan had created. This, they believed, would give Volcker's successor, Alan Greenspan, the running room he needed to keep interest rates low and encourage unemployment to fall. At the same time, by reducing the amount of private sector savings that was channeled into buying federal debt, it would increase the amount of private sector savings that was channeled into private sector investment.

And, in fact, both of these things happened. Greenspan allowed unemployment to keep falling, and private business investment soared. Increased private investment helped push labor productivity up, which, combined with labor scarcity, pushed wages up. Median incomes rose, and poverty fell. Deficit reduction isn't always the right economic strategy, but it appeared to be the right economic strategy for the circumstances of the time.

The Greenspan factor​

One prominent line of argument offered by conservatives at the time was to give all the credit to Greenspan, as then-Sen. Phil Graham did in a typical February 2000 speech. Indeed, the partisan imperative to find someone other than Clinton to credit with the strong economy of the 1990s is one of the main reasons Greenspan's reputation was so high around the turn of the century.

One can make simpler or more complicated versions of this case, but a nice simple version is this. Back in 1996, current Fed Chair Janet Yellen was serving on the Federal Reserve Board of Governors, and so was Larry Meyer. Meyer recalls that at one point during that year, he and Yellen went into Greenspan's office and "told the Chairman that we loved him but could not remain at his side much longer if he continued, as he had been doing for some time, to push the next tightening action into the next meeting, and then not follow through."

Greenspan resisted this pressure from inside the Fed to raise rates early, and that's why unemployment got so low in the 1990s.

Be all this as it may, it amounts to a strange argument against Clinton. Greenspan endorsed the 1993 deficit-reducing budget proposal that Clinton championed and Democrats passed over unanimous GOP objections. The proposal was intended to induce the Fed to maintain a low interest rate policy, which is what happened. And Clinton reappointed Greenspan as Fed chair twice.

Republicans claimed credit for themselves​

Lawrence Kudlow and Stephen Moore, in a op-ed for the Washington Times and the Cato Institute, say the credit truly belongs to Ronald Reagan, whose "supply-side economic ideas ... unleashed a great wave of entrepreneurial-technological innovation that transformed and restructured the economy, resulting in a long boom prosperity that continues to throw off economic benefits to this day."

This aligns well with partisan politics but accords poorly with the chronology.

Clinton raised marginal tax rates on the highest-income Americans, in a move that was roundly denounced by supply-siders as economically ruinous and was uniformly opposed by Republicans in Congress. But the economy was much more prosperous after this happened than it was during the years Reagan was actually in office and taxes were lower.

A more chronologically plausible version of events notes that the economy was doing nothing special in 1993 and 1994 and only really took off after Republicans took Congress in the midterms. Defenders of this theory struggle, however, to name exactly what it is that they did that sparked growth.

Part of Ohio Gov. John Kasich's 2016 campaign says that "[a]s chairman of the U.S. House Budget Committee, John Kasich led the historic effort to balance the federal budget for the first time in a generation," referring to a 1997 budget deal that he was a key player in. But this mischaracterizes the events surrounding the deal.

What happened is that because the economy was growing faster than expected, the deficit was smaller than expected, which led Republicans to push for enormous tax cuts. Clinton forced them to settle for small ones and got them to agree to some modest new spending commitments. Republicans of the 1990s, in short, took advantage of the fruits of prosperity more than they contributed to it.

The mixed legacy of Clinton-era economic management​

Even if you accept the pro-Clinton narrative on the '90s economy, it's a somewhat ambiguous narrative that has had two different main interpretations:

  1. The 1990s show that maintaining appropriate Keynesian countercyclical fiscal and monetary policies is very important.
  2. The 1990s show that deficit reduction is very important and/or that budget deficits are very bad.
In terms of their specific applications to the period between 1982 and 2001, these two ideas support the same conclusion: Reagan should not have cut taxes so deeply as to create a large structural budget deficit, and Clinton and congressional Democrats were right to push for deficit reduction.


And what follows is George W Bush committing the same economic malfeasance of cutting taxes for the rich, putting two wars on n the country’s credit card, exploding debt and deficit, and creating the worst recession since 1929.

No matter how many times Democrats fix these Republican disasters, they repeat themselves time and time again.
Nutbag
 

jbrownson0831

Diamond Member
Joined
Jul 27, 2020
Messages
15,849
Reaction score
13,705
Points
2,288

The case for Clintonism​

Conversations with people involved in making economic policy during the Clinton years make a case that they deserve credit for the strong growth that is a little too nuanced for a stump speech. The basic idea is that intelligent countercyclical budgeting creating the space for monetary policy to work as intended, generating an investment boom and full employment, both of which spurred productivity growth and broad prosperity.

To understand this, you need to understand the context of economic history as it looked in the mid-1990s.

The past two American recessions started around the time of the popping of an asset bubble — stocks in 2001 and houses in 2007. This also happened way back in 1929, but when Clinton was in office it hadn't happened since the end of World War II. Recessions happened in the back half of the 20th century because the Federal Reserve raised interest rates to slow investment and the economy to keep inflation in check. In the 1950s and '60s this had worked well, but over the course of the 1970s inflation got out of control even as unemployment stayed stubbornly high.

Ronald Reagan and Federal Reserve Chair Paul Volcker succeeded in taming inflation with a brief but vicious recession in 1982.

But Reagan's "supply-side" revolution focused on tax cuts, and rolling back elements of the Great Society did not succeed in bringing back the high growth rates that prevailed before the 1970s. The economy shrugged off a huge stock market crash in 1987, but inflation reared its head in the early 1990s, prompting interest rate hikes and a new recession.

The Clinton team took action to reverse the structural budget deficits that Reagan had created. This, they believed, would give Volcker's successor, Alan Greenspan, the running room he needed to keep interest rates low and encourage unemployment to fall. At the same time, by reducing the amount of private sector savings that was channeled into buying federal debt, it would increase the amount of private sector savings that was channeled into private sector investment.

And, in fact, both of these things happened. Greenspan allowed unemployment to keep falling, and private business investment soared. Increased private investment helped push labor productivity up, which, combined with labor scarcity, pushed wages up. Median incomes rose, and poverty fell. Deficit reduction isn't always the right economic strategy, but it appeared to be the right economic strategy for the circumstances of the time.

The Greenspan factor​

One prominent line of argument offered by conservatives at the time was to give all the credit to Greenspan, as then-Sen. Phil Graham did in a typical February 2000 speech. Indeed, the partisan imperative to find someone other than Clinton to credit with the strong economy of the 1990s is one of the main reasons Greenspan's reputation was so high around the turn of the century.

One can make simpler or more complicated versions of this case, but a nice simple version is this. Back in 1996, current Fed Chair Janet Yellen was serving on the Federal Reserve Board of Governors, and so was Larry Meyer. Meyer recalls that at one point during that year, he and Yellen went into Greenspan's office and "told the Chairman that we loved him but could not remain at his side much longer if he continued, as he had been doing for some time, to push the next tightening action into the next meeting, and then not follow through."

Greenspan resisted this pressure from inside the Fed to raise rates early, and that's why unemployment got so low in the 1990s.

Be all this as it may, it amounts to a strange argument against Clinton. Greenspan endorsed the 1993 deficit-reducing budget proposal that Clinton championed and Democrats passed over unanimous GOP objections. The proposal was intended to induce the Fed to maintain a low interest rate policy, which is what happened. And Clinton reappointed Greenspan as Fed chair twice.

Republicans claimed credit for themselves​

Lawrence Kudlow and Stephen Moore, in a op-ed for the Washington Times and the Cato Institute, say the credit truly belongs to Ronald Reagan, whose "supply-side economic ideas ... unleashed a great wave of entrepreneurial-technological innovation that transformed and restructured the economy, resulting in a long boom prosperity that continues to throw off economic benefits to this day."

This aligns well with partisan politics but accords poorly with the chronology.

Clinton raised marginal tax rates on the highest-income Americans, in a move that was roundly denounced by supply-siders as economically ruinous and was uniformly opposed by Republicans in Congress. But the economy was much more prosperous after this happened than it was during the years Reagan was actually in office and taxes were lower.

A more chronologically plausible version of events notes that the economy was doing nothing special in 1993 and 1994 and only really took off after Republicans took Congress in the midterms. Defenders of this theory struggle, however, to name exactly what it is that they did that sparked growth.

Part of Ohio Gov. John Kasich's 2016 campaign says that "[a]s chairman of the U.S. House Budget Committee, John Kasich led the historic effort to balance the federal budget for the first time in a generation," referring to a 1997 budget deal that he was a key player in. But this mischaracterizes the events surrounding the deal.

What happened is that because the economy was growing faster than expected, the deficit was smaller than expected, which led Republicans to push for enormous tax cuts. Clinton forced them to settle for small ones and got them to agree to some modest new spending commitments. Republicans of the 1990s, in short, took advantage of the fruits of prosperity more than they contributed to it.

The mixed legacy of Clinton-era economic management​

Even if you accept the pro-Clinton narrative on the '90s economy, it's a somewhat ambiguous narrative that has had two different main interpretations:

  1. The 1990s show that maintaining appropriate Keynesian countercyclical fiscal and monetary policies is very important.
  2. The 1990s show that deficit reduction is very important and/or that budget deficits are very bad.
In terms of their specific applications to the period between 1982 and 2001, these two ideas support the same conclusion: Reagan should not have cut taxes so deeply as to create a large structural budget deficit, and Clinton and congressional Democrats were right to push for deficit reduction.


And what follows is George W Bush committing the same economic malfeasance of cutting taxes for the rich, putting two wars on n the country’s credit card, exploding debt and deficit, and creating the worst recession since 1929.

No matter how many times Democrats fix these Republican disasters, they repeat themselves time and time again.
Yeah right....what was that wonderful mortgage loan deal that Slick Willy and his buddy Barney Frank came up with...SO good for the economy.....
 

Thunderbird

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The case for Clintonism​

Conversations with people involved in making economic policy during the Clinton years make a case that they deserve credit for the strong growth that is a little too nuanced for a stump speech. The basic idea is that intelligent countercyclical budgeting creating the space for monetary policy to work as intended, generating an investment boom and full employment, both of which spurred productivity growth and broad prosperity.

To understand this, you need to understand the context of economic history as it looked in the mid-1990s.

The past two American recessions started around the time of the popping of an asset bubble — stocks in 2001 and houses in 2007. This also happened way back in 1929, but when Clinton was in office it hadn't happened since the end of World War II. Recessions happened in the back half of the 20th century because the Federal Reserve raised interest rates to slow investment and the economy to keep inflation in check. In the 1950s and '60s this had worked well, but over the course of the 1970s inflation got out of control even as unemployment stayed stubbornly high.

Ronald Reagan and Federal Reserve Chair Paul Volcker succeeded in taming inflation with a brief but vicious recession in 1982.

But Reagan's "supply-side" revolution focused on tax cuts, and rolling back elements of the Great Society did not succeed in bringing back the high growth rates that prevailed before the 1970s. The economy shrugged off a huge stock market crash in 1987, but inflation reared its head in the early 1990s, prompting interest rate hikes and a new recession.

The Clinton team took action to reverse the structural budget deficits that Reagan had created. This, they believed, would give Volcker's successor, Alan Greenspan, the running room he needed to keep interest rates low and encourage unemployment to fall. At the same time, by reducing the amount of private sector savings that was channeled into buying federal debt, it would increase the amount of private sector savings that was channeled into private sector investment.

And, in fact, both of these things happened. Greenspan allowed unemployment to keep falling, and private business investment soared. Increased private investment helped push labor productivity up, which, combined with labor scarcity, pushed wages up. Median incomes rose, and poverty fell. Deficit reduction isn't always the right economic strategy, but it appeared to be the right economic strategy for the circumstances of the time.

The Greenspan factor​

One prominent line of argument offered by conservatives at the time was to give all the credit to Greenspan, as then-Sen. Phil Graham did in a typical February 2000 speech. Indeed, the partisan imperative to find someone other than Clinton to credit with the strong economy of the 1990s is one of the main reasons Greenspan's reputation was so high around the turn of the century.

One can make simpler or more complicated versions of this case, but a nice simple version is this. Back in 1996, current Fed Chair Janet Yellen was serving on the Federal Reserve Board of Governors, and so was Larry Meyer. Meyer recalls that at one point during that year, he and Yellen went into Greenspan's office and "told the Chairman that we loved him but could not remain at his side much longer if he continued, as he had been doing for some time, to push the next tightening action into the next meeting, and then not follow through."

Greenspan resisted this pressure from inside the Fed to raise rates early, and that's why unemployment got so low in the 1990s.

Be all this as it may, it amounts to a strange argument against Clinton. Greenspan endorsed the 1993 deficit-reducing budget proposal that Clinton championed and Democrats passed over unanimous GOP objections. The proposal was intended to induce the Fed to maintain a low interest rate policy, which is what happened. And Clinton reappointed Greenspan as Fed chair twice.

Republicans claimed credit for themselves​

Lawrence Kudlow and Stephen Moore, in a op-ed for the Washington Times and the Cato Institute, say the credit truly belongs to Ronald Reagan, whose "supply-side economic ideas ... unleashed a great wave of entrepreneurial-technological innovation that transformed and restructured the economy, resulting in a long boom prosperity that continues to throw off economic benefits to this day."

This aligns well with partisan politics but accords poorly with the chronology.

Clinton raised marginal tax rates on the highest-income Americans, in a move that was roundly denounced by supply-siders as economically ruinous and was uniformly opposed by Republicans in Congress. But the economy was much more prosperous after this happened than it was during the years Reagan was actually in office and taxes were lower.

A more chronologically plausible version of events notes that the economy was doing nothing special in 1993 and 1994 and only really took off after Republicans took Congress in the midterms. Defenders of this theory struggle, however, to name exactly what it is that they did that sparked growth.

Part of Ohio Gov. John Kasich's 2016 campaign says that "[a]s chairman of the U.S. House Budget Committee, John Kasich led the historic effort to balance the federal budget for the first time in a generation," referring to a 1997 budget deal that he was a key player in. But this mischaracterizes the events surrounding the deal.

What happened is that because the economy was growing faster than expected, the deficit was smaller than expected, which led Republicans to push for enormous tax cuts. Clinton forced them to settle for small ones and got them to agree to some modest new spending commitments. Republicans of the 1990s, in short, took advantage of the fruits of prosperity more than they contributed to it.

The mixed legacy of Clinton-era economic management​

Even if you accept the pro-Clinton narrative on the '90s economy, it's a somewhat ambiguous narrative that has had two different main interpretations:

  1. The 1990s show that maintaining appropriate Keynesian countercyclical fiscal and monetary policies is very important.
  2. The 1990s show that deficit reduction is very important and/or that budget deficits are very bad.
In terms of their specific applications to the period between 1982 and 2001, these two ideas support the same conclusion: Reagan should not have cut taxes so deeply as to create a large structural budget deficit, and Clinton and congressional Democrats were right to push for deficit reduction.


And what follows is George W Bush committing the same economic malfeasance of cutting taxes for the rich, putting two wars on n the country’s credit card, exploding debt and deficit, and creating the worst recession since 1929.

No matter how many times Democrats fix these Republican disasters, they repeat themselves time and time again.
Partisan polemics.



Some Republicans are deficit hawks.
Reagan’s victory in the Cold War made lower defense spending and a balanced budget possible.
Gingrich led Republicans and the House in the latter part of Clinton’s presidency.
 
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