Kerry’s Fairy Tales About Clintonomics (excellent read)

John Kerry says vote for him because he'll restore what Democrats talk about as Bill Clinton's "just-right, Goldilocks" economy. "Let's not forget what we [Democrats] did in the 1990s," he's been telling folks on the campaign trail and may well repeat in one of the next two debates. "And we can do it again."

But the splendid ’90s were not splendid because of the Democrats or Clinton or even Clinton's much ballyhooed Treasury Secretary Robert Rubin, now a Kerry adviser. It's a nice party myth, but it's far from accurate.

Some recent history is in order: After Clinton's election, the President went full-bore left on the economy, pressing for the largest tax increase in history (the words of the late Sen. Moynihan), a special $72-billion energy tax and vastly increased domestic spending, including a federal takeover of the entire health-care system, equal to one-seventh of America's yearly domestic output. Before he could drop these economy crushers on the nation, the President was largely foiled by a feisty Republican minority in both houses of Congress.

True, he did get a hefty tax hike through Congress, but with Senate Minority Leader Robert Dole and House GOP Whip Newt Gingrich leading the charge, the congressional Republicans significantly scaled back the huge Clinton tax offering, rallied to deep-six a $16-billion stimulus package and knocked off the broad-based energy tax as well.

Hillary health care, exposed as an enormously complex and expensive boondoggle, was also collapsing under steady GOP hammering, with a nice assist from a devastating critique in the liberal New Republic. On Sept. 26, 1994, Majority Leader George Mitchell (D.-Maine), the chief Senate sponsor of Hillarycare, officially raised the white flag.

A little over a month before the November balloting, Gingrich and more than 300 House Republican candidates nationalized the election by proclaiming their support of the very non-Clintonian, non-Democrat "Contract With America." Under the Newt-designed Contract, the Republicans pledged to give the average American family major tax relief, cut taxes substantially for investors, make wholesale changes in the welfare system and balance the budget.

Less than six weeks later, the American voter, enraged by how Clinton was governing and intrigued with the Contract's promises, handed the Democrats a historic defeat. The Republicans not only captured the Senate, but also won a majority in the House for the first time in 40 years, enthroning Gingrich as speaker.

Thus the Clinton effort to socialize a huge chunk of America had been seriously blunted; Clinton economic policy, as pursued from 1992-94, was now over. How, then, can Clinton be given credit for an economic program that was largely thwarted?

Indeed, Clinton himself knew that his first two years had been disastrous, certainly for his party. Panicked by the popular verdict on his presidency, he brought in adviser Dick Morris to save his administration from total ignominy. He instructed Clinton, as outlined in Morris’s book, Behind the Oval Office: ". . .[W]ork to eliminate the deficit, require work for welfare, cut taxes and reduce the federal bureaucracy." Clinton, though kicking and screaming all the way, eventually adopted Morris' advice.

By the spring of 1995, the President had abandoned Hillarycare for good and was proposing balanced budgets, albeit initially for show . Then he insisted before an October 1995 fundraiser in Texas that "I think I raised them [taxes] too much, too." But his rhetorical surrender to the center and the right was not yet complete. In his 1996 State of the Union address, he made the grand pronouncement that "the era of big government is over."

The President then acquiesced in a series of important Republican initiatives, putting some substance behind the oratory. In election year 1996, he signed, reluctantly and with liberals raging in opposition, a historic GOP welfare reform program, eliminating scores of federal welfare regulations and transferring critical spending authority to the states.

The initial results--which Clinton hailed at the Democratic convention in 2000--were spectacular, with caseloads having fallen like stones within just a couple of years. Clearly, Republicans had gotten this area of public policy right and Clinton was quietly tipping his hat to them while loudly seizing credit for the program's stunning success.

More Clinton concessions were to come. The following August Clinton signed into law a bipartisan balanced budget measure that not only restrained spending, but also included several critical Republican tax-relief items, Among them a solid, middle-class tax cut. The President had promised just such a cut to the voters in his 1992 campaign, but had conspicuously crawfished (though he did trot out a half-hearted proposal right after the devastating House losses in the November elections). The GOP-sponsored cut came in the form of a $500-per-child tax credit--courtesy mainly of the lobbying of pro-family activist Gary Bauer--which would amount to about $75 billion over a five-year period and proved a godsend to millions of American families. The measure also contained substantial tax relief elsewhere, a nearly 30% cut in the capital gains tax burden, a serious decrease in estate taxes, repeal of the alternative minimum tax on small business and a new retirement savings account, known as the Roth IRA.

In truth, Clinton had now gotten around to embracing many of the very same proposals promised in the "Contract" and served up by the first Gingrich Congress in 1995. Equally important, the Republicans weren't imposing on the country--or even threatening to impose--the kind of dangerous domestic spending and regulatory programs that can wreak economic havoc. What proved critical, says former Congressional Budget Office Director (1995-1999) June O'Neill, was "the absence of legislation that meddled with the economy or that had major, long-run spending consequences for the budget."

The result of all this: The economy bloomed. Money flowed into the U.S. Treasury largely because people were becoming wealthier. revenues from income and capital gains taxes were soaring, not because rates were being raised, but because taxes were being lowered. Spending was restrained, GDP was rising at a healthy 4% clip and the Dow Jones average had more than tripled by the time Clinton left office--and has managed to maintain these stratospheric heights.

The Ronald Reagan peace dividend, with an assist from George H. W. Bush, also proved crucial in generating the surpluses the Democrats keep bragging about. Even Clinton's defense team acknowledged this truth.

According to John Shalikashvili, the chairman of the Joint Chiefs under Clinton, and William J. Perry, Clinton's defense secretary (Washington Post, Aug. 10, 2000): "This 'peace dividend,' amounting to about $100 billion a year, has been a major contributor to the balanced budget that our economy now enjoys."

In other words, the economy the current President Bush inherited, while hardly perfect, had soared due to Republican economic principles, indeed conservative Republican principles, and was embraced, albeit tardily, by William Jefferson Clinton. So, Kerry to the contrary, the 90s boom was largely a Republican phenomenon.

Clinton had the great advantage of the false economy provided by the largely false .com fiasco, as well as the corporate accounting scandals. Bush has had to build a real economy and do so while dealing with 911 and the war on terror.

Thanks for posting. You said there were things you'd said differently. Were there some things you didn't agree with in this article?

3 posted on 10/10/2004 5:43:05 PM PDT by Boxsford ("We make out of the quarrel with others rhetoric, but of the quarrel with ourselves, poetry." Yeats)

clintonomics: robert rubin greasing every whore on The Street. Period.

John Kerry says vote for him because he'll restore what Democrats talk about as Bill Clinton's "just-right, Goldilocks" economy.

You mean Kerry's going to bring back the Clinton Bubble, inflate the NASDAQ up to 5,000, have it crash 3300 points in one year and usher in another recession?

The Clinton Bubble burst on March, 2000, ten months before Bush was inaugurated.

The Great Contribution of Clintonomics: The LARGEST INCOME TAX INCREASE IN THE HISTORY OF THE UNITED STATES.

That was it -- he skated the rest of the way, maintaining nothing, and let the economy slide into recession since he was on his way out...

Well, they turned on the money spigot at the Treasury and flooded the marketplace with cash, made all the less expensive by pressing Greenspan to lower interest rates when the situation did not call for it. Kept the market booming, albeit artificially, for a number of years. We still have not paid the 'hangover' price that has to work itself out through the economy. But if you want to see the impact on another once powerful economy that implemented the same policies, check out Japan.

Not only did they turn on the money spigot, Greenspan never increased margin requirements to buy stocks on margin during the bubble. If you recall, all the major brokerage houses did his job for him by restricting the margin puchase of a lot of the dot-com stocks. If I was Greenspan, I would have been embarassed about that lack of proper regulatory action.

Greenspan sold out early in Clinton's first term, when Greenspan's own term was up and Clinton had him over the barrel. As Clinton began to get in more trouble, he played some cards he had to play with Greenspan, kept the market flying artificially, and a bunch of sell-outs allowed a temporary financial windfall to cloud their judgement, looking the other way and giving Clinton a pass. These same people will take a big hit in the coming years, for the damage Clinton caused, to our financial system, and our country in general.

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