Clinton and Economic Growth in the ’90s

What we can say with certainty is that Clinton served as president during the last eight years of a decade-long economic expansion that stands as the longest boom in U.S. history. Clinton saw a gain of nearly 21 million jobs during his tenure (January 1993 – January 2001).Certainly Clinton deserves some credit for that remarkable economic growth, but just as certainly he can’t claim all the credit. How much he deserves is a matter of opinion that will probably be debated for years to come. By the time he left office, the economy was slowing rapidly, and it slipped into recession in March 2001, just weeks after George W. Bush was sworn in.

Clinton’s major contribution was pushing through the 1993 budget bill, which began to reduce what had become a chronic string of federal deficits. Republicans denounced it as the “largest tax increase in history,” though in fact it was not a record and also contained some cuts in projected spending. Republican Rep. Newt Gingrich predicted: “The tax increase will kill jobs and lead to a recession, and the recession will force people off of work and onto unemployment and will actually increase the deficit.” But just the opposite happened. Fears of inflation waned and interest rates fell, making money cheaper to borrow for homes, cars and investment. What had been a slow economic recovery turned into a roaring boom, bringing in so much unanticipated tax revenue from rising incomes and stock-market gains that the government actually was running record surpluses by the time Clinton left office.

Clinton can also be given credit for reappointing Alan Greenspan as head of the Federal Reserve, where the economist was widely credited with a masterly performance in handling interest rates. This was an unusual move for a Democratic president, as Greenspan is a libertarian Republican who had been a close economic adviser to Republican Presidents Gerald Ford and Ronald Reagan. Greenspan and Clinton worked closely, and in 2007 Greenspan praised Clinton’s handling of the federal deficit and his support for liberalized trade, calling him “the best Republican president we’ve had in a while.”

But many other factors, having little or nothing to do with government, also were at work during the Clinton years. Personal computers and the Internet came of age, bringing a revolution in the efficiency of processing information and making workers more productive. Manufacturing companies embraced more efficient production methods. A massive reduction in military spending, begun during the George H.W. Bush administration following the collapse of the former Soviet Union, allowed capital to be deployed to more economically productive ends. No major war disrupted the world’s rapidly growing trade.

Good luck also played a role. Oil prices declined during much of Clinton’s presidency, partly because of squabbling and cheating among the OPEC oil-producing nations. As late as 1999 crude oil was selling for less than $10 per barrel and gasoline hit a low of 95 cents per gallon at the pump, a price that included the 4.3-cent-per-gallon tax increase that Clinton had supported and Republicans had denounced.

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