September 15, 1996
"Good Luck and Alan Greenspan - Economy: Clinton's Success is Mostly a
Matter of Fortuitous Timing and Good Decisions Made by Others"
San Jose Mercury News
By Timothy Taylor
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SEVENTY percent of Americans say the economy is in good or fairly good shape,
according to a New York Times/CBS News Poll. Little wonder, since the economy
has grown for over five years and added 10 million jobs in that time.
But 55 percent also approve of how Bill Clinton has been handling the economy,
which is less obvious. One can make a strong case that on the economy, Clinton
has shown more luck than wisdom.
Unlike George Bush, who entered office after the economic upswing of the 1980s
had lasted seven years, Clinton took office after a recession had bottomed out
18 months earlier. He was perfectly positioned to take credit as the recovery
became perceptible to all.
Clinton has been blessed with Alan Greenspan's impeccable timing at the Federal
Reserve. Remember when Greenspan raised interest rates in 1994 to head off inflation?
Many squealed at the time. After all, Greenspan is a Republican who chaired Gerald
Ford's Council of Economic Advisers and was appointed and re-appointed to the
Fed by Republican presidents.
But the Fed was then able to trim back interest rates starting early in 1995,
giving Clinton an economic upswing with low inflation which now appears certain
to last through election day.
When Clinton has felt impelled to economic foolishness, he has been lucky enough
On reducing the federal budget deficit, Clinton was first saved from himself
in 1993. His initial budget called for a spending boost to stimulate the economy,
but his advisers persuaded him to turn to a deficit-reduction plan, instead.
When Clinton's initial 1995 budget offered $200 billion deficits into the indefinite
future, he needed saving again. After being lambasted by Republicans, Clinton
was first dragged into agreeing to the concept of a balanced budget, and then
to a 10-year timetable, and later to a a seven-year schedule. Even so, the bulk
of tough decisions in Clinton's plan would take place past 2000, after a second
Clinton term would be completed. But somehow, Clinton is campaigning as an implacable
Clinton did haltingly push for free-trade legislation like the North American
Free Trade Agreement and GATT, but his heart isn't with free trade. He prefers
to sign deals where he can claim personal credit for the export sales of a U.S.
firm, and seems especially drawn to bilateral trade deals that violate the spirit
or letter of the multilateral GATT agreement he signed.
Social Security and Medicare face ruination as the baby boom generation ages,
but Clinton has proposed nothing. He has continued Bush's cuts in defense spending,
but done nothing about rethinking America's strategic posture. He has shown no
ability to manipulate the $1.5 trillion federal budget to free up substantial
funding for his supposed priorities like science and technology, job training,
and helping the transition from welfare to work. HE HAS positively opposed the
notion that federal regulations should be refocused toward getting as much environmental
or health and safety benefit as possible for the money spent. Meanwhile, federal
regulations are costing the U.S. economy $670 billion a year - that's $7000 per
American household - and the total is rising.
Recently, Clinton's economic proposals have degenerated into public relations,
like his recent proposal to repeal capital gains taxes on homes. Since taxpayers
can roll capital gains on one home into the purchase of their next home, and then
take an exemption when they sell the home at retirement, few pay any capital gains
taxes on their home now. But it sounds good on the campaign trail.
The fairest judgment on Clinton's economic policies is that given good luck
and fortuitous interventions by friends, enemies and neutral parties like Greenspan,
he hasn't messed it up.
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