The central pillar of modern progressive Democrat politics in the early years of the 21st Century is built on the notion that the policies of former President Bill Clinton created the economic boom and federal budget surpluses of the United States in the 1990s.
Few question that the nation experienced a time of tremendous prosperity, low unemployment, and the national debt shrinking as a portion of the economy. Many attribute President Bill Clinton’s policies for the exultant state of economic affairs that arose during his time in the Oval Office. The only matters of debate then become: which policies deserve the credit for the explosive successes they helped ignite; and from which political ideology did these policies originate?
The lens with which partisans view the 1990s – particularly liberal Democrats who praise the Clinton Era and believe President Barack Obama may emulate it – is tainted with shocking levels of artificial correlations and outright distortion. While it is difficult to assess to what degree the denial of reason is the result of blind ideological ignorance, it is clear that the issue has become an article of faith to those on the Left.
This fervid legend of the modern Democrat Party – one that cannot be supported in isolation or with any substantive causality – claims that enacting large tax increases on high incomes produced the explosion in economic growth in the 1990s. Like all entertaining mythology, in order to be believed, it must remain simple and easily placed on a timeline. For example, Ancient Greeks believed the sun rose every day because the god Helios put it in a chariot and drove it across the sky. It is an objective fact that the sun did rise each day, the only question is whether a god drove it in a chariot. Likewise, it is a fact that President Bill Clinton did preside over a booming economy, the only question is whether his higher tax rates caused the economy to boom.
For Democrats faced with alternately praising and defending Bill Clinton’s record – one that features mostly pro-growth conservative Republican economic policies – it becomes an exercise in carefully excluding the overwhelming preponderance of his legislative triumphs in favor of cherry-picking the one policy initiative in his portfolio that liberals can coalesce around: raising marginal income tax rates in 1993. For his part, Clinton has been actively indulging his fellow Democrats in this endeavor.
Ironically, Bill Clinton stumbled on a similar version of his own twisting of history to suit his agenda when he was describing President Barack Obama’s revisionism of his position on the Iraq War during the 2008 Democratic presidential primaries. Having had enough of then-presidential-candidate Sen. Obama’s claims of purity on opposing the war, Clinton offered the following:
“You said in 2004 there was no difference between you and George Bush on the war. And you took that speech you’re now running on off your website in 2004. And there’s no difference in your voting record and Hillary’s ever since. Give me a break. This whole thing is the biggest fairy tale I’ve ever seen.”
Clearly, Clinton knows a great deal about the craft of conflating correlations and the art of deception. As devoted supporter of liberal Democrat candidates and progressive causes, producer David Geffen noted in February 2007 of Bill and Hillary Clinton:
“I don't think anybody believes that in the last six years, all of a sudden Bill Clinton has become a different person. Everybody in politics lies, but they do it with such ease, it's troubling.”
While the enormous tax hikes in 1993 were a pivotal decision to include in his first federal budget, a discerning look at the Clinton economic record in full context with the policies his administration pursued in the 1990s reveals at least four areas of major economic initiatives that had far more impact on igniting the prosperity enjoyed during his presidency.
Only three months after the Clinton tax hikes passed the Senate on a tiebreaking vote cast by then-Vice President Al Gore, the White House vigorously pursued passage of the North American Free Trade Agreement – NAFTA.
Once again, Vice President Gore was pressed into action to launch an effective media campaign to persuade voters that the free-trade agreement would spur economic growth by reducing tariffs and expanding exports to Mexico and Canada.
To press Clinton’s NAFTA argument, Vice President Gore famously debated billionaire businessman and 1992 independent presidential candidate Ross Perot on CNN’s Larry King Show. The result was a triumpant victory for Gore, whose intention was to pressure reluctant Democrats to support their president on an expressly Republican piece of legislation left by former President George H.W. Bush.
One year later, the Senate overwhelmingly passed Clinton’s prized GATT agreement that officially dawned the age of globalization and multinational corporations.
Clinton repealed a vital banking regulation during his second year as president when the Riegle-Neal Interstate Banking and Branching Efficiency Act became law in 1994, removing barriers to interstate branch-banking. The law allowed large banks to acquire smaller banks in other states, effectively starting the era of Too-Big-To-Fail financial institutions.
The biggest act of deregulation by Bill Clinton was signing the Telecommunications Act of 1996, which eliminated many federal regulations on the telecommunications industry. The deregulation was the primary factor that ignited internet and telecommunications bubble of the late-1990s.
To help finance the tech bubble, Clinton controversially removed the cornerstone of banking regulation in 1999 with the repeal of the 1933 Glass-Steagall Act. Clinton’s repeal removed the barrier between commercial banking and investment banks. The result, combined with the Commodity Futures Modernization Act of 2000, sparked the explosion of the now $300 trillion derivatives market and Wall Street’s entrance into the mortgage industry.
Reduction in capital gains tax rate
In 1997, Clinton slashed the tax rates on capital gains from 28 percent to 20 percent. The result was tech companies began offering stock options as primary compensation to attract talented employees.
The combination of 20 percent capital gains tax with a simultaneous 39.6 percent top income tax rate incentivized speculative day-trading and massive capital flows into the Wall Street tech bubble.
Coddling Wall Street
From the continual reappointment of “Irrational Exuberance” Federal Reserve Chairman Alan Greenspan, to the revolving door of Clinton’s staff like Erskine Bowles and Laura Tyson onto Wall Street, and former Goldman Sachs chief Robert Rubin as Treasury Secretary, Clinton proved time and again that keeping financial markets happy was his top priority.
Former Attorney General Janet Reno and her then-deputy Eric Holder looked the other way while massive accounting frauds were being perpetrated at Enron from 1998 through early-2001. The Clinton Presidential Library was even being funded by the fraudulent Global Crossing telecom giant.
Add to this the accounting fraud that occurred under Clinton’s former OMB Director Franklin Raines at Fannie Mae, as well as the pardon of Clinton Presidential Library donor Denise Rich’s fugitive oil-trader husband Marc Rich, and it is clear to see where the former president’s loyalties reside.
President Obama claims Clinton-Era tax rates on high incomes will cause the economy to grow. For that to happen, Obama would have to follow the rest of Clinton’s policies that actually favored growth and wealth.
Steven Holmes is the Los Angeles Political Buzz Examiner.