Exploding the myths of Clintonomics:
The bull market took off precisely when then-Fed Chairman Alan Greenspan took his foot off the brakes and hit the gas in 1995. It was also then that Republicans took control of Congress — further blunting the effects of the Clinton tax torpedo that had taken effect the previous year.
Clinton also benefitted from innovations long in the making, including the Pentium chip released in March 1993 and Microsoft’s Windows program released in August 1995. These together made the Internet boom possible.
As for the budget surpluses, they came as a complete surprise to Clinton economic forecasters, whose static models only predicted their tax hikes on the rich would narrow the budget gap, not get it into the black.
Their “deficit-reduction plan” didn’t create the surpluses at all. They were a direct result of a tidal wave of capital-gains revenues generated by the GOP-led stock boom.
Relieved that Washington would no longer threaten to take over 14% of the economy by socializing medicine or raise taxes even higher, the market took off like a shot at that point. And capital gains tax receipts exploded, flooding federal coffers.
Clinton’s own long-term budgets predicted no surpluses of any kind during his administration and beyond.
Bill Clinton never had a plan to end deficits. The Republicans and economic circumstances did it for him. But I’m sure that this myth that Bill Clinton balanced the budget will prevail in the minds of the media and Democrats, just as the false myth that Roosevelt, and not the war, got us out of the Depression continues to prevail many decades later. They have to rewrite history to justify their continued plunder. And of course, the near-term danger is that President-Elect Obama and the Congressional majority will use this mistaken history as a justification for tax hikes in a recession, which could be economically ruinous.
Remember the push for a balanced budget Constitutional amendment earlier in the Clinton administration? Clinton opposed it on grounds that balancing the budget would be bad for the economy. He said that, sure, we could balance the budget, with or without an amendment, but it would be a mistake. And he would never let it happen on his watch.
That doesn’t stop the Clinton’s from taking credit for all those things today, though. Immediately after of the recent Obama/McCain Presidential debates they interviewed Hillay! She went on and on about how herself and Bill proved Democratic economic principles improve the economy over Republican principles when you compared their presidency to Bush’s. Never mind that the ruling party of the Congress were reversed during the upturns and downturns.
“Carville rejected the idea of aggressively attacking the budget deficit, which he thought was already getting too much attention. He offered his analysis to Clinton: ‘I always ask the question: why does a dog lick his d**k? Because he can. Why don’t we balance the budget? Because we can’t.'”
– The Agenda, Bob Woodward, p. 21.