The Clinton Economic Era Was Not a Democratic Golden Age

I just want to bring this to your attention. I’ve been making the point for a while that while power-holding Democrats are getting better on identity issues (issues around minority rights and related issues), they’ve been universally bad on economic issues. In fact, the whole bipartisan Beltway consensus is built around both parties making sure that billionaires never lose.

The centerpiece (and original sin in the modern era) for that movement is these NAFTA-style trade agreements, the ones that protect capital and profit — and nothing else in the world. Not environments; not labor; not the climate; not the sovereignty of national governments; not humans in any form but the baronial. Nothing else in the world.

And while Reagan started the move of U.S. manufacturing overseas (he initiated the death of high-tech wafer fabrication in the U.S., one of our strongest new industries, and was well-paid in dollars for it by the Japanese as soon as he left office), it was Clinton who campaigned on and gave us NAFTA.

What’s wrong with this picture?

This view of Clinton is at odds, however, with the way his era is often portrayed and praised, as (relatively speaking) economic good times and proof of Democratic economic goodness. Now comes Dean Baker to show why the Clinton “good times” era was not what we think it was — thus reinforcing my main point about Democrats, that they’re as terrible for the country economically as any of the other “free traders” of either party.

Dean Baker begins (my emphasis and paragraphing):

There is widely held view in Washington policy circles that the economy was golden in the Clinton years. We had strong growth, low unemployment, rising real wages, a soaring stock market and huge budget surpluses. According to this myth, George W. Bush ruined this Eden with his tax cuts for the rich and wars that he didn’t pay for.

While there are plenty of bad things that can be said about George W. Bush, his tax cuts for the rich and his wars (whether paid for or not), this story of paradise lost badly flunks the reality test. At the most basic level, the chain of causation is fundamentally wrong.

Dean points to the soaring Clinton stock market as the symbolic evidence most people use to “prove” the Clintonian economic goodness, but in fact that market was a huge bubble, which burst, as Dean notes, before Clinton left office.

Though Baker doesn’t mention it, I’m pretty certain that the left-progressive desire to lay the dead cat of the burst economy on Bush’s door (a desire that increased with the start of the Iraq war) was an equal partner in the promotion of this myth from the left. The “loyal Bushies” of the time wanted to lay that cat on Clinton’s door, which fueled the resistance.

Back to Baker. He offers a graph showing that the Bush tax cuts didn’t cause the deficit — the economy did:

[T]he budget would have shifted from surpluses to deficits in 2002 even if there had been no tax cuts and no increase in military spending associated with the wars in Afghanistan or Iraq. While neither of these may have been good uses of public money, they did not cause the deficit. The downturn following the collapse of the stock bubble led to the deficits in 2002-2005.

That graph is below. Start reading it from the y-axis, with the Clintonian surplus in 2001, and note the zero-deficit line (the x-axis). In 2001, the “deficit” was below the zero-deficit line; in other words, it was a surplus. Now note the effect of the dark blue band, the “economic downturn,” as the years advance.

The Bush deficit came from the crash of the Clinton economy.

The Bush deficit came from the crash of the Clinton economy.

Do read the rest. I don’t want to crib the entire paper; it’s not long and very well done. The sentences I excluded are fascinating. His conclusion:

It is not a good idea to rely on asset bubbles to fuel economic growth or to provide the basis for fiscal responsibility. The result was disastrous when Bush led us down this path. The picture was not much prettier when Clinton went the same route a decade earlier.

So there. Clinton created an asset bubble, the stock market, or at least relied on it for economic cred. Busted. So we’re back to my own bottom line — the Dems can’t be trusted on economic issues, and Clinton (and Obama) are still Rubinite free-trade freaks.

The lesson of 1066

As in 1066, in 2012 there were two armies in the field arrayed against the good guys (progressives) — troops led by Romney, Duke of Bain, and the army of Prince Obama. We defeated Duke Romney, cleverly using Prince Obama against him. Now we must defeat (or at least contain) the Prince. He’s ruled by the baronial class as well, and cannot be allowed to advance their looting, anymore than we could have allowed Romney that opportunity.

If we don’t achieve both goals — if we don’t defeat both opposing forces — the nation will ultimately lose. I know I’m right; the evidence is overwhelming. Thanks to Dean Baker for clearing up the last bit of confusion. But it still leaves us with our problem, two armies arrayed against us.

In 1066, when the Danish-descended King Edward the Confessor died, he named Harold Godwinson king of England — thus King Harold. Two outsiders claimed the throne, Harald Hardrada of Norway and William of Normandy (“Normandy” means “Norsemanland,” it’s where Vikings permanently settled in France). Harald Hardrada landed first in the north of England. Our Harold rode north with his army and defeated him. Then William landed in the south (near Hastings) and Harold turned his tired army around and rode south. As it turned out, twice was not the charm, at least for Harold.

Two armies in the field — we’ve got the problem Harold had. We now have half of what he achieved. Let’s work toward a different second result.