Academic journal article Policy Review

We Can Do Bettah: Bill Clinton's Bronze-Medal Economy

Academic journal article Policy Review

We Can Do Bettah: Bill Clinton's Bronze-Medal Economy

Article excerpt

How can we be having this recovery? That's the slightly panicky question Republicans have been quietly asking themselves since news came in that annual economic growth had accelerated sharply to 7.3 percent in the fourth quarter of 1993. It's too early to know if the bounce is continuing; most economists are predicting economic growth of closer to 3 percent for 1994. Nevertheless, it wasn't even supposed to be that good, at least if you listened to the doomsday talk surrounding President Bill Clinton's $250-billion tax increase last summer.

"We are buying a one-way ticket to recession," thundered Senator Phil Gramm in early August. Senator William Roth, a Republican colleague, warned: 'Everyone knows we can't tax America into prosperity. " Added Senator Connie Mack: "This bill will cost America jobs, no doubt about it. "

Yet the predicted collapse didn't materialize. Naturally Mr. Clinton and the Democrats were ecstatic. Laura D'Andrea Tyson, the president's chief economic adviser, promptly pronounced the economy "squarely on a path of sustainable growth." The president, in his State of the Union message, needled "the naysayers who said this plan wouldn't work." The president then claimed credit for the good news: A deficit that is running well below expectations, interest rates that have declined to their lowest level in two decades and an economy that produced 1.6 million private sector jobs in 1993, "more than were created in the previous four years combined."

TOO LITTLE, TOO LATE

Any president would have made similar claims, of course. That's politics. And Bill Clinton may even deserve some small share of the credit for the recovery. He is proposing elimination of at least some federal programs; his battle for the North American Free Trade Agreement and the General Agreement on Tariffs and Trade showed a reassuring appreciation of the role of free markets and the need to keep America open to the global marketplace.

The question conservatives--and all Americans--should be asking themselves is not whether a recovery is taking place, but why it didn't happen sooner and why it hasn't been a great deal stronger. The Cold War has been over for more than three years. In theory, at least, the United States should be the major beneficiary: An unchallengeable haven for world capital with close ties to the emerging economic powerhouses of Latin America and Asia, its capitalist engine restored to fighting trim during the 1980s, locus of an information revolution that could rival the industrial revolution itself in terms of dynamism and opportunity.

Yet the economy turned in one of the most anemic recoveries from a recessionary trough on record. Even if 1994 exceeds expectations--say, a 5-percent increase in gross domestic product--it would be nothing much to celebrate. The 11 quarters of "recovery" from 1991 to the end of 1993 were just over half the average for the first three years of recoveries since World War II. The 1962-1964 recovery averaged nearly 5 percent per year; the 1982-1984 recovery averaged 4.4 percent. Since the current recovery began in the second quarter of 1991, the economy has crept forward at a mere 2.8 percent pace.

AMERICA ON HOLD

Nor is there much reason to credit Bill Clinton with what little improvement has taken place. For one thing, growth in 1993 was actually lower (3.2 percent vs. 3.9 percent) than in 1992, the last year of the Bush administration, when measured from fourth quarter to fourth quarter. Indeed, the economy appeared to be gaining steam in late 1992 with a 5.7 percent gain in the final quarter--only to stop dead in its tracks as Bill Clinton was being sworn into office. For the first two quarters of 1993, the economy slumped back to less than 2-percent growth.

Some of that may have reflected a pulling forward of economic activity in expectation of President Clinton's promised 1993 tax increases. …

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