The Bill Clinton '90s sure look better in retrospect, don't they? Especially when you compare them with the last decade and a half of awesome American failures: the dot-com bubble, the Supreme Court installing George W. Bush, 9/11, the failed invasions of Afghanistan and Iraq, the 2008 financial crisis, and the extremely weak recovery that followed. Even the penny-ante scandals of the Clinton days make one nostalgic. Remember when presidents had tawdry affairs instead of torture regimes or assassination programs for American citizens?
Hillary Clinton is, unsurprisingly, attempting to coast on some of that '90s nostalgia, running as a "growth Democrat," according to a New York Times article quoting many high-level Clinton supporters.
Attempting to resurrect the growth and high wages of the Clinton days is all well and good. But while much about the '90s was positive, the decade was also plagued by the manifest failures of Bill Clinton's economic policy. There is little evidence that Hillary Clinton has grappled with those failures, or even with what lay behind her husband's successes. Nor does she seem to have rigorously questioned whether the economy might have evolved such that simply trying to repeat history might not work.
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Merely imitating the forms and language of the old Clinton administration is about as likely to work as cargo cults' wooden airplanes were to restart contact with Western societies.
But first, the good of the Clinton years. The strong '90s economy, particularly the red-hot labor market of the late decade, is probably best characterized as a happy accident. A productivity boom driven by the adoption of computer technology met a conservative Federal Reserve chairman who for once did not react to rising wages by crushing them with tight money. All that was heated further by a stock bubble which sloshed money out into the broader economy.
To be sure, Bill Clinton deserves some credit. Raising taxes on the rich and boosting the earned income tax credit as he did might have ameliorated the effects of inequality on aggregate demand. Even simple stewardship is an important part of government — just allowing it to happen (and not, say, panicking about hypothetical future inflation) was important and worthwhile.
But it wasn't all good. Financial deregulation (a bipartisan affair in those days) turned out to have some nasty side effects. NAFTA's results were mixed at best. Worst of all, Clinton's heralded welfare reform turned out to be a grim failure. The true disaster of that policy was camouflaged somewhat by the brief '90s boom, but by now its full effects are obvious: a 150 percent increase in extreme poverty.
Finally, there's the issue of general economic structure. The '90s boom took hold fairly easily. But since then, the economy has sickened dramatically: Inequality has increased, the quality of jobs has decreased, the labor share of income has plummeted. Seven years after the 2008 crash, we're still missing about three points of prime-age employment (or about four million jobs).
If I were trying to summon the Ghost of the '90s Economy, I would do three things. First, do everything possible to stop the Federal Reserve from strangling the current recovery in its crib. Janet Yellen is taking steps to do just that, with the recent hike in interest rates. She was appointed to a five-year term in 2014, but she could still be asked to account why the Fed has not met its inflation target for the past three straight years (evidence the Fed could have done more for employment). What's more, there are still two open seats on the Fed's board of governors, which could be filled by monetary stimulus advocates at the earliest opportunity.
Second, I would admit the failure of welfare reform and design a replacement policy. Globalization is largely a fait accompli, but it would be extremely easy to knock together a new welfare program to attack poverty, perhaps starting with total abolishment of child poverty. This would be an economic good in itself (as well as striking a huge blow against racism and sexism), and also juice overall aggregate demand.
Third, I would address general economic sickness — essentially, inequality writ large. Run the economy as hot as possible, ratchet down corporate profits, help unions, and buttress the welfare state for those who are unable to work.
Is Hillary Clinton doing any of those things? Not really.
She's got some halfway decent policy on the third point, including some small new tax credits, a bit of infrastructure spending, raising the minimum wage, and a moderate pro-union package. But that's about it. Her economy page on her website does not even mention welfare or monetary policy.
The lack of repentance on welfare reform is morally outrageous. But it's the lack of attention to monetary policy that is least excusable on her own terms. Most of her economic platform revolves around trying to boost wages and juice job creation — but the Federal Reserve has the power to undo any such policy. If she passes an economic stimulus agenda, and the Fed simply raises rates to compensate, the result will be bupkis.
Simply standing back and hoping for a repeat of Bill Clinton's second term is unlikely to work. President Obama has been effectively forced to do just that, and the economic results are mediocre at best. Without a firm accounting of why the last four presidential terms have been so disappointing for the median family, Clinton's appeal to her husband's record is little more than cargo cult economics.
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