Arrow-right Camera


Greenspan, Not Candidates, Is Real Economic Architect Clinton, Dole Anxious To Claim Credit They Aren’t Really Due

Bill Clinton, the first president in decades to face the voters with no recession on his record, is working overtime to claim credit. Bob Dole counters that the economy isn’t all that great and that Republicans are responsible for any success.

But the most significant figure could well be a man whose name appears on no ballot and is hardly mentioned on the campaign trail - Federal Reserve Chairman Alan Greenspan.

Economists of all political stripes suggest the political assertions mean little.

“If you want to talk about anybody who helped the economy, it is Greenspan,” says Charles Schultz, an economist who served under Democrat Jimmy Carter. “The good record on inflation and the economy is the credit of the Federal Reserve.”

A Republican economist, Michael Boskin, scoffs at Clinton’s claim. “I don’t mean to be rude, but it is a huge stretch,” he says. “No serious economist would give him very much credit for the cyclical upturn of the economy.”

An economy measured in the trillions of dollars is pushed and pulled by a variety of forces, but economists agree that by far the biggest governmental influence comes from the Federal Reserve through its control over interest rates.

Simply put, the Fed has far more say on such matters as economic growth, recessions and inflation than any president.

Just as Clinton had the benefit of coming into office as a fledgling recovery was beginning to take hold, his predecessor, George Bush, was a victim of bad timing.

For much of Bush’s term, the Fed was raising interest rates in an effort to slow the economy and keep inflation from getting out of hand. As often happens when the Fed is tightening credit, the economy did more than slow - it went into an actual recession in July 1990.

The downturn was over by March of 1991. But the initial upturn was so anemic that voters in 1992 were still feeling anxious, and Clinton attacked Bush’s economic record as the worst since Herbert Hoover.

Clinton pledged an activist presidency that would address the economy’s long-term problems of stagnant wages and low productivity. He would emphasize “investments” in education, job training and infrastructure through a $20 billion-a-year “Rebuild America” program.

But while Clinton sounded traditional Democratic themes in his 1992 campaign, he has governed more like a Republican, jettisoning most of the spending programs he talked about on the campaign trail. Instead, he tailored his economic plan to please Wall Street bond investors by emphasizing deficit reduction.

Clinton’s economic advisers insist that those efforts paid off, allowing interest rates to fall, spurring investment and keeping the expansion alive.

However, interest rates actually rose the year after Clinton’s program was enacted, reflecting Fed moves in 1994 to battle inflation.

But unlike 1990, when Fed tightening brought on a recession, this time the central bank achieved the elusive goal of a “soft landing,” slowing growth enough to dampen inflationary pressures without throwing the economy into reverse.

This year - just in time for the election - the economy gained a second wind that has led to surprisingly robust growth, pushing unemployment to a seven-year low.

Clinton does win credit for not messing up.

“The best thing that presidents can do is get out of the way. There are lots of ways they can louse things up,” said David Wyss, chief financial economist at DRI-McGraw Hill.

On this score, Clinton is praised for not interfering in 1994 when the Fed raised interest rates. Indeed, Democrat Clinton has forged a remarkable partnership with Greenspan, himself a Republican. Over the howls of liberal Democrats, Clinton appointed Greenspan to a third term.

Dole has good things to say about Greenspan, too. But he and other Republicans say any political credit for the economic revival belongs not to Clinton but to Bush, who was president when the recovery began, and to the Republican Congress.

All is not perfect. Two problems that Clinton blasted Bush for in 1992 - weak income and productivity growth - have not been solved.

But the famous misery index - the combination of the unemployment rate and the inflation rate - is the lowest it has been in 27 years. And those politically important numbers make it nice to be an incumbent.

“Presidents like to take credit for an economy that is doing well, but if you look more closely, you usually find a competent Fed chairman somewhere in the wings,” said New York economist David Jones.

xxxx Economic scorecard : A comparison of the U.S. economy in the years that three presidents faced re-election: Reagan, 1984; Bush, 1992; Clinton, 1996. Gross Domestic Product Reagan: 6.8 percent. Bush: 2.7 percent. Clinton: 2.4 percent. Unemployment Reagan: 7.5 percent. Bush: 7.4 percent. Clinton: 5.4 percent. Inflation Reagan: 4.3 percent. Bush: 3.0 percent. Clinton: 2.9 percent. Budget Deficit Reagan: -$185.4 billion, 5.0 percent of GDP. Bush: -$290.4 billion, 4.9 percent of GDP. Clinton: -$116.8 billion administration estimate, 1.6 percent of GDP. Trade Deficit Reagan: -$109.1 billion. Bush: -$39.5 billion. Clinton: -$112 billion. Median Household Income in 1995 Dollars Reagan: $32,878, a 2.2 percent increase from 1983. Bush: $33,278, a 1.3 percent decline from 1991. Clinton, $34,076 in 1995, latest year available, 2.7 percent increase from 1994, first gain in six years.