Does Clinton Deserve Economic Credit?

“Is this the kind of economy we want going into an election?” bubbled Labor Secretary Robert Reich last week. “You bet!”

Yes, under the time-honored “being there” rule of American politics, a president gets the credit or the blame for the state of the economy while he’s in office - whether he has anything to do with it or not.

So, Reich’s boss, Bill Clinton, was beaming when he announced last week that unemployment had hit 5.3 percent, the lowest rate in six years, and that wages had jumped 9 cents an hour.

Those are impressive figures, especially compared with the rest of the world. If the economy were heading down, President Clinton’s re-election might be in serious jeopardy.

But forget politics. Does Clinton really deserve credit for what he calls “the most solid American economy in a generation”?

See for yourself. Clinton describes his strategy:

The deficit. By reducing the federal budget deficit, the government reduces its yearly borrowing, and, theoretically at least, that relieves upward pressure on interest rates. Lower rates, in turn, mean a more vibrant economy.

The deficit has fallen from $255 billion in fiscal 1993 (the last budget passed under President Bush) to an expected $140 billion in 1996, the smallest figure since 1982. Good work, but it’s hard to imagine it would have happened without intense pressure from Congress.

Recall that right after he took office in 1993, Clinton wanted to increase spending with a “stimulus package.” His health plan also would have sent federal costs soaring. But both measures were denied him, even by a Democratic Congress.

In February 1995, Clinton proposed a budget with a deficit of $197 billion in 1996, then $213 billion in 1997 and about $200 billion in subsequent years. That budget was defeated, 99-0, in the Senate.

A few months later, under attack from congressional Republicans, Clinton said he would eliminate the deficit entirely in seven years, matching the GOP goal. In the end, no agreement was reached, but a lid has been kept on discretionary spending this year.

Free trade. “My administration,” wrote Clinton, “has concluded more than 200 trade agreements, including the North American Free Trade Agreement and the Uruguay Round of the General Agreement on Tariffs and Trade. … As a result, merchandise exports have increased by 31 percent.”

He’s right about the importance of free trade. But at the very least, Clinton should share credit for NAFTA and GATT with the Bush administration. A slow start by Clinton almost snatched defeat from the jaws of victory in both cases, and the main opposition in Congress came from Democrats.

Reduced government. It’s true that 192,000 jobs have been eliminated over three years, but three-quarters of those have been in the Defense Department. The cuts, actually begun under the Bush administration, are seen more properly as a “peace dividend” - the payoff for Ronald Reagan’s investment in arms and diplomacy that won the Cold War.

I’m not begrudging Clinton his achievements. But ask yourself: Would he have pursued these policies vigorously in the absence of a conservative Congress? Or put it another way: If Clinton wins the 1996 election and Democrats reign in the House and Senate, what are the chances of a balanced budget, an expansion of NAFTA and cuts in federal jobs and regulations? Approximately nil.

But for argument’s sake, let’s give Clinton full marks for the state of the economy. Is it actually so terrific?

Sen. Daniel Patrick Moynihan, D-N.Y., in a famous essay titled “Defining Deviancy Down,” argued that we’ve lately become so inured to depravity that horrific violence barely disturbs us anymore. Similarly, the current economic theme has been “Defining Growth Down.” Even by the standards of recent history, gross deomestic product growth of 2.3 percent (the average for Clinton’s tenure) is anemic.

It’s a shame we’ve lowered our sights. During the decade before Clinton, growth averaged 3.2 percent (including the 1990-91 recession). And in the past 30 years, the United States has exceeded the average growth rate during Clinton’s tenure 23 times.

How could Clinton have done better? By leaving tax rates where they were to encourage savings and entrepreneurship. By trimming regulations to liberate creativity. By tackling Medicaid, Medicare and welfare to bring the deficit and interest rates down much more.

Still, to give Clinton his due: While he hasn’t done much to help the economy, he hasn’t done much to hurt it either. “Being there” - rather than intervening and tinkering - is sound policy.

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