By Jonathan M. Orszag - 12/02/11 12:56 AM EST
The U.S. economy continues to struggle, with 9 percent unemployment and anemic growth. In this election season, both political parties are still more focused on blaming each other than implementing real solutions to solving our economic ills. My former boss, President Clinton, has just published a book, Back to Work, with a lot of sound policy ideas — many of which would have immediate and long-term benefits for our economy.
But many want to ignore Clinton’s advice, despite the country’s strong economic performance during his two terms in office. To be clear, presidents get too much credit and too much blame for the economy during their terms, so I do not want to suggest that he personally created almost 23 million jobs or raised the typical household’s income by almost $7,000 (after adjusting for inflation).
Despite this record, many Republicans do not want to admit that Clinton deserves any credit at all. But Republican’s shifting story on Clinton and the economy shows the absurdity of their perspective. In 1993, they said his economic plan would be a “job killer” and would cause a recession. Then Sen. Bob Dole (R-Kan.), when running for president, said Americans were suffering a “Clinton Crunch” and that the economy should be performing better. They then admitted the economy was doing well, but claimed it was Alan Greenspan, Internet entrepreneurs or the Republican Congress who should be applauded. Their motto for assigning credit for the long and sustained period of economic expansion is ABC — Anyone But Clinton.
After he left office, they shifted their tune even more: either they blame Clinton for all of the economic problems of the last decade or they suggest that the economy could have performed better under his watch. On that latter claim, I am not sure how it could have performed any better — the unemployment rate did fall below 4 percent, a level most economists thought was impossible to reach again in the United States.
I am more than happy to give credit to everyone; to paraphrase John Kennedy, success has a thousand fathers. No reasonable person can deny that Clinton — through his decisions to act and not to act (often against the interests of his own party) — deserves a lot of credit for the strong economic performance during the 1990s.
Many in the Democratic Party tell a somewhat different story about the Clinton administration. Some, like Alec MacGillis of The Washington Post, say that Clinton’s policies contributed to “economic injustice and inequality in America.” Such an argument is also deeply flawed. The best strategy for economic justice and equality is a long economic expansion, and we had the longest one in our history during the 1990s. MacGillis also focuses on one part of the many policy changes that occurred in the 1990s and ignores the simple fact that the incomes of each group — from the poorest to the richest Americans — increased significantly. Given his record in office and in the past decade with his foundation, it is clear that Clinton is fighting for economic justice and still putting people first.
Others blame the financial crisis on him because he repealed certain sections of the Glass-Steagall Act, which prohibited bank-holding companies from owning other financial companies. But Peter Wallison, a fellow at the American Enterprise Institute, concluded that the repeal signed by Clinton had “no significant effect whatever on the financial crisis.”
Finally, some blame Clinton for not regulating derivative transactions in the late 1990s. Here, critics have a point. If Clinton had regulated derivatives, we might have been in a very different economic state today. But we have to remember that the derivative market was small in 1998, compared to what it became in the 2000s, and hindsight sees 20/20. It is hard to know what Clinton would have done if he had been in office in 2003 when Warren Buffett called such transactions “financial weapons of mass destruction.” From his past actions, I believe Clinton would have decided to impose at least some additional regulatory oversight, which could have prevented the financial crisis years later.
In the end, as John Adams said, facts are stubborn things, and no Republican or Democrat can change the fact that the economy prospered in the 1990s. Given the state of the economy today, we should look to the 1990s, as well as those who helped make that performance happen, for solutions to today’s problems. We don’t have the luxury today to play a blame game — we have to be in the solutions business.
Orszag is a senior managing director at Compass Lexecon, LLC, an economic consulting firm, and a senior fellow at the Center for American Progress. He formerly served as an economic policy adviser on President Clinton’s National Economic Council. The views and opinions expressed are solely those of the author.