How GOP Principles Saved “Clintonomics”
Democrats can’t stop spreading the tale that Bill Clinton was the fountain of our prosperity during the “Golden ’90s.” You probably heard them retelling this hoary myth at that Denver rock concert, with Bill beaming beatifically whenever Obama or some lesser light began publicly bowing and scraping before his economic wizardry. And you’ll be hearing it many times again before Election Day. Well, yes, the Clinton years were prosperous, but this was due to conservative policies pushed by the GOP. This is not GOP propaganda, but fact.
Let’s look at the record (and pardon me if these words sound familiar, since I’ve been writing about such stuff for several years). After Clinton’s election in 1992, he went full-bore left on the economy, pressing for the largest tax hike in history (in the words of the late Sen. Patrick Moynihan), a special $72-billion energy tax and a vast swelling of domestic spending, including a federal takeover of the entire health-care system, equal to one-seventh of America’s yearly domestic output.
Before he could drop these economy crushers on the nation, the President was largely foiled by a feisty Republican minority in both houses of Congress. True, he did get through a hefty tax hike, but with Senate Minority Leader Robert Dole and House GOP Whip Newt Gingrich mounting their steeds, the congressional Republicans significantly scaled back the huge Clinton tax offering, rallied to deep-six a $16-billion stimulus package and knocked off the broad-based energy tax as well.
Hillary’s health care, exposed as an enormously complex and expensive boondoggle, was also collapsing under steady GOP hammering, with a nice assist from a devastating critique in the liberal New Republic. On Sept. 26, 1994, Majority Leader George Mitchell (D.-Maine), the chief Senate sponsor of Hillarycare, officially raised the white flag of surrender. (The non-partisan Congressional Quarterly has chronicled all this.)
A little over a month before the November ’94 balloting, Gingrich and more than 300 House Republican candidates nationalized the election by proclaiming their support for the very non-Clintonian, non-Democratic “Contract With America.”
Under the Newt-designed contract, the Republicans pledged to give the average American family major tax relief, cut taxes substantially for investors, make wholesale changes in the welfare system and balance the budget. Less than six weeks later, the American voters, enraged by Clintonomics (plus his big push for gays in the military), handed the Democrats a historic defeat.
The Republicans not only captured the Senate, but won a majority in the House for the first time in 40 years, enthroning Gingrich as speaker. Thus, the Clinton effort to socialize a huge chunk of America had been seriously blunted. Clinton’s economic policy, as pursued from 1992 through 1994, was over. How, then, can Clinton be given credit for an economic program that was largely thwarted? The simple answer: He can’t.
Aware that his first two years had been a disaster (even though he inherited an expanding economy, according to his own Office of Management and Budget), a panicky Clinton brought in Dick Morris to rescue his presidency. Morris instructed Clinton, as described in Morris’s Behind the Oval Office, to “[W]ork to eliminate the deficit, require work for welfare, cut taxes and reduce the federal bureaucracy.” That is, govern conservatively.
Clinton Tacks Right
Clinton, though kicking and screaming all the way, eventually embraced Morris’s advice. By the spring of 1995, the President had abandoned Hillarycare for good and was proposing balanced budgets. Then he declared at an October 17 fundraiser in Houston, Texas, that “I think I raised them [taxes] too much, too.”
But Clinton’s rhetorical surrender to the center and the right was not yet complete. In his 1996 State of the Union address, he made the grand pronouncement that “the era of Big Government is over.” Clinton then acquiesced in a series of important Republican initiatives, putting some substance behind the oratory.
In election year 1996, he signed, reluctantly and with liberals raging in opposition, a historic GOP welfare reform program, eliminating scores of federal welfare regulations and transferring critical spending authority to the states. The initial results — which Clinton hailed at the Democratic Convention in 2000 — were spectacular, with caseloads’ falling like stones within just a couple of years.
Clearly, Republicans had gotten this area of public policy right and Clinton was quietly tipping his hat to them while loudly seizing credit for the program’s stunning success.
More Clinton concessions were to come. The President in August of 1997 signed into law a bipartisan balanced-budget measure that not only restrained spending, but also included several critical Republican tax-relief items, including a solid, middle-class tax cut, a pledge the President had crawfished on after his ’92 election.
The GOP-sponsored cut came in the form of a $500-per-child tax credit — courtesy mainly of the lobbying of pro-family activist Gary Bauer — which would amount to about $75 billion over a five-year period and prove a godsend to millions of American families.
The measure also contained substantial tax relief elsewhere: a nearly 30% cut in the capital gains tax burden, a serious decrease in estate taxes, repeal of the alternative minimum tax on small business and a new retirement savings account, known as the Roth IRA. Clinton had now gotten around to embracing many of the very same proposals promised in the “Contract” and served up by the first Gingrich Congress in 1995. In the meantime, Fed Chairman Alan Greenspan had been keeping interest rates relatively low, thus giving another boost to the country’s economic success.
Equally important, the Republicans weren’t imposing on the country — or even threatening to impose — the kind of dangerous domestic spending and regulatory programs that can wreak economic havoc. “What proved critical,” says former Congressional Budget Office Director, June O’Neill, “was the absence of legislation that meddled with the economy or that had major, long-run spending consequences on the budget.”
The result of all this? The economy bloomed. Money flowed into the U.S. Treasury, largely because people were becoming wealthier. Revenues from income and capital gains taxes were soaring, not because rates were being raised but because rates were being lowered. Spending was restrained, GDP was rising at a healthy 4% clip and the Dow average had more than tripled by the time Clinton left office — and has managed to maintain these stratospheric heights, largely because of the Bush tax cuts.
The Ronald Reagan peace dividend, with an assist from George H.W. Bush, also proved crucial in generating the surpluses the Democrats keep bragging about. Even Clinton’s Defense team has acknowledged this truth.
According to John Shalikashvili, the chairman of the Joint Chiefs under Clinton, and Clinton Defense Secretary William J. Perry (Washington Post, Aug. 10, 2000): “This ‘peace dividend,’ amounting to about $100 billion a year, has been a major contributor to the balanced budget that our economy now enjoys.”
In other words, the economy that Bill Clinton and the Democrats take credit for had soared due to conservative Republican economic principles and a Reagan-engineered peace dividend. But Bill and the Democrats keep pretending that they invented this “Goldilocks” economy. The truth, of course, is different.