Alan Greenspan, the guru of all things economic, says he’s a libertarian, small-government Republican. But his new book, The Age of Turbulence, while jammed with interesting tidbits, sends out a far different political message. It says that Bill Clinton, the champion of big government, high taxes and national health care, was a splendid President whose effort to rein in deficits was nearly thwarted by a hidebound Republican congressional majority.
From Greenspan’s point of view, Newt Gingrich’s House and Bob Dole’s Senate were clearly wrong to oppose Clinton’s bold, gigantic 1993 tax hike, even though it was the “largest tax increase in the history of public finance in the United States or anywhere else in the world,” according to the late Sen. Daniel Patrick Moynihan (D.-N.Y.).
Greenspan not only hails Clinton’s tax hikes, but scolds Bush and the GOP for scaling them back. “Far more urgent than tax cuts,” Greenspan informed the Bush people in 2002, “was the need to address the threat posed by the soaring new deficits.”
Even the initial Bush tax cuts in 2001 — when surpluses seemed to stretch as far as the eye could see — were evidently wrong-headed. And Greenspan makes it clear he deeply regrets giving the impression that he favored them, or at least the size of those cuts. Greenspan, it develops, doesn’t have much use for supply-siders and the belief that tax cuts improve the economy.
Readers could be forgiven for thinking that Greenspan might just be endorsing Hillary, too, so long as her husband would be handing out advice. Embellishing on his book’s bouquet to Bill, Greenspan informed CBS’s “60 Minutes” that Hillary is “very smart” and is “unquestionably capable” of handling the presidency, though his “tendency” would be to vote with his party.
Dazzled by Bill
Still, his book’s praise for Bill Clinton and Clinton’s economic team, including Treasury Secretary Robert Rubin, who never met a tax cut he could embrace, is so lavish you’d like to take a peek at the ballot Greenspan actually casts if Hillary winds up as the Democratic nominee.
Greenspan seems dazzled by Bill Clinton’s brains, skill and effectiveness. The President was on a par with Richard Nixon for “sheer intelligence” (though Nixon, unlike Bill, apparently, had deep, personal flaws).
Clinton realized immediately that he had to come to grips with the deficit, just as Greenspan had informed him. So, without a single vote from the Republicans in either house, he raised trillions in taxes almost as soon as he assumed office. Good for Bill, Greenspan argues.
Everything Clinton did in the economic realm was first rate, in Greenspan’s view. Unlike many politicians, Clinton had “shown a preference for dealing in facts.” Indeed, a “consistent disciplined focus on long-term economic growth became a hallmark of his presidency” (page150).
Conservatives can’t argue with Greenspan’s bashing Bush for failing to use his veto pen or for embracing pork-laden money bills and driving that expensive Medicare drug law through Congress. But transforming Bill Clinton into a statesman with a passion for fiscal responsibility stands reality on its head.
In his first two years in office, Bill Clinton did what Democrats do best: He not only called for a vast increase in taxes but a vast increase in domestic spending, including a multi-billion-dollar stimulus package and the entire takeover of the national healthcare system, one-seventh of America’s yearly domestic output. Clinton, with Greenspan apparently oblivious, was going full-bore left.
The Senate Republicans slimmed down the tax increases, blocked the $16-billion stimulus package, killed the $72-billion broad-based energy tax and stopped HillaryCare in its tracks. Less than six weeks after Senate Majority Leader George Mitchell (D.-Maine) raised the white flag on HillaryCare, the Republicans swept both the House and the Senate at the polls. Then — and only then — did Bill Clinton begin to retreat from his Leonid Brezhnev routine.
Panicked by the popular disapproval of his tax-and-spend presidency, Clinton brought on adviser Dick Morris to move his administration toward the center and downgrade the role of White House liberals.
With Morris and the GOP hammering him to tack right, Clinton buried HillaryCare, offered balanced-budget proposals and began saying things that sounded sweet to conservative ears.
He claimed before an October 1995 fund raiser in Texas that “I think I raised them [taxes] too much, too,” and he insisted in his 1996 State of the Union address that “the era of big government is over.”
Clinton also offered a more serious-minded budget in election year 1996, one designed to end the deficit in 2002. While it was clearly a political document, noted the non-partisan Congressional Quarterly, Clinton’s budget was “nevertheless a remarkable manifesto for a Democrat — proof of how far the Republicans had moved Clinton and the budget debate since sweeping into control of Congress in 1995.”
Only a year earlier, CQ recalled, “the White House had drawn up a budget that assumed deficits of $200 billion or more a year well into the future.”
The President then acquiesced in a series of important Republican initiatives. In election year 1996, he signed, albeit reluctantly and with liberals raging against it (and after he had previously vetoed it), historic welfare-reform legislation, transferring critical federal authority and block grants to the states. Case loads dropped like stones.
More concessions were to come. With Gingrich Republicans in the lead, Clinton promoted the middle-class tax cut he had pledged in the campaign but had later ditched, cut the capital gains tax 30% and seriously decreased estate taxes.
Equally important, voters and investors knew that with the GOP in control of both houses, Clinton couldn’t get any big spending programs through Congress.
Along with Greenspan’s keeping interest rates low, the economy began to boom — and so did the surpluses. The surpluses came about for another reason: Ronald Reagan — another Republican Greenspan short-shrifts — had ended the Cold War, so Defense spending was dropping dramatically.
Good times came during the Clinton years largely because of Republicans. But Greenspan has given almost all the credit to Bill.