Whether you are watching the stock market, the headlines, or merely your 401K account balance, there is not much positive about the economic collapse just getting underway in the United States. With each new negative earnings report, bankruptcy, and ominous unemployment report, it gets a little harder to see any silver lining around the black cloud. However, there is one positive consequence of the economic debacle: The Bill Clinton Myth has finally been debunked.
Most people are familiar with the Myth, but mistake it for history. It’s a wonderful story if you are a Democrat or other variety of government-worshipper. For those who practice that religion, the Bill Clinton years serve as a Golden Age to talk about, write about, maybe even pray about, hoping for their return.
Unforunately, this myth does not even offer the benefits of its more interesting ancient predecessors. While the ancient myths of gods and monsters contained spiritual and philosophical truth underneath their obviously fictional storylines, the Bill Clinton Myth contains no truth at all. Perhaps “myth” is the wrong word, because it gives good myths a bad name.
The Bill Clinton Myth goes something like this. After “mismanagement” of the economy by President George H.W. Bush, which resulted in the recession that coincided with the 1992 election, Clinton took office and “managed the economy” wisely during his eight year presidency. Clinton’s “centrist policies” were just what the economy needed at a time of technological revolution, and his wise stewardship resulted in not only unprecedented growth and low unemployment for the economy, but balanced budgets and even surpluses for the federal government. By the time Clinton left office, the United States was more powerful economically than it had been at any time in its history.
Like the Populist Myth of the 19th Century, this one is a great story, but none of it is true. While even some Republicans begrudgingly credit Clinton with the mythical budget surpluses or the equally mythical prosperity in the 1990’s, they do themselves a disservice in regard to their quest to discredit every Democrat who ever (or will ever) lived.
In reality, there were no federal government surpluses. The lion’s share of the prosperity was a Federal Reserve-created bubble (the dot com bubble) and what real economic growth there was occurred despite Clinton’s policies, not because of them.
It might be necessary to go back and read that last sentence again. It is heresy, as surely as Galileo’s heliocentrism was to the Inquisition. It’s also just as true.
First, the so-called “surpluses” were bogus. As Craig Steiner explains, the appearance of a surplus was merely increased tax revenues from the dot com bubble allowing the Clinton administration to borrow more money from Social Security. While the public debt went down in the last four years of the Clinton presidency, the intergovernmental debt (mostly to Social Security) went up by an even greater amount, resulting in an increase in the national debt in each of those years. These are easily verifiable facts out of the published federal government budgets for those years. Anyone who doubts this can simply look up the budgets from 1997- 2001 and see the deficits for themselves.
Certainly, there were astounding developments in technology in the late 1980’s and throughout the 1990’s. One could look at this decade as a mild version of the technological revolution that occurred at the turn of the 20th century, although the breakthroughs, mostly in computing, were not as paradigm-shifting as the invention of the steam engine or the automobile, much less the telephone or the computer itself. These advances resulted in vast increases in productivity. A whole industry was born, employing people in higher paying jobs and revolutionizing communication, commerce, and production.
All of this happened during Bill Clinton’s presidency, although its roots go back at least as far as the Reagan years, possibly even Carter. But what did Bill Clinton do to cause this technological revolution? Nothing. Microsoft, Oracle, Apple, and the rest of the real new companies that emerged during this technological revolution were children of the free market. Gates, Ellison, Jobs and the rest were all entrepreneurs who took enormous risks based on their superior vision of where breakthroughs in technology could take commerce.
Anyone old enough to remember knows the government had very little understanding of the tech sector and frequently complained it didn’t know how to regulate the new types of products or business processes the tech sector presented. In other words, much of the reason for the explosive growth was the absence of government involvement. Until the lumbering machinations of government caught up, a free market in technology existed that allowed for spectacular innovation and growth.
The most significant action undertaken by the Clinton administration regarding the tech revolution was its anti-trust case against Microsoft. Here, Clinton’s contempt for free markets and property rights came shining through. This particular anti-trust case had a bizarre twist, as it was based upon the ludicrous assertion that Microsoft had some responsibility to build opportunity for its competitors into its own product. As usual, the government tried to “ensure competition” by using its coercive power to cripple the leader, rather than protect the property rights of all.
There was another side to the tech revolution that wasn’t the natural result of free markets: the dot com bubble. This was Pets.com, online supermarkets, and other hare-brained schemes that only got capitalized due to the reckless monetary policy pursued by the bubble-maestro himself, Alan Greenspan.
To be fair, Clinton doesn’t deserve much blame for this bubble. Most politicians demonstrate little understanding of monetary policy, beyond their belief that lower interest rates raises stock prices and higher stock prices equals votes. At one point, Clinton actually made a speech in which he claimed the business cycle had been eliminated.[1] That shows his understanding was as limited as most other presidents’.
Regardless, the dot com bubble had nothing to do with Clinton. It was merely the Fed doing what the Fed does, inflate and distort the economy, regardless of who happens to occupy the White House.
Finally, in addition to the false credit Clinton receives for his imaginary role in the perceived prosperity of the 1990’s, he has somehow escaped all blame for his very real hand in the problems we are facing now. Remember, it was Clinton who appointed FDR II (Franklin Delano Raines) as CEO of Fannie Mae, and then pressured the GSE to significantly increase its loans to riskier sub-prime borrowers.
The Clinton administration bragged it had not only had a hand in the first black CEO of a Fortune 500 company,[2] but also that it had made home ownership possible for millions of Americans that otherwise could not have obtained mortgages. Raines is now the subject of over 100 civil lawsuits and a huge percentage of those mortgages are defaulting. As usual, the government’s results when interfering in markets are exactly the opposite of its intentions.
Contrary to the Clinton Myth, the Clinton presidency had nothing to do with what real prosperity there was in the 1990’s. The Clinton administration was as clueless and impotent as most others while the Federal Reserve blew up an enormous bubble on its watch, sowing the seeds for the mortgage crisis that started the present economic disaster. Economically, the Clinton presidency was an unmitigated disaster, and hopefully it is clear to all but the most fervent believers that his “stewardship of the economy” is a myth.
Lest this be seen as partisan, let me clear the air. There have been two presidents credited with prosperity that seemed to coincide with their years in office during the past 40 years. One was Reagan, a Republican, and the other, Clinton, a Democrat. In both cases, they were falsely credited with prosperity that was mostly an illusion caused by the Federal Reserve. Their policies otherwise failed miserably.[3]
With the Clinton Myth exposed as a fraud, perhaps we can get rid of the entire government religion. Centuries ago, most people of the earth ceased sacrificing animals to bring rain, better crops, or good fortune hunting. They had finally realized there is no cause-effect relationship between killing a goat and the end of a drought. We need to likewise recognize that no politician has ever had any more to do with prosperity than those unfortunate goats had to do with the weather.[4] Freed from this superstition, it becomes clear that only free markets, individual effort, and creativity can create wealth and prosperity.
Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.
[1] I recall him making this ludicrous statement, but have not been able to reference it. Perhaps someone can provide the citation in a comment.
[2] The focus by both the Clinton administration and the media on Raines, a political hack who took over a Government Sponsored Entity, was a disservice in that it distracted attention from REAL black executives, like Kenneth Chenault, and Richard Nanula, who had risen to their positions based upon their talent and hard work.
[3] To be fair, Reagan’s rhetoric was admirable. He talked constantly about lower taxes, smaller government, and more personal liberty. However, he failed to implement this ideology to any significant degree, possibly because of a Democratic Congress. More importantly, he ran huge deficits due to defense spending and the growth of entitlement programs on his watch that constituted bigger government rather than smaller.
[4] Actually, the government religion is far more harmful than the ancient religious cults. When the ancients sacrificed a goat, they neither benefitted nor harmed anyone (other than the goat). When government tries to “create prosperity,” it harms everyone in society.