Bill Clinton and George Walker Bush: Economic Policies - Essay Example

Bill Clinton and George W. Bush: Economic Policies Comparing the economic policies of Presidents GeorgeW. Bush and Bill Clinton requires reviewing initiatives of their respective administrations that affected the economy then examining the results of these actions. The Bush administration, according to recent opinion polls, has increasingly moved in the wrong direction in many categories with economic outlook being no exception. Several economic indicators give credence to this perception. In contrast, the country experienced positive changes during the Clinton years according to economic growth conditions and supported by public opinion. Bush supporters argue that Clinton inherited a booming economy on the upswing from the previous Reagan/Bush presidencies then ran it into the ground for which George W. now takes the blame. Many Clinton backers disagree taking the position that the current Bush administration has instituted a faith-based economic policy; that Armageddon will happen soon so it doesn’t matter how the country’s economy is managed. To give total credit or blame to one person for every aspect of the nation’s economic condition is hardly a credible stance. However, this paper will compare the two presidents’ economic policies as they relate directly to the end result in similar categories as a means to compare their successes and failures on an even playing field. To that end, this discussion provides an extensive view of the economy over the previous 12 years spotlighting on percentage changes of several economic indicators rather than total number. The steady creation of employment opportunities is one of the most telling signs of a country’s economic condition. According to the Bureau of Labor Statistics, the number of jobs increased 2.38 percent per year under Clinton, but it has decreased 0.17 percent per year in the years Bush has held office (Atkinson & Hutto, 2004). The Bush administration claimed that the economy was on a downturn following the Clinton presidency then was further hindered by the attacks on the World Trade Center in 2001. Bush sold the idea of tax cuts to the public predicting that this step would help to stimulate the economy by creating 3.7 million jobs in 2003, but produced only 1.7 million, fewer than the number of births in the country that year (Council of Economic Advisors, 2003). By contrast, 22 million jobs were created during the eight years Clinton was in office. The tax cut concept was not based on sound, objective economic analysis, rather it was an ideology borrowed from the equally failed trickledown theory of the 1980’s which, simply put, theorizes that by putting more money in the hands of the rich, they will be spurred to spend and invest more which eventually creates jobs for the middle and lower classes. According to estimates by the Brookings/Urban Institute Tax Center, 62 percent of the Bush tax cuts went to people in the top 5 percent income level. The top five percent spend a lower portion of their income as they delve into investments and savings accounts that gain higher returns on their money. The lower 95 percent must, from necessity, return most of their paychecks back into the economy. Spending, economists agree, is the ingredient that stimulates the economy and creates jobs which generates additional spending and around it goes. The Bush federal tax cuts were ineffective at generating spending because the bulk of the money was not put in the hands of people that spend. Cutting taxes on capital gains and business expenses are not an effective way to give the economy a boost. Business would likely trade their tax cuts for more customers walking through the door. They have had access to low interest rates for many years yet few are investing in the future at present. The inevitable outcome of the ‘Bush Economic Growth’ plan is that it will lead to never-ending deficits which will ultimately devastate future employment gains (Mishel & Bernstein, 2003). The deficit, the nation’s bank account of sorts, is another major indicator of economic condition. Clinton turned a Reagan/Bush $300 deficit into a $160 billion surplus by the year he left office. The National Debt currently stands at more than $8.4 trillion dollars, according to the U.S. Treasury Department report (April, 2006) which, in 2005, cost U.S. taxpayers more than $350 billion in deficit payments (Bureau of the Public Debt, 2006). Clinton told CNN in a 2005 interview, that the United States depends on Japan, China, Britain, Saudi Arabia and Korea “to basically loan us money every day of the year to cover my tax cut and these conflicts and Katrina. I dont think it makes any sense. I think it’s wrong” (Stephanopoulos, 2005). Spending restraints employed by Clinton brought federal spending down from 22 percent of the Gross Domestic Product (GDP) in 1992 to 18 percent in 2001, the lowest since 1966 (Briefing Room, 2000). During the first 3.5 years Bush was in office, the GDP grew by 2.4 percent. It had swelled to 3.2 percent by the 3.5 year mark of the Bush administration (Freeman, 2004). Productivity can be an important indicator of economic success because high rates of productivity usually companion with advances in living standards as it measures the amount of economic yield that each hour of work produces. During the Bush administration, it has grown by an average of 3.76 percent per year but just managed to grow 1.83 percent on average per year during the Clinton administration. These are the first positive economic numbers supporting the Bush policies but on further inspection, comparing the annual growth of GDP under each administration would be deceptive, or ‘fuzzy math,’ because the population continues to grow. “Per capita GDP, in other words, how much output there is each year relative to the total population, is a more accurate measure. While per capita GDP rose 2.42 percent under Clinton, it has risen just 1.62 percent per year during the Bush presidency. In large part, this is because fewer people are working” (Atkinson, 2003). A higher unemployment rate results in less money being circulated, making this a strong indicator of economic growth or decline. This rate stood at 7.5 percent at the beginning of the Clinton presidency then dropped each year until it reached 5.4 percent in 1996. Although economists believed lowering it further would trigger inflation, Clinton’s policies continued to push the rate down without significant inflation until it stood at the astonishingly low rate of 4.0 percent in December of 2000. The Bush administration, by contrast, has consistently seen from five to six percent unemployment figures (Freeman, 2004). Median household income demonstrates the true economic mid-point of the population. It is an effective measurement of a families’ general welfare as, by definition, half of all households make more and half make less than the median. Median household income has decreased by an average of 1.15 percent per year under Bush and, predictably, increased an average of 1.65 percent per year during the Clinton years (U.S. Census Bureau, 2004b). No economic indicator symbolizes the American dream in the same way homeownership does. This is an economic policy success for which Bush frequently has boasted. During his administration, the home ownership rate has increased 0.37 percent per year. That is, however, considered an economic slowdown when numbers are compared to the average increases of 1.94 percent during the Clinton administration (U.S. Census Bureau, 2004a). Clinton wins the economic numbers match over Bush by a first-round knockout but was this simply good fortune smiling on the man whose campaign message was ‘it’s the economy stupid?’ Many argue that Bush’s method tax-cuts are the best method by which to stimulate the economy while Clinton’s policy of spending restraints cut the flow of capital into the economy. Outside forces caused Clinton to win the battle of the numbers, not economic policy. The reason the economy prospered during the Clinton administration was, in part, because of the dollars generated by the internet. Clinton should thank Bill Gates’ inventive nature as when he gained the presidency, the internet was the hot investment driving the market upward as millions of dollars were traded in internet stock. Clinton had nothing to do with the invention of the internet, as Gore claimed, therefore cannot accept credit for the economy. If Clinton had been president during the economic bust following 911, his numbers wouldn’t be as complementary. The recession that followed was slight only as a result of action by the Bush Administration. Given 911 and the drain of funds into the Iraq war, the economy under Bush has performed remarkably well. The tax cuts worked and continue to keep the economy relatively strong (Weisbrot, 2001). The Clinton economic plan was meant to limit government expenditures thereby balancing the budget so as to then further stimulate the economy with its surplus. The policies also inspired economic growth in concert with the objective of paying down the enormous debt inherited from the Reagan/Bush era. The underlying assumption of Clinton economics is that lowering the budget debt leads to lower long-term interest rates because the government has to borrow less with the lower rates stimulating additional investment growing the economy. One can reasonably argue that there is little economic reasoning for this assertion. According to any standard model used by economists, the changes on interest rates during the Clinton years were too small to have had a noticeable positive impact on growth meaning the economic upturn was not investment-led. During the mid-1990’s, the Federal Reserve abandoned the viewpoint that the economy operates most efficiently when unemployment stands at about six percent and that any lower figures might trigger inflation. Adjusting interest rates lower affects business investment and, in turn, Clinton’s employment numbers. Another factor that affected the economy was that the stock market experienced a $14 trillion increase in stock holdings during the 1990’s causing upper income households to generously consume goods. We now know this spending was founded largely on paper increases in wealth which vanished by the beginning of the Bush administration. This fortune made ‘on paper’ provided substantial economic motivation in the same way that large increases in deficit spending would. Clinton cannot claim credit for the sudden stock market surge and had nothing to do with the Fed’s policy change. The areas of economic directives that Clinton supported were NAFTA and the creation and expansion of the World Trade Organization. Both these moves, many argue, not disproportionate tax relief, serve to prevent the majority of Americans from sharing in the gains from economic growth. Clinton’s welfare reform program took money from millions of poor families and out of the economy. Clinton’s economic policies instigated the upward distribution of wealth, not the other way around as his campaign claimed of the Reagan/Bush era policies. One of many examples of failed Clinton policies is the median wage finally reached its pre-1990 level in 1999, under the Bush administration (Weisbrot, 2001). It appears that, while both sides espouse what they believe is sound economic theory backed by statistics, disparities in economic outcomes under each administration are attributable at least in part to the policy choices of the respective presidents. The ballooning of the National Debt is cause for concern from both positions, however, as if foreign nations decide not to continue to finance America’s Federal deficit, interest rates will skyrocket, bond rates will fall and the stock market’s increases, which are not based on rising profits, will plummet for many long years to come. References Atkinson, Robert D. (October 20, 2003). “The Innovation Economy: A New Vision for Growth in the 21st Century.” Progressive Policy Institute. Atkinson, Robert D. & Hutto, Julie. (October 18, 2004). “Bush vs. Clinton: An Economic Performance Index.” Bureau of Labor Statistics. Washington D.C. Briefing Room. (December 28, 2000). “President Clinton: The United States on Track to Pay Off the Debt by End of the Decade.” Washington D.C.: The White House. Bureau of the Public Debt. (April 13, 2006). “The Debt to the Penny.” U.S. Department of the Treasury. Retrieved April 14, 2006 from Council of Economic Advisors. (February 4, 2003). Strengthening America’s Economy: The President’s Jobs and Growth Proposals. Washington D.C.: Council of Economic Advisors. Freeman, Robert. (September 27, 2004). “Evaluating Bush’s Economic Performance: A Field Guide for the Perplexed.” Common Dreams Newscenter. Retrieved April 14, 2006 from Mishel, Lawrence & Bernstein, Jared. (June 6, 2003). “Grading the Bush ‘Jobs and Growth Plan.’” [Testimony given before the U.S. Senate Democratic Policy Committee Hearing.] Economic Policy Institute. Stephanopoulos, George. (September 19, 2005). “Clinton: Bush Should Raise Taxes to Pay for Recovery.” CNN, Politics. Retrieved April 14, 2006 from U.S. Census Bureau. (2004a). “Housing Vacancies and Homeownership Annual Statistics (1995, 2000, and 2003), Table 9: ‘Estimates for the Total Housing Inventory for the United States.’” Washington D.C.: U.S. Department of Commerce. U.S. Census Bureau. (August 27, 2004b). “Historical Income Tables, Table H-6: All Races by Median and Mean Income: 1975-2003.” Washington D.C.: U.S. Department of Commerce. Weisbrot, Mark. (January 9, 2001). “Clinton’s Economic Legacy.” Common Dreams Newscenter. Retrieved April 14, 2006 from Read More