Bill Clinton's economic policy, referred to by some as Clintonomics (portmanteau Clinton and economy ), summarizes the US economic policy of President Bill Clinton that presidency, which runs from January 1993-January 2001.
President Clinton oversaw a very strong economy during his tenure. The US has strong economic growth (about 4% per year) and record employment creation (22.7 million). He raised taxes on higher-income taxpayers early in the first half and cut back on defense spending, which contributed to increased revenues and reduced spending relative to economic size. These factors helped bring the federal budget into a surplus from fiscal year 1998-2001, the only year of surplus after 1969. Publicly held debt, a key measure of national debt, fell relative to GDP across two terms, from 47.8 % in 1993 to 31.4% in 2001.
Clinton signed NAFTA into law along with many other free trade agreements. He also implements significant welfare reforms. Its financial deregulation (both secretly and openly through the Gramm-Leach-Bliley Act) has been criticized as a contributing factor to the Great Recession.
Video Economic policy of the Bill Clinton administration
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The Clinton presidency included a large period of economic growth in American history. Clintonomics covers both a set of economic policies and governmental philosophy. Clinton's economic approach (clintonomics) requires the modernization of the federal government, making it more corporate-friendly while giving greater authority to state and local governments. The ultimate goal is to make the American government smaller, less wasteful, and more agile in a new era of globalization.
Clinton took office after the recession ended, and his economic practice was held by his supporters as a trigger for recovery and surplus, although some critics of the president remained more skeptical of the cause and effect of his initiative. Clintonomics policy focus can be encapsulated by the following four points:
- Form fiscal discipline and eliminate budget deficits
- Maintain low interest rates and encourage private sector investment
- Eliminate protectionist tariffs
- Invest in human resources through education and research
Prior to the 1992 presidential campaign, America had undergone twelve years of conservative policies implemented by Ronald Reagan and George Herbert Walker Bush. Clinton ran on an economic platform balancing budgets, lowering inflation, lowering unemployment, and continuing the traditional policy of conservative free trade.
David Greenberg, a professor of history and media research at Rutgers University, argues that:
The Clinton years are undoubtedly the time of progress, especially on the economics of [...] The Clinton slogan of 1992, 'Putting the first man,' and his pressure on 'economic, foolish,' is optimistic that populism is still gritty in the middle of the suffering class under Ronald Reagan and George HW Bush. [...] By the end of Clinton's presidency, the numbers were impressive. In addition to the record high surplus and the lowest poverty rates, the economy can boast the longest economic expansion in history; the lowest unemployment since the early 1970s; and the lowest poverty rate for single mothers, American blacks, and the elderly.
Maps Economic policy of the Bill Clinton administration
Fiscal Policy
Tax reform
In proposing a plan to cut the deficit, Clinton submitted a budget and a corresponding tax law that would cut the $ 500 billion deficit for five years by reducing spending of $ 255 billion and raising taxes on 1.2 percent of the richest Americans. It also imposed a new energy tax on all Americans and imposed about a quarter of those who received Social Security payments for higher taxes on their benefits.
The Republican Congress leader launched an aggressive opposition to the bill, claiming that tax increases would only make things worse. Republicans united in this opposition, and every Republicans in both houses of Congress voted against the proposal. In fact, it took a vote of Vice President Gore in the Senate to pass the bill. After extensive lobbying by the Clinton Administration, the DPR briefly voted in favor of the bill by voting 218 to 216. The budget package expanded the income tax credit earned (EITC) as an aid to low-income families. This reduces the amount they pay in federal income and Federal Insurance Contributions Act tax (FICA), providing $ 21 billion in aid to 15 million low-income families.
Clinton signed the 1993 Omnibus Reconciliation Act into law. This law creates income tax of 36 percent to 39.6 percent for high-income individuals above 1.2 percent of wage earners. Businesses are given income tax rates of 35%. The hat was lifted on Medicare. The tax is raised by 4.3 cents per gallon for transportation fuel and the taxable part of Social Security benefits increases.
Clinton passed the Small Business Employment Protection Act of 1996 that reduced taxes for many small businesses. In addition, he signed a law that increased tax deductions for entrepreneurial business owners from 30% to 80% in 1997. The Taxulayer Relief Act reduced some federal taxes. The 28% rate for capital gains is lowered to 20%. The 15% rate is lowered to 10%. In 1980, tax credits were enacted on the basis of the number of individuals under the age of 17 in a household. In 1998, $ 400 per child and in 1999, it was raised to $ 500. The law was removed from taxable profits on home sales of up to $ 500,000 for married individuals, and $ 250,000 for single individuals. Education savings funds and pension funds are subject to tax breaks. Some expired tax terms are extended for the selected business. Since 1998, exceptions can be made for family farming and small businesses eligible for it. In 1999, the correction of inflation at the $ 10,000 annual gift tax exemption was reached. In 2006, the $ 600,000 income tax exemption had increased to $ 1 million.
The economy continued to grow, and in February 2000, it broke the record for the longest unbroken economic expansion in US history. However, it has been argued that strong economic growth in the late 1990s was caused by faulty allocations and malinvestments of the NASDAQ and Dot-Com Bubbles, both of which ended in late 2001 to mid-2002.
After Republicans won control of Congress in 1994, Clinton strongly opposed the proposed tax cuts, believing that they liked the rich and weakened economic growth. In August 1997, however, Clinton and the Republican Congress were finally able to reach a compromise on the bill that reduced capital gains and real estate taxes and gave taxpayers $ 500 credit per child and tax credit for tuition and college tuition. The bill also calls for a new individual retirement account (IRA) called Roth IRA to allow people to invest income taxes to retire without having to pay taxes at the time of withdrawal. In addition, the law raises the national minimum for cigarette taxes. The following year, Congress approved Clinton's proposal to make colleges more affordable by extending federal student financial assistance through Pell Grants, and lower student lending rates.
Clinton also battles Congress almost every session on the federal budget, in an effort to secure spending on education, government, environmental, and AmeriCorps-a national service program passed by the Democratic Congress in the early days of the Clinton administration. Both sides, however, were unable to find a compromise and the budget battle came to a stalemate in 1995 over proposed cuts in Medicare, Medicaid, education, and the environment. After Clinton vetoed much of the Republican expenditure bill, Republicans in Congress twice refused to issue a temporary spending authorization, forcing the federal government to close partly because the agency had no budget to operate. In April 1996, Clinton and Congress finally approved a budget that gave money to government agencies until the end of the fiscal year in October. The budget includes some Republican-backed spending cuts (reducing the cost of cultural programs, labor and housing) but also conserves many of Clinton's programs, including education and the environment.
Deficit and debt
President Clinton so far has the best budgetary results of any modern President, at least from President Reagan and beyond through President Obama.
- He has a budget surplus for fiscal year 1998-2001, the only such year from 1970-2016. Clinton's last four budgets are a balanced budget with a surplus, beginning with the 1997 budget.
- The ratio of debt held by the public to GDP, the main measure of US federal debt, fell from 47.8% in 1993 to 33.6% in 2000. Publicly held debt is actually paid by $ 453 billion during 1998 - The 2001 period, the only time this happened between 1970 and 2016.
- Federal spending fell from 20.7% of GDP in 1993 to 17.6% of GDP in 2000, below the historical average (1966 to 2015) of 20.2% of GDP.
- Tax revenue rose steadily from 17.0% of GDP in 1993 to 20.0% of GDP in 2000, well above the historical average of 17.4% of GDP.
- Defense spending fell from 4.3% of GDP in 1993 to 2.9% of GDP in 2000, as the US enjoyed a "peace dividend" after the fall of the Soviet Union. In dollars, defense spending fell from $ 292 billion in 1993 to $ 266 billion in 1996, then gradually rose to $ 295 billion in 2000.
- Non-expenditure non-expenditure spending fell from 3.6% of GDP in 1993 to 3.2% of GDP in 2000. In units of dollars, it grew from $ 248 billion in 1993 to $ 343 billion in 2000; Strong economic growth still allows the ratio to decline relative to GDP.
The pattern of raising taxes and cutting expenditures (ie savings) in an economic boom coincides exactly with John Maynard Keynes's suggestion, which declared in 1937: "Explosion, not slump, is the right time for austerity at the Treasury." However, this remarkable success not stopping conservative experts to try to discredit this achievement. Their argument basically goes like this: Even though the debt held by the public is reduced, the surplus funds paid to Social Security are used to pay the bondholders, who essentially borrow from one pocket (the recipient of the future Social Security Program) to pay the other ( current bondholders), so the total debt increases. However, while this is true, this is also how the adage "works mathematics" for all other modern Presidents as well. It is not accurate to discredit the tremendous fiscal savings of the Clinton era relative to other modern Presidents, which however coincide with a booming economy by almost any size. It is also relevant to point out that the booming economy is taking place irrespective of Republican warnings that such tax increases to the highest income taxpayers will slow the economy and create jobs. Perhaps the boom will be even greater if a larger deficit has been executed, but this is not an argument made at the time.
Welfare reform
The 1996 Personal Responsibility and Work Opportunity Act (PRWORA) established the Temporary Assistance for Storm Family (TANF) program, funded by grants to the state. The program replaces the Aid to Families with Dependent Children (AFDC) program, which has open funding for eligible and federal matches for state spending. To receive TANF's full grant amount, the state must meet certain requirements related to their own expenses, as well as the percentage of welfare recipients working or participating in the training program. This threshold can be reduced if the burden of welfare cases falls. The law also modifies the eligibility rules for proven benefits programs such as food stamps and Additional Security Income (SSI).
The CBO estimated in March 1999 that the TANF basic block grant (authorization to spend) would amount to $ 16.5 billion annually by 2002, with the amount allocated to each country based on the history of state spending. This block grant amount proved to be more than can be issued by the state initially, because the AFDC and TANF case loads fell 40% from 1994 to 1998 due to the booming economy. As a result, countries have accumulated a surplus that can be used for years to come. Countries also have the flexibility to use these funds for childcare and other programs. The CBO also estimated that TANF expenditure (actual spending) would amount to $ 12.6 billion in fiscal 1999 and 2000, growing to $ 14.2 billion in 2002, and reaching $ 19.4 billion in 2009. For scale, the total in FY 2000 is about $ 2,000 billion, so this represents about 0.6%. Furthermore, CBO estimates that the unused balance will grow from $ 7.1 billion in 2008 to $ 25.4 billion in 2005.
However, the legal effect goes far beyond the impact of a small budget. The Brookings Institution reported in 2006 that: "With its emphasis on employment, time constraints and sanctions against states that do not place most of their burdens in work programs and on individuals who refuse to meet state employment requirements, TANF is a history of reversal of the rights of represented rights by AFDC If the 1996 reforms had an effect intended to reduce dependence on welfare, a key indicator of success was a decrease in welfare burden. The transformation of state-administered TANF administration data to the federal government showed that case loads began to decline in the spring of 1994 and fell even more soon after the federal law came into effect in 1996. Between 1994 and 2005, the caseload decreased by about 60 percent. The number of families receiving cash welfare is now the lowest since 1969, and the percentage of children on welfare is lower than since 1966. "The effect is very significant in single mothers; the share of single mother who worked grew from 58% in 1993 to 75% in 2000. Employment among unmarried mothers increased from 44% to 66%. The report concludes that: "The pattern is clear: income rises, welfare declines.This is a very clear definition to reduce dependence on welfare."
Trading
Clinton made it one of his goals as president to pass a trade law that lowers barriers to trade with other countries. He severed ties with many of his supporters, including unions, and those in his own party to support free trade laws. Opponents argue that lowering tariffs and leisurely rules on imports will harm American jobs because people will buy cheaper products from other countries. Clinton denied that free trade would help America as it would allow the US to boost exports and grow the economy. Clinton also believes that free trade can help move foreign countries to economic and political reforms.
The Clinton administration negotiated a total of about 300 trade agreements with other countries. The latest Finance Minister, Lawrence Summers, stated that the reduced tariffs resulting from Clinton's trade policy, which lowers prices to consumers and keeps inflation low, are technically the "biggest tax cuts in world history."
NAFTA
Three NAFTA countries were signed by President George H. W. Bush during December 1992, pending ratification by the legislatures of the three countries. Clinton did not alter the original treaty, but furnished it with the North American Agreement on Environmental Cooperation and the North American Agreement on Labor Cooperation, making NAFTA the first "green" trade agreement and the first trade agreement related to any country's labor laws, albeit with very sanctions weak. NAFTA is provided to gradually reduce tariffs and the creation of free trade blocs of North American-American, Canadian and Mexican countries. NAFTA opponents, led by Ross Perot, claim to force American companies to move their workforce to Mexico, where they can produce goods with cheaper labor and send them back to the United States at lower prices. Clinton, however, argues that NAFTA will increase US exports and create new jobs. Clinton while signing the NAFTA bill states: "... NAFTA means work, American jobs, and well-paying American jobs, and if I do not believe it, I will not endorse this agreement." He convinced many Democrats to join most Republicans in favor of the trade agreement and in 1993 Congress passed the agreement.
While economists generally view free trade as a positive overall for the countries involved, certain groups may be affected, such as manufacturing workers. As an example:
- In a survey of leading economists in 2012, 95% support the notion that on average, US citizens benefit from NAFTA. A 2001 review of the Journal of Economic Perspectives found that NAFTA is a net profit for the United States. A 2015 study found that US welfare increased by 0.08% as a result of NAFTA tariff reductions, and that US intra-block trade increased by 41%.
- By 2015, the Congressional Research Service concludes that "the overall effect of NAFTA on the US economy appears to be relatively modest, especially as trade with Canada and Mexico accounts for a small percentage of US GDP, but there are adjusting costs for workers and firms because the three countries are aligned with trade and more open investment among their economies. "CRS also pointed out that NAFTA for the most part establishes rules for ongoing behavior (for example, US manufacturing firms have already moved some jobs to Mexico, thus avoiding US regulations and unions, in an effort maximize profit.)
- The US Chamber of Commerce donates NAFTA with an increase in US goods and services trade with Canada and Mexico from $ 337 billion in 1993 to $ 1.2 trillion in 2011, while AFL-CIO blames an agreement to send 700,000 American manufacturing jobs to Mexico during that time.
World Trade Organization (WTO)
Officials in the Clinton administration also participated in the final round of trade talks sponsored by the General Agreement on Tariffs and Trade (GATT), an international trade organization. The negotiations have taken place since 1986. In a rare move, Clinton held a Congress to ratify the trade agreement in the winter of 1994, where the treaty was approved. As part of the GATT agreement, the new international trade body, the World Trade Organization (WTO), replaced GATT in 1995. The new WTO has stronger authority to enforce trade agreements and include wider trade than GATT.
Asia
Clinton also held meetings with leaders of the Pacific Rim countries to discuss lowering trade barriers. In November 1993 he hosted the Asia-Pacific Economic Cooperation (APEC) meeting in Seattle, Washington, attended by leaders from 12 Pacific Rim countries. In 1994, Clinton set up an agreement in Indonesia with Pacific Rim countries to gradually eliminate trade barriers and open their markets.
Clinton faced his first defeat in the trading law during his second term. In November 1997, Republican-controlled Congress postponed a vote on the bill to restore the presidential trade authority that ended in 1994. The bill would give the president the authority to negotiate a trade deal that Congress is not authorized to modify-known as "fast track negotiations" because it streamlines the agreement process. Clinton could not produce enough support for legislation, even among the Democrats.
Clinton faced another trade setback in December 1999, when the WTO met in Seattle for a new round of trade talks. Clinton hopes that new agreements on issues such as agriculture and intellectual property can be raised at the meeting, but the talks fail. Anti-WTO protesters on the streets of Seattle disrupt meetings and international delegates who attend these meetings can not compromise primarily because delegates from smaller and poorer countries reject Clinton's attempts to discuss standards -the standard of labor and the environment.
That same year, Clinton signed an important trade agreement with the People's Republic of China. The deal-a result of more than a decade of negotiation-will reduce many trade barriers between the two countries, making it easier to export US products such as cars, banking services, and movies. However, the treaty can only apply if China is accepted at the WTO and granted permanent "permanent trade relations" status by the US Congress. Under the pact, the United States will support China's membership in the WTO. Many Democrats and Republicans are reluctant to grant permanent status to China because they are concerned about human rights in the country and the impact of Chinese imports on US industry and jobs. The Congress, however, voted in 2000 to provide permanent normal trading relations with China. Several economic studies have been released that show an increase in trade resulting in US prices falling and increasing US GDP by 0.7% over the next decade.
Banking deregulation
Clinton signed the Financial Services Modernization or GLBA Act in 1999, allowing banks, insurance companies, and investment houses to join and thus repeal the Glass-Steagall Act that has existed since 1932. It also prevented further regulation from risky financial derivatives. Financial deregulation (both secretly and openly through the GLBA) was criticized as a contributing factor to the Great Recession. While he denied the claim, he expressed regret and admitted that behind him he would veto the bill, especially as he exempted financial derivatives at risk from regulation, not because it eliminated the long-standing Glass-Steagall barrier between investment and banking storage. In his view, even if he had vetoed the bill, Congress would rule out a veto, since its support is almost unanimous.
Politifact judged Clinton's claim that Glass-Steagall's removal had no "relation to financial accidents [2008]" as "Most True," with the caveat that its claims focus on removing the separation of investment and banking deposit and not the wider exclusion of risky financial instruments derivatives). These derivatives, such as credit default swaps at the core of the 2008 crisis, are essentially used to secure mortgage-related securities, with AIG as the primary provider. This encourages more mortgage-related loans, because AIG theoretically stands behind the mortgage securities used to finance mortgage loans. However, AIG is not managed effectively and does not have the financial resources to fulfill its insurance promises when housing standards begin and investors begin claiming insurance payments on mortgage securities by default. AIG collapsed spectacularly in September 2008, and became a channel for a large government bailout (over $ 100 billion) to many banks in the world where AIG owes money, one of the darkest episodes in crisis.
Summary of economic results
Overall
Clinton led the following economic results, measured from January 1993 to December 2000, with alternate dates as shown:
- Real GDP growth averaged 3.8%, compared with an average growth of 3.1% from 1970-1992. The economy is growing every quarter.
- Real per capita GDP increased from about $ 36,000 in 1992 to $ 44,470 in 2000 (in 2009 dollars), about 23%, more or less the same as it did from 1981-1989 during the Reagan administration.
- Inflation averaged 2.6%, versus 6.1% from 1970-1992 and 3.0% in 1992.
Labor market
- Non-farm payrolls increased by 22.7 million from February 1993 to January 2001 (averaging 236,000 per month, the fastest record for the term of office of the President) while civilian employment increased by 18.5 million (on average 193,000 per month).
- The unemployment rate was 7.3% in January 1993, falling steady to 3.8% in April 2000 and 4.2% in January 2001 when the second term ended. It was below 5.0% after May 1997.
- Unemployment for African-Americans dropped from 14.1% in January 1993 to 7.0% in April 2000, the lowest level in record.
- Unemployment for Hispanics fell from 11.3% in January 1993 to 5.1% in October 2000, the lowest level in record up to that time.
Household
- Average household income increased from $ 50,725 in 1992 to $ 57,790 in 2000, an increase of 13.9%.
- The poverty rate declined from 15.1% in 1993 to 11.3% in 2000, the sixth biggest decline in poverty in almost 30 years. The amount in poverty fell from 39.2 million in 1993 to 31.58 million in 2000, a decrease of 7.6 million.
- Household ownership rate reached 67.7% towards the end of the Clinton administration, the highest level on record. In contrast, the level of homeownership fell from 65.6% in the first quarter of 1981 to 63.7% in the first quarter of 1993.
- Clinton is working with a Republican-led Congress to enact welfare reform. As a result, the welfare roll declined drastically and was the lowest since 1969. Between January 1993 and September 1999, the number of welfare recipients dropped 7.5 million (53% decrease) to 6.6 million. By comparison, between 1981-1992, the number of welfare recipients increased by 2.5 million (22% increase) to 13.6 million people.
Criticism
Clinton has been heavily criticized for overseeing the creation of the North American Free Trade Agreement (NAFTA), which makes it more affordable for manufacturing companies to divert jobs to foreign countries and then import their products back into the United States.
Some liberals and progressives believe that Clinton is not enough to reverse the trend toward widening incomes and wealth inequality that began in the late 1970s and 1980s. The upper marginal income tax rate for high-income individuals (1,2% over recipients) was 70 percent in 1980, then downgraded to 28 percent by 1986 by Reagan; Clinton raised it back to 39.6 percent, but remained well below the pre-Reagan level. The Clinton administration also does not provide benefits to unions that are unionized and does not support the strengthening of collective bargaining rights.
The lower unemployment rate is another big part of Clinton's macroeconomic policy. Many argue that Hillary charges a lot of American work because she supports free trade, which some argue causes the US to lose jobs to countries like China (Burns and Taylor 390). Even if Clinton did harm the Americans for free trade support, he left more jobs than the lost because his presidential unemployment rate, and especially his second term, was the lowest in 30 years (Burns and Taylor 390). ). Others attribute this to sustained interest rate cuts, driving the booming stock market and job growth in the booming tech sector.
See also
- The Presidency of Bill Clinton
- New Democrat
- Back to Work: Why We Need Smart Governance for a Strong Economy
- George W. Bush administration's economic policy
- Reaganomic
- Rubinomics
Note
References
- Anonymous. Tax Relief Act in 1997. File Tax.Com. March 8, 2008
- Anonymous. "S & amp; P 500." Standard & amp; Poor. March 8, 2008
- Midgley, James. "The United States: Prosperity, Work, and Development." International Social Welfare Journal 10: 7 (2000): 284-293.
- Bartlett, Bruce. "Clinton Economics." NRO NationalreviewONLINE July 7, 2004. March 8, 2008
- "The Economic Heritage of Bill Clinton." BBC. January 15, 2001. British Broadcast Corporation. March 8, 2008
- Bartlett, Bruce. "They are Days." The New York Times . July 1, 2004. March 4, 2008
- Burns, John W. and Andrew J. Taylor. "A New Democrat? The Economic Performance of the Clinton Presidency." Independent Review V.3 (2001): 387-408.
External links
- Clinton Presidency: Historic Growth
Source of the article : Wikipedia
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