Why Democrats Should Disregard Bill Clinton’s Endorsement of Obama’s Tax Deal

bill clinton barack obamaBill Clinton seems the perfect validator for Barack Obama — which is why the President is utilizing the former president for selling his tax deal. After all, the economy boomed when Clinton was president and 22 million net new jobs were created. What’s more, Bill Clinton was reelected — even though he lost both houses of Congress in the 1994 midterms.

But the analogy falls apart as soon as you realize Clinton’s economy was vastly different from Obama’s. The recession Clinton inherited was relatively small, and caused by the Fed raising interest rates too high to ward off inflation. So it could be reversed by the Fed lowering interest rates — as the Fed did in 1994. By 1995, the so-called “jobless recovery” had morphed into a full-blown jobs recovery. By 1996, at pollster Dick Morris’s urging, Clinton could proclaim to the American people “you’ve never had it so good, and you ain’t seen nothing yet.”

The Great Recession has been far larger, caused not by the Fed raising interest rates but by the bursting of a giant housing bubble. In 2008, the biggest asset of most middle-class people, upon which they borrowed and that they assumed would be their nest eggs for retirmenet, collapsed. Housing prices continue to fall in most parts of the country. The Fed has lowered interest rates all it can, and unemployment remains sky high.

Bill Clinton presided over an economic boom engineered by Fed chair Alan Greenspan, who felt confident he could drop interest rates far lower than anyone expected without risking inflation. The result was 4 percent unemployment in many parts of America, as well as the best jobs recovery in history.

The price Greenspan exacted from Clinton — and a resurgent Republican congress demanded — was a balanced budget. As a result, Clinton had to give up much of his “investment agenda” in education, infrastructure, and other long-neglected means of building the productivity of average working Americans. The economy enjoyed a huge cyclical recovery.

But the economy’s underlying structure remained as it had been before, including stagnant wages for most Americans. Within a few years the middle and working class was treating their homes as ATMs, borrowing trillions of dollars in order to maintain their standard of living, and at the same time demand enough goods and services to keep almost everyone in jobs.

Those days are over. The Democratic Party can no longer ignore critical investments in the productivity of average workers. Nor can it ignore the increasing concentration of income and wealth at the very top, and the inability of America’s middle and working class to get the economy moving again.

The GOP hasn’t changed their story or their strategy since the 1990s. It’s the fault of big government. That was false then, and it’s false now. The structural problems are now much worse, and the cyclical recovery from the Great Recession pathetically anemic.

If the Democratic Party has stood for anything over the years it is to maintain and restore upward mobility for the majority of working Americans, ensure that the playing field isn’t tilted in the direction of the privileged, and limit the power of the richest among us to entrench themselves and their heirs into a semi-permanent plutocracy.

Continuing the Bush tax cuts of 2001 and 2003, including a sharp cut in the estate tax, violates these core principles. Doing so in the midst of an economic emergency that demands bold measures to rescue America’s vast middle and working class adds further insult. For President Obama and former President Clinton to tell America there’s “no other choice” or that “this is the best we can do” — when Democrats remain putatively in control of the House, Senate, and the presidency — is misleading.

I admire Barack Obama and Bill Clinton. I advised the former and worked for the latter. They are good men. But they have either been outwitted by the privileged and powerful of America, or seduced by those on Wall Street and the executive suites of America into believing that the Republican nostrums are necessary, or succumbed Democratic advisors who think in terms of small-bore tactics rather than large and principled strategies.

Robert ReichI urge congressional Democrats to remember the larger principles — not in order to be purist or make the perfect the enemy of the better, but to move toward an economy and a society that we believe in, that reflects the needs of the vast majority of Americans at this difficult time.

Robert Reich

Republished with permission from Robert Reich’s blog.

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Comments

  1. Joe Weinstein says

    Once again Reich has both gone into the historic essentials and deduced some compelling operative conclusions. One can debate with commentator Scharf about ‘real causes’ of a ‘jobless recovery’, but, as Reich shows us, if fundamentals and policy are even half right, in a real recovery joblessness is a passing stage.

    According to commenter Scharf, the ‘Stimulus Act’ stimulated joblessness. In a cynical sense, he is right. A bigger stimulus would have resulted in a lowered jobless rate, but passage of the quarter-hearted smaller-scale stimulus was taken (by Obama and of course Republicans) to rule out a larger stimulus.

    However, Scharf is mistaken to lump Pelosi, Reid and Obama all together or to assume that none have a clue. In the November 2010 elections, Dems were most vulnerable in the House, somewhat vulnerable in the Senate, and not at all in the White House – precisely the reverse of these branches’ leaders degree of passivity toward and culpability for the lackluster economy.

    It was convenient for Obama to speak of how ‘we’ were ‘shellacked’, and use that as an excuse to do openly what he has apparently long ‘lusted in his heart’ to do anyhow: de facto become a Republican. Reid remains a weak reed. The Clintons are still playing the game of going along to get along. If the national Dems have any leader at all at this point it clearly is Pelosi.

  2. says

    The assumption that Clinton was anything but a rubber stamp for spending is a bad one. His administration is a perfect example of how little power the President has since Nixon impounded, unconstitutionally, the spending in 1969. Whether Obama or Clinton endorse or do not endorce the Republican plans is not relevant.

    The “Jobless Recovery” happened because the “rich” and corporations do what they typically do in a recession. They stop hiring. That can cut their workforce in half in two years. And so it did since 2008.

    One Repubican said, “It is not that the people are being taxed too little; it is because the government is spending too much.” We did not tax, borrow, and spend our way out of the previous recession.

    Usurping private credit with public credit is what caused this recession. Spending our nation’s GDP on government consumption rather than creating and maintaining the means of production has never brought us out of an economic disaster.

    Our WW2 investment in the means of production not only won the war, but brought on economic prosperity. The Stimulus Act stimulated joblessness, as evidenced by going from 7.6% to 9.8%.

    That happened between January of 2009 and January of 2010. The Poverty Pimps, Macy’s Marxists, and Limousine Liberal may have missed that. The skilled workers and semi-professionals did not. It was 3.4 million of their jobs that disappeared, not the upper class professionals like Robert Reich.

    The November 2nd election should have been a reality orientation on this political fact for Pelosi, Reid, and Obama. If understanding political and economic realities were a felony, the Democrats could not be found guilty in any US court.

    • Ken M says

      I would challenge Reich’s claim of “22 million net” jobs created during the Clinton administration. Yes, there were 22 million jobs created but also a lot of jobs that were lost. So while there was a net gain in jobs it wasn’t 22 million.

      Reich also omits his and Clinton’s support for NAFTA which hit the unionized sector of the economy the hardest. This was union busting. If Reich and Clinton say they didn’t expect this, they’re either fools or liars.

      Reich’s claim of Clinton being “a good man,” is pure idiocy. How? By escaliting the war against the poor with welfare reform? Continuation of the murderous sanctions against the Iraqi people? Reich conveniently fails to mention that the percentage of workers in unions continued to fall during the Clinton administration, and that concentration of wealth grew in favor of the wealthiest.

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