The Clinton 90s Considered: Part 1

     They have been on my mind lately as I have talked about in previous posts.

      http://diaryofarepublicanhater.blogspot.com/2011/12/joseph-stiglitz-on-roaring-nineties.html

      Why? For a few reasons. One is I'm currently reading "The Roaring Nineties" by Joseph Stiglitz. Stiglitz was the Chairman for Clinton's Council of Economic Advisors so he knows what happened in that Administration.

      In addition I'm a liberal Democrat and the post-Clinton era has seen a marked downturn in the U.S. economy and standard of living. The Clinton 90s then are naturally a time that I with many Democrats look back on with nostalgia. Yet what I am admitting lately is that while it's true that the post-Clinton era has been unspeakably meager the seeds of this may have been planted in part during the Clinton years themselves much as I may not like to think of it that way.

   For this Stiglitz provides an invaluable service in giving a first hand honest accounting of the 90s true pluses and minuses, those things that team Clinton can take pride in, those parts of the legacy that are a little more troubling and those that were more about luck than anything.

  This is important because I think that the current Democratic party lives under Clinton's shadow for better and worse. Many liberals were very critical of Obama during the summer for his apparent acceptance of the idea that budget balance was an important focus in the middle of a recovery that at the time seemed to be stalling, though it has since picked up at least some-the big threat now being that Europe will drag us into its quick sand.

    Yet much of why Obama and the Democrats have bought into the importance of a balanced budget and the need to tame the deficit is the Clinton legacy. After all it would seem that the balanced budget that was in surplus when he left office in 2001 was his proudest legacy. This established once and for all that we Democrats are not fiscally reckless that despite the Republican canard about tax and spend liberals we had shown them wrong, Clinton had proven them wrong.

    When W went into office and with his huge regressive tax cuts pushed us back into recession this only solidified the Democrats as the party of fiscal discipline, Cheney's claim that "Reagan proved deficits don't matter" further validating this vanity of Democrats. In this the Dems are a victim of their own success forgetting that the party was always about more than simply balanced budgets, that this was never the end of a real liberal policy agenda. The Democrats have been tricked into being the party of fiscal discipline. The budget therefore only matters when Democrats are President.

    http://diaryofarepublicanhater.blogspot.com/2011/11/why-deficits-only-matter-when-democrat.html

     One therefore has to be honest about both the victories and short comings of the 90s. The one thing that's clear is that for Democrats of today certainly the Obama Democrats, Clinton represents Democratic success much more than does FDR or LBJ. New Democrat policy seemed to work.

    Yet in retrospect if you see not only the prosperity of the time but the stagnation and recession we have seen since the legacy is clearly more complex. The 90s are a source of nostalgia for many liberals. It was in the 90s that we could still for the last time believe in America. The American Dream was still real then. Or we could still believe that it was. When Clinton signed the bill that "ended welfare as we know it" many liberals didn't flinch. I know I didn't. Back then we didn't yet realize that America is not a middle class country anymore.

   Ending welfare as we knew it sounded good. Clinton didn't want to end it just end its inefficiencies, make it better, properly incentivize it. It would better serve it's recipients by making it easier for them to get job training and go back to work.

   In retrospect that's not what happened, we just ended it. I don't think Clinton meant it that way. I still believe that he thought he was reforming it. While he obviously is not of a mind to admit he made a mistake now, there's no doubt that his Clinton Initiative is in part meant to make up for it-for that and for the loss of jobs from Nafta. Not that I agree that trade itself is bad. Clinton's mistake here wasn't free trade either-for the record he did add worker protections on the Nafta agreement.

  But as James Galbraith and Dean Baker show what's needed more than those even is a dollar that is not overvalued as it was throughout Clinton's term. Clinton did have victories as well, none more important that not allowing the Fed Mandate to be made price stability alone. Overall it's not a perfect legacy by any stretch, it had it's victories but it's failures.

  But more than anything we have to realize that as Stiglitz shows the success of the budget surplus was dumb luck in many ways. What helped was that in this case it inadvertently recapitalized the banks. But that wasn't the objective of the plan but the mistaken belief that bond vigilantes were about to pounce. The deficit reduction plan probably went to far. As the MMTers suggest a budget surplus  is also a "private sector deficit."

 And of course part of the reason we had a surplus was the red hot economy and stock market.