Clinton Confidential

The best-kept secret of the Clinton years is economic.

Richard B. McKenzie from the November 1996 issue

(Page 2 of 2)

Noting the divergence between Clinton's economic record and his reputation and early rhetoric as a liberal, it is natural to wonder who this guy really is. Is Clinton a Roosevelt liberal or a Reagan conservative? The choice between the two political labels may be a false one. Neither admirers of Franklin Roosevelt nor fans of Ronald Reagan will find much comfort in Bill Clinton's policies during his first term. FDR liberals will worry that Clinton has put too little emphasis on extending redistributive programs, while Reagan conservatives will not likely forgive him for raising tax rates or tampering with labor markets.

Clinton unsuccessfully pressed for a national health care system. He sought and secured mandated parental leave for workers and an increase in the minimum wage (with the votes of some Republicans). After resisting, however, he also in August signed welfare legislation that eliminates the entitlement status of cash welfare, establishes time limits, cuts spending by $55 billion over six years, and allows states to experiment with a wide variety of programs. Early in his term, he energetically supported passage of the North American Free Trade Agreement, which Ronald Reagan vigorously applauded.

Despite occasional agreement, Clinton and Reagan are decidedly different in their basic attitudes toward government. Reagan firmly believed that the overall size of the federal government was a fundamental problem. By contrast, Clinton seems to earnestly believe that the federal government should be a wellspring of policy solutions for many of today's social and economic problems. Still, the economic record for the federal government during the Clinton years, as evaluated by measures conservative Republicans hold dear, is decidedly more conservative than Bush's record and can, in key ways, be favorably compared to the record of the Reagan years.

There is, of course, a subtle but important distinction between describing what has happened during the "Clinton years" (or "Reagan years") and identifying the "Clinton effect" (or "Reagan effect"). The economic record of any short span of years obviously results from the interplay of many domestic and global forces, not the least of which is the extent of partisan conflict and cooperation between the White House and Congress. No doubt, the Clinton White House has been constrained by Republicans in Congress, with the differences between the two on budgets often a matter of a few billion dollars a year. While Clinton has benefited from the economy's growth, its lackluster performance relative to the 1980s may have worked against a more rapid decline in the relative size of government. All that can be done here is to let the record speak for itself.

Neither Republicans nor Democrats are likely to welcome this review of the data. Republicans do not want the Clinton era to be painted with even moderately conservative stripes. They prefer to present their candidate to the electorate as only more conservative than a very liberal Democrat with a very liberal record on all counts, so that Bob Dole will not seem too far to the right. The real challenge for Republicans is to portray Dole--who is partially responsible for the economic record, good and bad, of the last three (if not 35) years--as more conservative than Clinton (and, for that matter, Bush) in not just rhetoric but policy substance. That's no easy task, given Dole's penchant to date for talking like George Bush--with little conviction, clarity, or specificity on matters of economic policy-- and his record of support for tax increases, huge social programs such as Medicare, and regulatory monstrosities like the Americans with Disabilities Act.

Nor are Democrats apt to welcome my analysis. They do not want their liberal allies to see the Clinton years as more economically conservative than the Reagan years. Liberal Democrats may begin to see Clinton as ineffective in the pursuit of their causes. If so, the Democrats risk disaffection of their core constituencies.

Both Republicans and Democrats seem to want to keep voters in the dark, holding close the year's best-kept political secret: Although the era of big government is really not over yet--after all, the federal government still accounts for more than a fifth of GDP--the government's relentless growth relative to GDP has been checked. There seems to be little that even a president with the purest of liberal intentions (if that is indeed true of Clinton) can do about it. The evidence is mounting that government policies are constrained more and more by global economic forces rather than domestic political forces.

In the face of this trend, the relative growth of government under Bush was only a blip. It can be partly explained by the sluggish economy, which in turn was partly due to increases in taxes and regulation. (The same combination of factors helps explain Bush's defeat.) It may also be that the "Reagan Revolution" went further than global economic forces required, giving Bush some leeway for expansion. But the continuing worldwide competition for capital has prevented Clinton from building on his predecessor's accomplishment.

Clinton has a strong chance of being re-elected precisely because he has not been able to expand federal involvement in the economy as much as he imagined he could four years ago. His favorable ratings began to climb just after he lost his struggle to mount a hostile takeover of the country's health care industry--and as federal outlays began to shrink relative to the expanding economy. Conservatives understandably lament the passing of the Reagan era. At the same time, given the actual economic records of the last two administrations, they should be happy that Bill Clinton defeated George Bush.