Hillary Clinton's Cargo Cult Economics - TheWeek

[WillyT]

Hillary Clinton's cargo cult economics
Ryan Cooper - TheWeek
December 23, 2015



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The Bill Clinton '90s sure look better in retrospect, don't they? Especially when you compare them with the last decade and a half of awesome American failures: the dot-com bubble, the Supreme Court installing George W. Bush, 9/11, the failed invasions of Afghanistan and Iraq, the 2008 financial crisis, and the extremely weak recovery that followed. Even the penny-ante scandals of the Clinton days make one nostalgic. Remember when presidents had tawdry affairs instead of torture regimes or assassination programs for American citizens?

Hillary Clinton is, unsurprisingly, attempting to coast on some of that '90s nostalgia, running as a "growth Democrat," according to a New York Times article quoting many high-level Clinton supporters.

Attempting to resurrect the growth and high wages of the Clinton days is all well and good. But while much about the '90s was positive, the decade was also plagued by the manifest failures of Bill Clinton's economic policy. There is little evidence that Hillary Clinton has grappled with those failures, or even with what lay behind her husband's successes. Nor does she seem to have rigorously questioned whether the economy might have evolved such that simply trying to repeat history might not work.

Merely imitating the forms and language of the old Clinton administration is about as likely to work as cargo cults' wooden airplanes were to restart contact with Western societies.

But first, the good of the Clinton years. The strong '90s economy, particularly the red-hot labor market of the late decade, is probably best characterized as a happy accident. A productivity boom driven by the adoption of computer technology met a conservative Federal Reserve chairman who for once did not react to rising wages by crushing them with tight money. All that was heated further by a stock bubble which sloshed money out into the broader economy.

To be sure, Bill Clinton deserves some credit. Raising taxes on the rich and boosting the earned income tax credit as he did might have ameliorated the effects of inequality on aggregate demand. Even simple stewardship is an important part of government — just allowing it to happen (and not, say, panicking about hypothetical future inflation) was important and worthwhile.

But it wasn't all good. Financial deregulation (a bipartisan affair in those days) turned out to have some nasty side effects. NAFTA's results were mixed at best. Worst of all, Clinton's heralded welfare reform turned out to be a grim failure. The true disaster of that policy was camouflaged somewhat by the brief '90s boom, but by now its full effects are obvious: a 150 percent increase in extreme poverty.

Finally, there's the issue of general economic structure. The '90s boom took hold fairly easily. But since then, the economy has sickened dramatically: Inequality has increased, the quality of jobs has decreased, the labor share of income has plummeted. Seven years after the 2008 crash, we're still missing about three points of prime-age employment (or about four million jobs).

If I were trying to summon the Ghost of the '90s Economy, I would do three things...

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More: http://theweek.com/articles/595759/hillary-clintons-cargo-cult-economics

[ViseGrip]

1. Yes, we are all now living in Bill Clinton's NAFTA, CAFTA, END of Glass STeagall world!

Thanks for the post willyt!

[99Forever]

2. :#FeeltheBern

[MisterP]

3. the 90s was predicated on a big bubble--it was the telecosm, swept away

by Moore's Law: AI would take us to Mars and Prox, would download us all to be ourselves, forever, but with the asymptotically-growing sum total of human knowledge

didn't work out

2007 was caused by yet another "foolproof" investment (the only inflation-proof investments are in fact Legos): Reagan and Clinton's promises that if we let the stockbrokers take over and unfetter "the markets" we'd all have infinite dollars: these promises have failed for over three decades now, and they no longer convince any but its short- or long-term beneficiaries who get their money killing gold-egg-laying geese and still wail about "da unions!"