Clinton's Second Term And The American Economy

NEW HAVEN: Bill Clinton could not have asked for a better election year economy: unemployment averaging 5.2%, the lowest since 1973; 10.7 million new jobs since 1992, a gain of 9%; inflation steady at around 3%; a stock market booming and low interest rates; consumer and business confidence high; the budget deficit cut four years in a row, falling 63% to $107billion, 1.4% of gdp. "Are you better off than four years ago?" Clinton asked the voters, and they answered "Yes."

Presidents get credit and blame for whatever happens, whether deserved or not. Alan Greenspan's Federal Reserve deserves credit for managing the 1992-96 recovery from the "Bush recession." Many inflation hawks, some inside the Fed, thought unemployment rates below 6% were dangerous, but Greenspan let unemployment fall towards pre-1970 rates as long as prices and wages remain well-behaved.

For deficit reduction, Clinton can claim credit. Early on, Treasury secretary Robert Rubin persuaded him to concentrate on deficit reduction, scrapping a middle class tax cut and planned public investment initiatives. Clinton's fiscal package attacking the deficit passed Congress without a single Republican vote. The economy recovered, the bond market cheered, and middle class voters didn't revolt.