THE OLD MYTH AND THE SEA
November 18, 2008
President-elect Barack Obama's economic plan is extremely similar to Bill Clinton's. It includes tax hikes on the rich, Keynesian pump-priming and other new government spending, claiming that they will boost average wages and growth in the stock market. He is even recycling Clinton's old economic team; a show of support designed to calm the markets after the post-election stock sell-off. But it hasn't worked, probably because Wall Street knows that Obama is also recycling myths about the Clinton years, says Investor's Business Daily (IBD).
- For starters, Clinton didn't turn the economy around, it had already begun before he took office; in fact, the mild recession ended in 1991 -- long before he was even elected.
- But that didn't stop him from trashing the "Republican economy" as "the worst in 50 years;" statements echoed by Obama today.
Even though the media assumed the Clinton tax hikes stimulated the economy, it actually grew in spite of them, says IDB:
- The bull market took off precisely when then-Fed Chairman Alan Greenspan took his foot off the brakes and hit the gas in 1995, and when the Republicans took control Congress -- further blunting the effects of the Clinton tax torpedo that had taken effect the previous year.
- Clinton also benefitted from innovations long in the making, including the Pentium chip released in March 1993 and Microsoft's Windows program released in August 1995.
- Clinton's "deficit-reduction plan" didn't create the surpluses at all; they were a direct result of a tidal wave of capital-gains revenues generated by the GOP-led stock boom.
- In 1993, he forecasted a budget deficit of $202 billion in fiscal year 2000, but the Treasury produced a record surplus of $236 billion; that's a swing of more than $400 billion.
Let's hope Obama will recognize these other factors and think twice about dusting off Clinton's tax-heavy economic plan, says IBD.
Source: Editorial, "The Myths of Clintonomics," Investor's Business Daily, November 14, 2008.
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