The Myths Of Clintonomics

IBD Editorials ^ | November 14, 2008

[Kaslin]

Fiscal Policy: President-elect Obama says he's modeling his recovery plan on Clintonomics because it pulled the economy out of a ditch last decade. But that's an old myth — and a dangerous one at that.

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"I've got an economic plan similar to Bill Clinton's," Obama has said, including tax hikes on the rich and Keynesian pump-priming, among other new government spending.

He rationalizes that Clinton raised taxes during a recession, and look what happened — average wages went up, along with economic growth and the stock market. And eventually the Treasury reported surpluses after decades of deficits.

Obama is even recycling Clinton's old economic team. Standing behind him at his first press conference were old Clinton hands Bob Reich, Laura Tyson, Larry Summers and Bob Rubin. The show of support was 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.

For starters, Clinton didn't turn the economy around. The recovery had already begun before he took office. In fact, the mild recession ended in 1991 — long before he was even elected.

[Skooz]

i resented union friends bragging to me later about how “clinton turned the economy around”.

Anyone who says that is an idiot. You can tell them I said so.

[CutePuppy]

Here is another myth that is often being bandied about in the media - that Democratic Presidents are good for the stock market.

It's not entirely accurate, if one of several proper adjustments is made:

1. Shift market results 1 year past election, when first policies (like budget and regulation) have started to take place, instead of results of former president's "legacy" market.

2. Adjust for the market that starts to move down before election if Democrat has a reasonable or likely chance to win - like the "Obama market" we are seeing right now. That decreases the market performance of Republican President and as the market eventually recovers from lower levels, tends to artificially increase the results under Democratic President.

3. Include the mix of Congress and President of same or different parties. e.g. Carter with all Dem Congress was a disaster for markets which took some years of Reagan's policies to reflect in market price in his term in office, Clinton in first 2 years - 1 year after actual policy decision found their way into disastrous 1994 and culminated in "Gingrich Revolution", at which moment immdeiately after the election market shot up and didn't look back for years... with Clinton eventually taking the credit for economy (and getting the credit for the market chart).

One recent and short, but detailed and interesting study of electoral statistics and the market:
Divided Government Is Best for the Market, by Donald L. Luskin

Actually, despite the title, Luskin study proves that markets do much better under Republican President with Republican Congress and worst under Democratic Congress.

[GBA]

"Clinton was like that guy who stands on the seashore and orders the tides to move, and then thinks he was responsible."

It's worse than that. He bet everyone he could do it first, so since they then saw it happen, they now believe he did what he says and raising taxes and Clintonomics means a great economy.

[ReagansShinyHair]

Hey, don’t forget about the massive opportunities for trade that Clinton opened up with China. Too bad most of us don’t manufacture weapons of mass destruction or have state secrets we want to sell them.

/sarc, if you couldn’t tell.

[ReagansShinyHair]

I made sure 1890 ate the pickles first.