By Luke Brinker
As Politico’s Maggie Haberman notes, Newt Gingrich has made the booming 1990s economy a cornerstone of his presidential candidacy. While former President Bill Clinton often receives credit for the decade’s job growth, technological innovation, and budget surpluses, Gingrich argues that as leader of House Republicans, he was pivotal in bringing about ’90s prosperity.
While Democratic partisans (who are not, in fact, synonymous with principled liberals) crow about Clinton’s economic stewardship, they conveniently ignore the more unsavory aspects of the 42nd president’s economic record. The president who declared in 1995 that the era of big government was over collaborated with a Republican Congress to produce policy outcomes of dubious merit. Indeed, many of the issues at the core of the present economic crisis – lax regulation of financial institutions, rising poverty, and soaring income inequality – have roots in policies endorsed by both Clinton and Gingrich.
Because he left the presidency when the national unemployment rate was a mere four percent and the budget surplus was approximately a quarter-trillion dollars, Clinton is in much demand for advice on how to revive the torpid American economy in 2011. In a move that may have been intended to upstage his wife’s erstwhile rival President Barack Obama, Clinton this year released Back to Work, his prescription for curing the nation’s economic ills. The book, touted as a defense of government’s vital role in the national economy, is silent on Clinton’s complicity in paving the path for the current economic morass. The former president, in typical Clintonian fashion, asserts that he sought to better regulate the private sector, only to be stymied by the Republican Congress. But as Jeff Madrick points out in his review of Back to Work, Clinton actively affirmed deregulation. He signed the Gramm-Leach-Bliley law of 1999, repealing the New Deal-era Glass-Steagall law that erected barriers between Main Street commercial banks and high-risk investment banks. Gramm-Leach-Bliley allowed for the formation of financial behemoths like Citigroup, a too-big-to-fail institution bailed out to the tune of nearly a half-trillion dollars after the 2008 crash. (In an especially brazen act of crony capitalism, Clinton’s Treasury Secretary, former Goldman Sachs CEO Robert Rubin, left the administration within days of the law’s passage in order to serve as a “senior adviser” to the newly-formed Citigroup. Rubin received an estimated $126 million in pay during his Citigroup tenure.)
Not only did Clinton do away with Glass-Steagall, he also ignored the advice of the Commodities Futures and Trading Commission’s (CFTC) Brooksley Born. Born warned of the destabilizing potential of derivatives, the very financial instruments that helped precipitate the 2008 crash. But because the Wall Street-friendly New Democrats of the Clinton White House did not want to appear anti-business, the president heeded the words of Treasury Secretary Larry Summers, who maligned Born as a wild-eyed radical. (Summer later worked for hedge fund D.E. Shaw, earning about $5 million in salary over 16 months.)
Because Clinton’s New Democrats genuflected at the altar of Wall Street, it’s unsurprising that Clinton aide and former Democratic National Committee chairman Terry McAuliffe boasted in his memoir that the Clinton administration witnessed the creation of “[m]ore millionaires and billionaires … than at any other time in history.” (Keep that in mind the next time someone suggests that returning to Clinton-era tax rates would inevitably “punish success.”) But while Silicon Valley tech executives and Wall Streeters thrived, income inequality continued apace in the Clinton-Gingrich ’90s. I mention this not to deny the Clinton administration’s success in overseeing the creation of 22 million jobs (no net jobs were created during the George W. Bush years), but merely as a corrective to the angst of liberals convinced that Clinton was a more effective liberal than Obama and to Democratic partisans’ unquestioning extolling of Clinton’s economic virtues. (Modern liberalism affirms John Rawls’s dictum that a society is only as successful as its least fortunate members, and by that standard, Clinton had very real shortcomings.)
Among the ’90s legislation Gingrich touts is the 1996 welfare overhaul signed by Clinton. The overhaul abolished the federal Aid to Families with Dependent Children (AFDC) and replaced it with the state-based Temporary Assistance to Needy Families (TANF). The real test of any welfare program comes when economic catastrophe hits. During recessions and depressions, poverty necessarily rises. In a wealthy, industrialized superpower, one would expect to see the welfare state respond robustly. However, that has not happened in recent years:
If you think the point of the program is to help the poor, then no, welfare reform is not working. As Jake Blumgart writes at The American Prospect, the reformed program “has failed to cushion the neediest through recessions. While in 2009 the food-stamp program responded to the increased need for government assistance, growing by 57 percent, the number of TANF caseloads merely inched upward…At the heart of the worst recession in 80 years, TANF funds only reached 4.5 million families, or 28 percent of those living in poverty. By contrast, in 1995, the old welfare system covered 13.5 million families, or 75 percent of those living in poverty.”
This, as the result of a law signed by a president ostensibly representing the Party of the People. Clinton’s acolytes invariably respond to critiques of the welfare reform law by noting (correctly) that the bill passed by the Republican Congress – the only bill that could pass – was far tougher on the poor than the law the president would have preferred to sign. But there was not sufficient congressional backing to override a presidential veto. Clinton, worried about appearing soft on “welfare queens” in the presidential election year of 1996, signed the law anyway – a true profile in courage.
Is there something hypocritical about a Republican presidential candidate claiming credit for the economy of the ’90s while denouncing a return to that era’s tax rates as leading to economic ruin? Of course. But Democratic partisans who opportunistically appeal to the sentiment behind Occupy Wall Street had better be careful before they embrace the entirety of the former president’s economic legacy.