Republicans: If 90's prosperity wasn't Clinton's doing...

wasteofo2

I've got a question for Republicans/Capitalists/Conservatives etc.

You often hear it said that the amazing economic growth of the 1990's wasn't due to Clinton, but the economy as a whole. The technological advances of the 90's allowed businesses to operate more efficiently and expand rapidly.

But if this is the case, why is it that America did so well while other modern nations like Japan, Germany and England all had relatively rough times during our spat of prosperity?

Those three nations all had acess to the same technological revolution America did, and yet Japan and Germany did flat-out poorly, and England just kinda did nothing.

So what gives? Could Clinton's policies cutting consumer taxes have actually allowed for the booming economy?

Pengwuino

Well two things are a bit confusing here.

1) I was under the impression that the economic growth that took place was because of the immergence of a lot of tech sectors. Japan has always normally been ahead of the US in pushing through new technologies which begs the question as to whether or not these advances were actually occuring in both places at the same time. Do you know if they were?

2) Is this thread a claim that tax cuts actually stimulated an economy?

I don't see why germany should be used as a comparison as economic difficulties for Germany is like comparing waiting lines at a bank to the DMV. It would also be nice to consider that we're dealing with fairly different economies...

Astronuc

Clinton was not responsible for the economic boom of the 1990's. The matter is much more complicated.

One thing that helped Clinton, and which has hurt Bush, is that the US did not engage in a military action during the Clinton administration, whereas during Bush's term, we have the war in Iraq and Afghanistan.

Alan Greenspan summarized a good part of the 90's boom: Irrational Exhuberance.

There are several other critical factors: Reduction in taxes, reduction in interest rates, acceleration of retirement savings (e.g. 401K) and mutual funds, and foreign investment. Basically, the 90's was financed on debt.

Keep in mind that the NASDAQ is only 2,287 as of Friday, and that is down from its high of 5132.52 on March 10, 2000. "The heavily tech dependent exchange fell more than 62% in the following two years when the bottom dropped out of the, so-called Internet bubble."

We also had many accounting and business fraud problems, e.g. Enron.

Germany and much of Europe are encumbered by costly social and welfare programs. The US federal and state governments started reducing support for social and welfare programs, including the deinstitutionalization of mentally ill.

Japan suffered from inflation (particularly in real estate) and high costs, among other problems, such as increasing competition from other Asian nations, particularly the PRC.

For now, the US economy is in a precarious state with record trade deficits, loss of high paying manufacturing jobs, increasing disparity in wealth and income, and reduction in the median has continued from 2000-2005.

References -

http://www.cbpp.org/8-30-05pov.htm
http://www.cbpp.org/9-26-03pov.htm

http://www.census.gov/hhes/income/4person.html

Since Bush took office, the middle-income group has declined by 1.2 percentage points , and now constitutes less than 45% of all households.

NY Times, Feb. 26, 2006 - Such wages require both spouses to work, in order to achieve a reasonable (not in poverty) standard of living.

russ_watters

There is more than one reason (Japan, specifically, had/has some pretty systemic economic problems), but basically, the Internet/tech boom happened in the US, so most of the economic benefit went to the US. No, they didn't. The internet boom happened here first and here mostly. Even what did go on in other countries - who did they buy the hardware and software from? Intel, Microsoft, Cisco, Novell, 3Com..... Silicon Valley. It certainly didn't hurt, but the internet boom made a huge decade for the US inevitable.

Also, remember, the US was on the upswing economically when Clinton took office. He caught a good wave to ride and the internet boom made it even bigger. But remember also - the wave crashed before he left office and before his policies were changed.

I'm not quite as pessimistic as Astronuc, though - economics is cyclical and we're now on the upswing. Specifically, the thing about wages going down (it recently made some press, too) is also part of the cycle and looking at the data, you can pretty closely pinpoint where we are in the cycle and thus predict with a high degree of confidence that the future holds an upswing in incomes across the board.

Astronuc

Yes, I would agree with that. Clinton had very little to do with the economy, except that he did, with help of a Republican congress, manage to avoid deficit spending in his administration.

russ_watters

One thing I'd like to comment on, partly a side issue, is that while "irrational exhuberance" was responsible for pretty much every random tech company's stock going to 1000 (and overvaluing all the rest), there were a number of real companies that did really well for real during that time. So the economic growth wasn't an illusion, it was just the scale that was an illusion.

SOS2008

So if I'm a fiscal conservative can I participate?

I agree with that too--we were going into recession, and clearly so by the summer prior to 9-11. I also agree that the wars of attrition and ensuing occupations are unnecessarily draining and straining our economy. In all fairness to Bush, 9-11 and Katrina have hurt us a great deal, which has nothing to do with economic policy. (However, if the DP World port deal continues to raise questions of the Bushies' relations with the bin Laden family, I may begin to wonder more strongly about 9-11.)

I agree that history repeats itself and that there are cycles. At the same time, variables can and do create change, sometimes significantly; nothing is completely static. I worry that higher than normal outsourcing/importing/illegal immigration may prevent U.S. wages from rebounding -- And a long list of factors that have changed significantly, such as record deficits, foreign holdings of debt, related petro-dollars and/or possibility of countries going off the US$, etc.

As with nuclear weapons, terrorism has changed the nature of war, yet we still approach our enemies via conventional war against nation states. Maybe we shouldn't count so much on economic cycles either. Something repeated in history has been the rise and fall of empires. Maybe to survive we need some major paradigm shifts in our thinking.

russ_watters

Excuse me? That's strap-you-to-a-gurney-for-your-own-protection tinfoil-hattery.

Skyhunter

I am a pre Reagan Republican does that count?
I agree, the internet was key to the productivity gains and therefore the economic expansion of the 90's. (Thank you Al Gore for inventing it. )

Give credit where credit is due, Clinton invested heavily in infrastructure to grow the economy. One of those investments was the "information superhighway", commonly known as the internet.

Astronuc

Fourth year in a row that earnings have declined. We still have to wait for the 2005 data, but I seem to remember that more people fell into poverty last year, although we seemed to have disagreed on the statistical significance.

ECONOMIC RECOVERY FAILED TO BENEFIT MUCH OF THE POPULATION IN 2004 - http://www.cbpp.org/8-30-05pov.htm

Certainly last year was very good for me. On the other hand, I know of others who did not fair so well.

Also - http://www.cbsnews.com/stories/2005/...in672878.shtml

and in 2005
U.S. racks up record trade deficit in '05 $725.8 billion total is 17.5% increase over 2004's mark and how does the US pay back this deficit - by debt financing. And what happens when the US cannot repay its debt?

Many economist and fiscal conservatives are concerned about the increasing aggregate debt level of the US.

Remember, it was too late to avoid catastrophe when the watchman on the Titanic saw the iceberg!

Astronuc

That might be a stretch. Is there a substantiated claim that Dubai Port World has an affiliation with or is controlled whole or in part by the bin Laden family?

Skyhunter

Well it is a State owned company, the State is run by wealthy sheiks that liked to go hunting with Osama bin Laden.
http://in.rediff.com/news/2004/mar/25osama.htm

There certainly are a lot of 'coincidental' associations. I am beginning to see what outsider was talking about when he said he believed that there is a 'jack move' being pulled off, and the American people are not going to be the beneficiaries.

SOS2008

I have no doubt about connection between the Bushes and the bin Laden family (or the Saudi royal family). To what extent the relation affected 9-11 is more of a stretch -- but the 9-11 warnings were ignored by Bush, and Bush Sr. was meeting with the bin Laden family at the time of the attack, who were then given assistance out of the country without investigation.
Control, no, but affiliation is not a stretch IMO.
Even if there is no real threat to security, just look at the polls. It has been a political disaster. That Bush is so adamant as to threaten his first veto raises a red flag.

NOTE: To keep from hijacking this thread further, please refer to recent posts in the "Control of US ports" thread.

(As for this thread, I made many economic points--perhaps we could stick to that, Russ?)

Astronuc

The underlying question then is whether or not al Qaida has any influence in Dubai Port World or whether or not al Qaida could easily infiltrate DPW. That might be a tough one.

It would seem Bush and many of his supporters dismiss those possibilities, and therefore are willing to risk US security for money.

The most 'conservative' approach ( ) would be to reject DPW outright, i.e. zero risk, if one even suspects al Qaida might be involved now or in the future in DPW. Is that fair? No. Just prudent.

russ_watters

To show how much of a nerd I am, a while ago I copied that income data to xls and graph'd it (attached) - it is a lot easier to see the trends in the graphs (Original data HERE - second set of data). The second graph is the same as a first, but with the top two removed so you can see the trend better in the bottom sets.

As you said, 2004 was the 4th year of declines for some income brackets, though not for all. The previous cycle's downturn (89-92/3) had about 3-4 years of declining wages, again depending on the income bracket. And in the last handful of cycles it has taken 5-7 years for incomes to top their previous cycle's highs. Also of note, the top bracket gained disproportionally above their own trend during the tech boom. Ie, while everyone got richer, the rich got richer faster than they normally do while everyone else got richer at about the same rate they normally do.

Attached Files

income.ZIP (6.2 KB, 1 views)

russ_watters

Also, a little nit: The trade deficit doesn't add up to any real debt and isn't financed, it is simply the difference between how much we import and how much we export - and the difference is made up with cash.

There is some debate as to whether a trade deficit in and of itself is a bad thing: [I didn't read much past the introduction...] http://www.freetrade.org/pubs/pas/tpa-002.html Your article does a good job of providing both sides of the debate as well.

[edit] Basically, a trade deficit is seen as a bad thing because it represents a net outflow of cash, which is money directly out of the economy. But that doesn't account for the value added to the economy by whatever goods were imported. Ie, if you buy a Japanese tv, you now have less money in your bank account, but has your net worth changed? No - to replace that cash, you now own an equally valuable TV.

My biggest gripe is with the numbers themselves - trade deficit is always reported as an absolute number, whereas most other important numbers are expressed in a rate (ie, unemployment rate, inflation rate, gdp growth rate). Expressing it in absolute numbers gives the erroneous impression that a constant increase means the situation is getting "worse". Ie, if the total amount of trade increases by 5%, you can expect the total trade defiit to increase by 5% and consider that no change in trade deficit relative to the total amount of trade.

loseyourname

Okay, this is even more of a nitpick, and I'm not disagreeing with you that a trade deficit doesn't have to be a bad thing, but your overall net worth will decrease pretty quickly when buying tech goods, unless you're buying antiques, even though it won't decrease immediately, because tech products depreciate in value faster than cash does.