8/23/00 2:55 p.m.
How We Got Here
Our economic success has more to do with what Clinton didn't do.

By NR's Editors

residents tend to get the credit or blame for the condition of the economy during their administrations. It would take someone far more modest than Bill Clinton to resist claiming credit for an economy as strong as ours has been, as he did for the umpteenth time at the Democratic convention. If in claiming that credit Clinton exaggerated how bad things had been before he came along — the Bush recession lasted only eight months, and economic growth was running at a healthy 4 percent clip by the end of 1992 — this too is within the bounds of partisan rhetoric.

In any case, it is less important that the right party get credit for economic success than that the right policies do. And here Clinton must be faulted. He and his subordinates do not understand the reasons for their own success. According to them, Clinton's signal accomplishment was to raise taxes in 1993: The tax increase replaced deficits with surpluses, which in turn reduced interest rates, which stimulated economic growth.

Clinton has the story backward. Interest rates were falling before he raised taxes, and they started rising almost as soon as he did — not to fall again until Republicans took Congress. The economy slowed down after the tax increase: The growth rate from 1993 to 1995 was below the norm for an economy in the early stages of recovery. The best that can be said for Clinton's tax hike is that it did not hurt the economy as badly as its Republican critics at the time foolishly predicted.

To Clinton's credit, he pursued other policies that more than compensated for his tax increase. The North American Free Trade Agreement and the trade deal with China cut taxes on international trade. Clinton allowed Alan Greenspan to reduce inflation, which had numerous beneficial effects. Lower inflation increased the rewards to work, save, and invest. It reduced interest rates, which made stocks more valuable. And it substantially reduced the effective burden of capital-gains taxes. In 1997, Clinton went further by acceding to Republican demands for an outright cut in capital-gains tax rates. The resulting high economic growth caused the budget surplus — not the other way around.

Yet in Los Angeles, Clinton boasted about none of the policies that actually contributed to the boom. To do so would have required him to share credit with others — Greenspan, the Republican Congress — and to alienate the protectionists in his party. If he was unwilling to do that, it would surely be asking too much of him to acknowledge that he also helped the economy by failing to pass the energy tax and the health-care plan he proposed in 1993.

Which brings us back to the question of partisan credit. Americans should be more grateful for all the things Clinton did not do, or was not able to do, than for anything he did.