In an interview with Ron Brownstein, the former president shared his thoughts on where the economy went wrong after 2000:

Economists looking to explain this decade of futility have offered a panorama of explanations. The bursting of the high-technology bubble and then the attacks of September 11, 2001, started the slide. President Bush’s huge 2001 and 2003 tax cuts vaporized Clinton’s federal budget surpluses while failing to ignite broadly shared prosperity. Increasing pressure from emerging economies led by China virtually eradicated job growth in industries (such as manufacturing) subject to international competition. Automation “hollowed out” low-skill jobs. The personal debt that Americans piled on to maintain their living standard as incomes declined combined with deregulatory decisions under Clinton and Bush to produce a financial system rotted with risk. After it crumbled, Bush’s bank rescue plan and President Obama’s stimulus prevented the economy from sliding into full-scale depression but failed to generate the self-sustaining recovery—the “escape velocity”—that their architects envisaged.
In our conversation, Clinton pointed to some of these factors (particularly personal debt, the pressure of international competition, and the federal deficits that reopened after Bush’s tax cuts). But he also stressed one other: the absence of an innovation big enough to spur change throughout the economy. “When I was president, I got a big break … and I just put the hammer to it, which is that information technology exploded through every aspect of the American economy,” he said. “[It was] no longer limited in its job-generating potential to Silicon Valley and Route 128 in Massachusetts.… It went everywhere.” [Emphasis added]
That momentum waned, Clinton argued, when the economy failed to produce another technological breakthrough of comparable magnitude. “There was no basis to generate broad-based new employment,” he said.

So that’s the smart thing. Clinton acknowledged the obvious, that a positive exogenous shock had much to do with the roaringness of the Roaring ’90s, which is to his credit.

I’ll also add that a few things from Brownstein’s greatest hits coundown seem not quite right to me:

(a) President Bush’s huge 2001 and 2003 tax cuts vaporized Clinton’s federal budget surpluses while failing to ignite broadly shared prosperity.

There’s definitely something to this way of looking at the impact of the 2001 and 2003 tax cuts, but I’d recommend reading my colleague Christopher Papagianis’s finer-grained analysis.

I’d argue that the high-income rate reductions made a positive difference. Did they ignite broadly shared prosperity? No, they did not, not least because there are many variables at play and it is unsound to expect that high-income rate reductions alone can ignite broadly shared prosperity. The bulk of the tax cuts, the reduction in the basic rate, the expansion of the child tax credit, etc., had weak to non-existent incentive effects.

(b) Increasing pressure from emerging economies led by China virtually eradicated job growth in industries (such as manufacturing) subject to international competition.

I like thinking through the mechanism at work. Leading firms also learned to do more with fewer bodies in response to intense domestic competition. We could attribute the increasing pressure to emerging economies. We could also attribute it to rising productivity that flowed from managerial innovation that flowed from investor activism that flowed from cultural change and financial innovation, with the global economic integration and a changing domestic regulatory environment playing a role at almost every step in complex ways.

My guess is that the high and rising fixed costs associated with employing workers played a bigger role in restraining job growth than China.

(c) The personal debt that Americans piled on to maintain their living standard as incomes declined combined with deregulatory decisions under Clinton and Bush to produce a financial system rotted with risk.

Were Americans just maintaining their living standards during this period or did living standards increase, once we consider the changing quality of the goods and services being consumed via debt finance?

Regardless, let’s turn to the not-so-smart thing:

The former president picked clean energy as the new idea most likely to revive job growth.

No comment.

Brownstein goes on to say many things I disagree with, but perhaps you will feel differently on reading the column.