Hope in Clintonomics

Obama has said, "My theories have been tested. The last time they were tried was by a guy named Bill Clinton. And we created 23 million new jobs, went from deficits to surplus, and we created a lot of millionaires to boot." Clinton is also set to play a major part of the Democratic Naitonal Convention next month. But is Obama right to have so much faith in Clintonesque policy? We should be sceptical:

Even if a budget akin to Clinton’s 1993 package were passed, the U.S. economy isn’t necessarily poised to reap the same benefits, at least in the short term: Interest rates are already at rock bottom, and they still haven’t encouraged the kind of borrowing that low interest rates spurred during the 1990s. What’s more, the other big factors that fueled 1990s growth had little to do with Clinton’s White House. “We had a period of rapid technological innovation, that was really when the Internet came full force as an economic event,” says [economist Mark] Zandi. What’s more, the US was still reaping the gains of former Fed Chair Paul Volcker’s successful battle against inflation in the 1980s, as interest rates were already on their way down when Clinton came into office, Zandi adds. 

Bruce Bartlett takes a different approach.