No, Democrat Presidents aren't Great Job Creators
During Tuesday night’s Republican presidential debate, the editor-in-chief of the Wall Street Journal Gerald Baker posed this intriguing question to Carly Fiorina:
“Ms. Fiorina, while you’ve all pointed out how weak the current recovery has been and how disappointing by any historical standards, in the general election, the Democrats will inevitably ask you and voters to compare the recent president’s jobs performance. Now, in seven years under President Obama, the U.S. has added an average of 107,000 jobs a month. Under President Clinton, the economy added about 240,000 jobs a month. Under George W. Bush, it was only 13,000 a month. If you win the nomination, you’ll probably be facing a Democrat named Clinton. How are you going to respond to the claim that Democratic presidents are better at creating jobs than Republicans?”
Without quibbling with the misleading premise that heads of state “create” jobs, Gerald Baker asked a tough and fair question. Republicans should be glad Baker asked it because as Baker suggests, Hillary Clinton will use this talking point to try to discredit Republican policies. By asking the question at this stage of the campaign, Baker gives Republicans ample time to prepare a compelling answer and not be caught off guard in the general election.
Carly Fiorina was unprepared for the question and avoided answering it all together.
What follows is the correct answer. But because in politics the correct answer doesn’t always yield the most votes, Republican candidates will need to condense this lengthy explanation into a concise set of talking points that resonate with voters.
The first key fact to recall is that the economic expansion during the Clinton presidency was primarily attributable to the advent of the internet and the tech boom that spawned new industries. Bill Clinton’s role in the digital revolution starts and ends with his Vice President telling tall tales about having invented the internet.
If Hillary Clinton is going to credit her husband with the 90s boom, she must point to specific Clinton era policies proposed and implemented by the Clinton administration that spurred job growth. Inventing the internet isn’t one of them. So what is?
Many conservative economists argue that the 1994 North Atlantic Free Trade Agreement (NAFTA) signed by Clinton resulted in substantial economic benefits by among other things, increasing U.S. exports and expanding U.S. agriculture. Yet today’s Democrats are at best ambivalent about free trade, and many, including labor unions and the eventual Democratic primary runner-up Bernie Sanders, are stanchly against it. Since most Republicans support NAFTA and given how controversial the free trade issue is on the Left, Clinton isn’t likely to tout NAFTA.
Another Clinton era policy that undoubtedly contributed to the economic boom is the tax relief and deficit reduction package passed by a Republican Congress and reluctantly signed into law by Bill Clinton in 1997.
The legislation included a cut in the top capital gains tax rate from 28% to 20% -- an anathema to the modern Left -- and a new $500 child tax credit. Bill Clinton initially resisted the legislation, just as he resisted welfare reform, but his shrewd political instincts coupled with the reality of a Republican-led Congress compelled him to begrudgingly sign into law a decidedly conservative bill.
In short, the 90s economic boom was the result of the tech boom, possibly NAFTA, and conservative tax cutting, deficit reduction policies crafted by Newt Gingrich and the Republican Congress. Bill Clinton deserves credit primarily for not succeeding in obstructing conservative policies.
Towards the end of the Clinton presidency, in March 2000, the Dot Com bubble burst, the NASDAQ crashed, and the 10-year economic expansion halted. By March 2001, just two months into George W. Bush’s first term, the U.S. was in a recession.
Although it’s patently irrational to blame George Bush for the start of the 2000-2001 recession, the job growth numbers cited by Gerald Baker reflect only who was president at the time the recession officially started, not who is ultimately responsible. Bill Clinton got lucky by having had left office a couple of months prior to March 2001.
Conversely, Bush got unlucky, inheriting a weak economy that had been expanding since the end of George H.W. Bush’s term.
Then 9/11 happened.
The terrorist attacks seven months into the Bush presidency devastated the airline industry and plunged the country into a deep recession, which subsequently led to massive job losses, totaling a net loss of 2.243 million jobs in 2001 and 2002. Additionally, between March 2000 and October 2002, NASDAQ companies lost $5 trillion in market value.
The recession technically ended in November 2001, and from 2003 through 2007, the real GDP grew at an average annual rate of 3.1%. In terms of economic performance, George Bush had the double misfortune of inheriting a weak economy post a tech bubble and an unprecedented terrorist attack on U.S. soil.
In 2008, another recession ignited by the housing bubble began. This so-called “great recession” is the main reason for the low average job creation numbers during the Bush presidency.
Democrats and their allies in the mainstream media disingenuously blame George Bush for the great recession, and Republicans have been unwilling to aggressively refute this demonstrable falsehood. That’s a mistake. As much as Republicans don’t want to have to spend political capital on defending George Bush, they’ll have to respond to Hillary Clinton’s attacks or risk too many voters continuing to believe the myth that Republican policies caused the 2008 recession.
The housing bubble was mainly the result of bad government policies predating Bush (admittedly continued under Bush) that compelled mortgage banks to give loans to people who could not afford them. The government’s underlying objective for lowering lending standards was to increase home ownership rates among low income families and minorities. This sort of social engineering that disregards the law of unintended consequences is quintessential left-wing economics. The Bush Administration could have probably done more to reign in Fannie Mae and Freddie Mac, and the subprime mortgage investment frenzy that precipitated the banking crisis, but to blame the Bush administration for left-wing policies promoted by left-wing politicians is intellectually dishonest.
Ironically, many on the left also blame the repeal of the Glass Steagall Act signed into law by Bill Clinton for contributing to the housing crisis. It’s not true, but if we accept the Left’s premise, it would mean that Bill Clinton bears more responsibility for the great recession than George Bush.
By the time President Obama was inaugurated in January 2009, the financial markets had been stabilized and the worst of the recession was over. The GDP contracted by 6.7% in the first quarter of 2009, compared to 8.9% in 2008. By June 2009, we were officially out of the recession and the historically slow recovery had begun. Notably, the recession technically ended before most of the so-called stimulus money had been spent.
Since 2009, the economy has been growing at a tepid pace, creating a moderate number of jobs, while the labor participation rate has plunged to 38-year lows. But because there were no other major shocks to the U.S. economy, such as a major terrorist attack or a bubble bursting, job creation did not take a major hit.
The discrepancy in job creation numbers between Clinton, Bush, and Obama doesn’t affirm the superiority of left-wing policies in creating jobs; in most cases, it does just the opposite. To be sure, there are other variables at play, including Federal Reserve policy which presidents have no control over.
When Hillary Clinton misleadingly touts job creation under Democrat presidents, Republicans will have to formulate a concise and politically savvy response that shatters the myth of Bill Clinton as the great job creator.
Finally, there’s the Reagan factor. The eventual Republican nominee should highlight that Reagan created more jobs than Clinton and that the Reagan recovery following the disastrous Jimmy Carter economy was far more robust across virtually every variable than the Obama recovery, including rising incomes for low-income families.