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Economic policy of the Bill Clinton administration

From Wikipedia, the free encyclopedia

The economic policies of Bill Clinton, referred to by some as Clintonomics (a portmanteau of "Clinton" and "economics"), encapsulates the economic policies of United States President Bill Clinton that were implemented during his presidency, which lasted from January 1993–January 2001.

President Clinton oversaw a very robust economy during his tenure. The U.S. had strong economic growth (around 4% annually) and record job creation (22.7 million). He raised taxes on higher income taxpayers early in his first term and cut defense spending and welfare, which contributed to a rise in revenue and decline in spending relative to the size of the economy. These factors helped bring the federal budget into surplus from fiscal years 1998–2001, the only surplus years after 1969. Debt held by the public, a primary measure of the national debt, fell relative to GDP throughout his two terms, from 47.8% in 1993 to 31.4% in 2001.[1]

Clinton signed NAFTA into law along with many other free trade agreements. He also enacted significant welfare reform. His deregulation of finance (both tacit and overt through the Gramm-Leach-Bliley Act) has been criticized as a contributing factor to the Great Recession.[2]

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  • ✪ The Clinton Years, or the 1990s: Crash Course US History #45
  • ✪ What Was Bill Clinton's Economic Policy? Investment Specialists on Economic Growth (1993)
  • ✪ The Reagan Revolution: Crash Course US History #43


Hi, I’m John Green, this is CrashCourse U.S. history, and today we have finally reached the Clinton years. Bill Clinton and I are really quite similar, actually. We were both brought up in the South. We both come from broken families … well, no, not actually. Also, I did not attended any Ivy League University. Yeah, I’m actually nothing like Bill Clinton. Well, except for the southern thing, and also both of us are married to women who are smarter than we are. Mr. Green, Mr. Green? But he was president. Whatever, I’m still young Me From the Past! Clinton wasn’t even governor of Arkansas until he was like (looks at computer)....oh, crap, he was 32, I’m finished! INTRO So Clinton’s presidency was focused on Domestic Policy and a sex scandal – in fact his campaign war room famously featured a sign that read “It’s the Economy, stupid.” His domestic legacy is pretty complex, though, so we’re going to start with his foreign policy. The Clinton years didn’t feature as many major foreign policy successes as Bush 41, but Clinton did have his moments. Like his administration achieved a partial success with the 1993 Oslo Accords when Israel recognized the legitimacy of the Palestinian Liberation Organisation. However, that eventually resulted in the PLO becoming progressively less powerful and as you may have noticed, it didn’t ultimately achieve peace in the Middle East. Clinton was more successful in Yugoslavia where he pushed NATO to actually do something for once in this case bombing, sending troops, kinda something. Now there had been widespread ethnic cleansing of Bosnian Muslims before the NATO intervention but the fighting ended with the Dayton Accords. And then there’s the Rwandan genocide, which the Clinton administration did absolutely nothing to prevent and where 800,000 people died in less than a month. The Rwandan genocide is probably the international community's greatest failure in the 2nd half of the 20th century and while certainly Clinton was among many people who were complicit to that including like, me, yeah… you know... so far it’s not such a great foreign policy record. Terrorism also became a bigger issue during Clinton’s presidency. The World Trade Center was bombed for the 1st time, the U.S.S. Cole was attacked. But the most destructive terrorist act during Clinton’s presidency was of course committed by Americans - Timothy McVeigh and Terry Nichols who blew up the Murrah Federal building in Oklahoma City. Which brings us to an awkward transition from domestic terrorism to domestic policy. So Bill Clinton was from Hope Arkansas and he ran as a centrist democrat who wanted to do things differently. He wasn’t going to be inside the Washington beltway. And he wasn’t going to be some old-fashioned liberal who was all about raising taxes funneling billions of dollars to Snuffleupagus. That centrism made him very electable but his first few domestic agenda items faltered, like he tried to end the ban on gay people entering in the military but opposition led him to compromise with the famous Don’t Ask Don’t Tell policy. Essentially you were allowed to be homosexual, if you were in the military, you just weren’t allowed to acknowledge it. And then there was the 1993 Health Care initiative led by Clinton’s wife, Hillary, which was also a failure. By the 90’s the United States was the last industrialized nation not to have universal health care and while Hillary Clinton’s plan would have resulted in Americans having universal health care it was too complicated to sell to us. Also, it faced very powerful opposition from like drug companies, and insurers, and medical device makers… lots of people. But at least it had a working website. What’s that, Stan? There was no web? What did they use, like a mobile app or something? There was no apps? I thought we were in modern history! So on the heels of these failed policy initiatives in 1994 Democrats were swept out of Congress and Republicans took control of both the Senate and the House. The new speaker of the House, whose real name was Newt Gingrich, and who would later run for president despite being named Newt Gingrich issued something called the Contract with America. It promised to cut government, cut taxes, cut regulation, overhaul welfare and end affirmative action -- and this led to a Government shutdown in 1995 over an inability to reach a budget agreement between the Congress and the president. Which in turn made all these new Congressional Republicans very unpopular with the American people as a whole and played into Clinton’s political strategy of “triangulation.” His strategy was to campaign against radical republicans while co-opting some of their ideas. The most obvious example was his declaration in January 1996 that “The era of big government is over”. Spoiler alert: It wasn’t. There has been no president since WWII who decreased the size of the government. And that will change when never because all of the things that actually cost the government a lot of money like Social Security and Medicare are very popular and both of those programs benefit old people who vote disproportionately because they have nothing to do since Murder She Wrote was cancelled. However, Clinton did actually shrink parts of the government with policies like the Telecommunications Act of 1996, which deregulated broadcasting. But Clinton’s signature economic policy was Welfare Reform – aka the Personal Responsibility and Work Opportunity Act – of 1996. This law replaced the Aid to Families with Dependent Children program, which had given money directly to poor mothers. But with Clinton’s welfare reform states received block grants that came with strings attached including work requirements and time limits for total benefits. Welfare rolls plummeted and many economists see this as the rare bipartisan victory in the 1990’s but it’s still controversial and many liberal people felt like Bill Clinton had betrayed them. But Clinton still remained popular through much of his presidency largely because it really is the economy stupid - and the economy got better. In fact by the time Clinton left office unemployment was below 4% which hadn’t happened since the 1960s. That meant there should have been inflation but somehow there wasn’t, possibly because of increased global competition that kept wages down and also energy prices that were remarkably low as worldwide oil production increased. Microchips made it possible to develop loads of new products, like personal computers and DVD players, and video games, and cell phones, and Crash Course. And computers completely transformed the American workplace. I mean until the 90’s people would go to work, and they would sit in their offices at their desks, and they would… I don’t know what did because they didn’t have computers! How did anything get done before computers, I mean how were books written, how was the Godfather edited, how was this globe made, I mean did some individual’s human hand sculpt it from clay? So no wonder the economy got better we had stumbled on the biggest innovation since like wheels. And during the Clinton administration we didn’t just have computers we had computers that began to connect to each other. I’m referring of course to the Internet which might have remained like a military communications network if computer scientists and entrepreneurs hadn’t worked out how to use it to sell things. This was the beginning of the e-commerce boom, which would be followed by an e-commerce bust, but then another e-commerce boom, which would eventually give us websites where you can buy Crash Course DVD’s, like, and also lesser known e-commerce sites like Ebay and Amazon. Oh, it’s time for the mystery document? The rules here are simple. I read the mystery document, I either get the author correct, or I get shocked. Okay here we go. “The information highway will extend the electronic marketplace and make it the ultimate go-between, the universal middleman. Often the only humans involved in a transaction will be the actual buyer and the seller. All the goods for sale in the world will be available for you to examine, compare, and often customize. When you want to buy something you’ll be able to tell your computer to find if for you at the best price offered by any acceptable source or ask your computer to “haggle” with the computers of various sellers. Information about vendors and their products and services will be available to any computer connected to the highway. Servers distributed worldwide will accept bids, resolve offers into completed transactions, control authentication and security, and handle all other aspects of the marketplace, including the transfer of funds. This will carry us into a new world of low-friction, low-overhead capitalism, in which market information will be plentiful and transaction costs low. It will be a shopper’s heaven.” Stan, that sounds like something that Amazon founder Jeff Bezos would say. No? Dangit, Bill Gates. Let me tell you how much I enjoy this, none. Oh, the information super highway it made all of this possible including my shock pen. Ahhh! Now one of the lessons of history is that good news for someone is almost always bad news for someone else and that was certainly the case with the longest period of economic expansion in American history. Increased use of Information Technology facilitated the globalization of manufacturing and the pressure to manufacture cheaply pushed wages down and encouraged companies to locate factories in countries with lower environmental regulations and also lower wages. That’s great for companies, it’s good for prices, arguably good for workers in the developing world, not so great for the environment or for American workers. The deregulation of finance also contributed to global growth. Capital could flow more easily anywhere in the world but this also meant that it could flow out easily, making financial crises more likely and more widespread. The growth of free flowing capital in the 1990’s created a world in which the crash of 2008 was more or less inevitable. But before that we had the crash of 2000. As money flowed into the stock market, bubbles developed. And in some ways this was more problematic than it used to be because a much greater percentage of Americans had become investors in stocks - an actual majority of them by the year 2000. And many of these investors were buying into these hot new dot-com stocks, in fact the tech-heavy NASDAQ exchange soared in 1998 and 1999. And then it lost 80% of its value in 2000 when the bubble burst. It turns out that the business model of selling you dog food at a loss is not a sustainable business model. Although to be fair Amazon has been selling stuff at a loss now for 20 years and they’re still at it. So… you know… maybe I’m wrong. So during this period real wages grew but the gains were very unequal like when you adjust for inflation, wages of nonsupervisory workers remained below what they were in the 1970s. And for the poor it was even worse. Our old friend Eric Foner reports that “Average after-tax income of the poorest 1/5 of Americans fell 12 percent, and that of the middle 1/5 decreased by 3 percent.”[1] Meanwhile, the income of the top fifth increased 38%. Now of course this trend towards inequality and the majority of jobs being created in low wage, insecure, service industries would continue into the 21st century. But the economic and political pictures that we’ve sought to paint only tell half of the story of the 1990s, because it was also a decade characterized by what has been called the Culture Wars. A big part of this was immigration, which rose enormously after immigration reform in 1965. Between 1965 and 2000 the US saw almost 24 million immigrants arrive, compared with 27 million during the peak immigration period between 1880 and 1924. Fully half of new immigrants came from Latin America and the Caribbean, 35% came from Asia, only 10% came from Europe and most of them were from the former USSR and the Balkans. As had always been the case, most immigrants were attracted by labor opportunities, but now more were highly educated. In fact, 40% had college educations. Let’s go to the thoughtbubble. Latinos were the largest immigrant group by far, with Mexicans making up the largest contingent and by 2007 Latinos would replace African Americans as the second largest ethnic group. Latinos suffered disproportionate poverty, and, despite significant economic gains during the 1990s, African Americans still found their economic opportunities limited. According to Eric Foner, “In 2007, the total assets of the median white family […] stood at $87,000. For black families, the figure was $5,400.”[2] Diversity also increased in other ways like single parent families became more accepted which was essential as 50% of marriages ended in divorce. Out-of-wedlock births declined, primarily because teenagers were practicing safer sex. And teens and adults were cohabiting before or instead of marriage. Eventually the Mom, Dad, and 2.4 kids standard American household became only one of a number of accepted options for families. Gay and trans people became increasingly visible in the national consciousness as a result of the GLBT rights movement and it becoming safer for people to come out of the closet. On the other hand, the AIDS epidemic, which disproportionately affected the GLBT community was disastrous. By 2000 400,000 Americans had died of AIDS. Then there’s the depressing rise in imprisonment. Politicians competed with each other to see who could be tougher on crime and as the War on Drugs continued, many state legislatures passed “three strikes” laws meaning that people who were convicted of three felonies would go to prison for life. The number of Americans in prison skyrocketed. By 2008 it was 2.3 million, ONE QUARTER of the total number of inmates on planet Earth. Thanks, thoughtbubble. Although I have to say I thought this was going to be a happy one, I mean the economy is growing, things are getting better for people in the GLBTQ community, and then boom, boom, boom, it’s all terrible! I don’t want to underplay the many benefits of our increased prosperity and diversity but all of this multiculturalism and change made for a very tense political atmosphere. To some people it seemed like the open free-wheeling liberalism of the 60’s had run amuck, and those people really started to hate the Clintons. But among Bill Clinton’s many flaws: facelessness, cigar smoking, his biggest was his inability to stop cheating on his wife. Clinton had dodged accusations of extramarital skoodilypooping while running for the presidential nomination which contributed to his unfortunate “Slick Willie” moniker. But while he was president, Clinton’s former employee Paula Jones sued him for sexual harassment that had occurred, allegedly occurred, I guess it probably occurred, allegedly occurred while he was governor of Arkansas. While gathering evidence for that lawsuit, investigators discovered that the president had carried on a sexual relationship with a young intern named Monica Lewinsky. The President denied having “sexual relations” with Monica Lewinsky which was a lie unless you are President Bill Clinton and have a very narrow definition of “sexual relations.” That lie to a justice department official was the basis for articles of impeachment for perjury and obstruction of justice. And so it was that the president of the United States was impeached for saying that he didn’t have sex with a woman that he did have sex with, unless of course you define sex very narrowly, and it all depends on what your definition of is is, and etc. In early 1999, Clinton was acquitted of these charges in a congressional vote that went right down party lines and he served out the remainder of his term but he was significantly weakened. Also, he served out the remainder of his presidency sleeping on the couch. So the 90s were a really pivotal decade to the world we live in right now, a globalized, multicultural, instagram-filtered world But as we became more globally connected political divisions grew within the United States. And this became especially problematic because with the growth of the Internet it was easier than ever to only hear voices that you already know you agree with. To live inside of an echo chamber where your news doesn’t necessarily resemble your neighbor’s news. In some ways Bill Clinton directed these changes but in most ways they directed him. But that’s what I find so fascinating about history, even the fancy people who get their heads on the chalkboard, even they are subject to historical forces. Thanks for watching. I’ll see you next week. Crash Course is made with all the help of these nice people and it’s possible because of your support through, a voluntary subscription service that allows you to pay monthly for Crash Course whatever you want so that we can keep it free for everyone forever. You’ll find lots of cool perks at Subbable like a chance to sponsor videos, and signed posters and stuff, so please check it out. You can click here on my face or there is a link in the video info below. Thank you so much for watching Crash Course, thanks for making it possible, and as we say in my hometown, “Don’t forget to be awesome.” ________________ [1] Foner. Give me Liberty ebook version p. 1141 [2] Foner, Give me Liberty. Ebook version p. 1150.



Four charts showing real GDP growth, unemployment rate, non-farm jobs added, inflation rate, and interest rates in the Clinton era.
Four charts showing real GDP growth, unemployment rate, non-farm jobs added, inflation rate, and interest rates in the Clinton era.

Clinton's presidency included a great period of economic growth in America's history. Clintonomics encompassed both a set of economic policies as well as governmental philosophy. Clinton's economic (clintonomics) approach entailed modernization of the federal government, making it more enterprise-friendly while dispensing greater authority to state and local governments. The ultimate goal involved rendering the American government smaller, less wasteful, and more agile in light of a newly globalized era.[3]

Clinton assumed office following the end of a recession, and the economic practices he implemented are held up by his supporters as having fostered a recovery and surplus, though some of the president's critics remained more skeptical of the cause-effect outcome of his initiatives. The Clintonomics policy focus could be encapsulated by the following four points:

Prior to the 1992 presidential campaign, America had undergone twelve years of conservative policies implemented by Ronald Reagan and George Herbert Walker Bush. Clinton ran on the economic platform of balancing the budget, lowering inflation, lowering unemployment, and continuing the traditionally conservative policies of free trade.

David Greenberg, a professor of history and media studies at Rutgers University, opined that:

The Clinton years were unquestionably a time of progress, especially on the economy ... Clinton's 1992 slogan, 'Putting people first,' and his stress on 'the economy, stupid,' pitched an optimistic if still gritty populism at a middle class that had suffered under Ronald Reagan and George H.W. Bush. ... By the end of the Clinton presidency, the numbers were uniformly impressive. Besides the record-high surpluses and the record-low poverty rates, the economy could boast the longest economic expansion in history; the lowest unemployment since the early 1970s; and the lowest poverty rates for single mothers, black Americans, and the aged.[4]

Fiscal policy

The Ominibus Budget Reconciliation Act of 1993 increased the average federal tax rates for the top 1%, while lowering average tax rates for the middle class.
The Ominibus Budget Reconciliation Act of 1993 increased the average federal tax rates for the top 1%, while lowering average tax rates for the middle class.
Job Growth by U.S. President, measured as cumulative percentage change from month after inauguration to end of term. More jobs were created under the Clinton administration than any other President.
Job Growth by U.S. President, measured as cumulative percentage change from month after inauguration to end of term. More jobs were created under the Clinton administration than any other President.

Tax reform

In proposing a plan to cut the deficit, Clinton submitted a budget and corresponding tax legislation that would cut the deficit by $500 billion over five years by reducing $255 billion of spending and raising taxes on the wealthiest 1.2% of Americans.[5] It also imposed a new energy tax on all Americans and subjected about a quarter of those receiving Social Security payments to higher taxes on their benefits.[6]

Republican Congressional leaders launched an aggressive opposition against the bill, claiming that the tax increase would only make matters worse. Republicans were united in this opposition, and every Republican in both houses of Congress voted against the proposal. In fact, it took Vice President Gore's tie-breaking vote in the Senate to pass the bill.[7] After extensive lobbying by the Clinton Administration, the House narrowly voted in favor of the bill by a vote of 218 to 216.[8] The budget package expanded the earned income tax credit (EITC) as relief to low-income families. It reduced the amount they paid in federal income and Federal Insurance Contributions Act tax (FICA), providing $21 billion in relief for 15 million low-income families.

Clinton signed the Omnibus Budget Reconciliation Act of 1993 into law. This act created a 36 percent to 39.6 percent income tax for high-income individuals in the top 1.2% of wage earners. Businesses were given an income tax rate of 35%. The cap was repealed on Medicare. The taxes were raised 4.3 cents per gallon on transportation fuels and the taxable portion of Social Security benefits were increased.

Clinton enacted Small Business Job Protection Act of 1996 which reduced taxes for many small business. Furthermore, he signed legislation that increased the tax deduction for self-employed business owners from 30% to 80% by 1997. The Taxpayer Relief Act reduced some federal taxes. The 28% rate for capital gains was lowered to 20%. The 15% rate was lowered to 10%. In 1980, a tax credit was put into place based on the number of individuals under the age of 17 in a household. In 1998, it was $400 per child and in 1999, it was raised to $500. This Act removed from taxation profits on the sale of a house of up to $500,000 for individuals who are married, and $250,000 for single individuals. Educational savings and retirement funds were given tax relief. Some of the expiring tax provisions were extended for selected businesses. Since 1998, an exemption could be taken out for those family farms and small businesses that qualified for it. In 1999, the correction of inflation on the $10,000 annual gift tax exclusion was accomplished. By the year 2006, the $600,000 estate tax exemption had risen to $1 million.

The economy continued to grow, and in February 2000 it broke the record for the longest uninterrupted economic expansion in U.S. history.[9][10]

After Republicans won control of Congress in 1994, Clinton vehemently fought their proposed tax cuts, believing that they favored the wealthy and would weaken economic growth. In August 1997, however, Clinton and Congressional Republicans were finally able to reach a compromise on a bill that reduced capital gain and estate taxes and gave taxpayers a credit of $500 per child and tax credits for college tuition and expenses. The bill also called for a new individual retirement account (IRA) called the Roth IRA to allow people to invest taxed income for retirement without having to pay taxes upon withdrawal. Additionally, the law raised the national minimum for cigarette taxes. The next year, Congress approved Clinton's proposal to make college more affordable by expanding federal student financial aid through Pell Grants, and lowering interest rates on student loans.

Clinton also battled Congress nearly every session on the federal budget, in an attempt to secure spending on education, government entitlements, the environment, and AmeriCorps–the national service program that was passed by the Democratic Congress in the early days of the Clinton administration. The two sides, however, could not find a compromise and the budget battle came to a stalemate in 1995 over proposed cuts in Medicare, Medicaid, education, and the environment. After Clinton vetoed numerous Republican spending bills, Republicans in Congress twice refused to pass temporary spending authorizations, forcing the federal government to partially shut down because agencies had no budget on which to operate.[11] In April 1996, Clinton and Congress finally agreed on a budget that provided money for government agencies until the end of the fiscal year in October. The budget included some of the spending cuts that the Republicans supported (decreasing the cost of cultural, labor, and housing programs) but also preserved many programs that Clinton wanted, including educational and environmental ones.

Deficits and debt

Four CBO charts with revenue, spending, deficit and debt information. The budget was in surplus from fiscal years 1998-2001, the only such years between 1970 and 2016. The debt to GDP ratio also improved.
Four CBO charts with revenue, spending, deficit and debt information. The budget was in surplus from fiscal years 1998-2001, the only such years between 1970 and 2016. The debt to GDP ratio also improved.

Below are the budgetary results for President Clinton's two terms in office:

  • He had budget surpluses for fiscal years 1998-2001, the only such years from 1970-2016. Clinton's final four budgets were balanced budgets with surpluses, beginning with the 1997 budget.
  • The ratio of debt held by the public to GDP, a primary measure of U.S. federal debt, fell from 47.8% in 1993 to 33.6% by 2000. Debt held by the public was actually paid down by $453 billion over the 1998-2001 periods, the only time this happened between 1970 and 2016.
  • Federal spending fell from 20.7% GDP in 1993 to 17.6% GDP in 2000, below the historical average (1966 to 2015) of 20.2% GDP.
  • Tax revenues rose steadily from 17.0% GDP in 1993 to 20.0% GDP in 2000, well above the historical average of 17.4% GDP.
  • Defense spending fell from 4.3% GDP in 1993 to 2.9% GDP by 2000, as the U.S. enjoyed a "peace dividend" in the wake of the fall of the Soviet Union. In dollar terms, defense spending fell from $292B in 1993 to $266B by 1996, then slowly rose to $295 billion by 2000.
  • Non-defense discretionary spending fell from 3.6% GDP in 1993 to 3.2% GDP by 2000. In dollar terms, it grew from $248B in 1993 to $343B in 2000; robust economic growth still enabled the ratio to fall relative to GDP.[1]

This pattern of raising taxes and cutting spending (i.e., austerity) in an economic boom coincides precisely with the advice of John Maynard Keynes, who stated in 1937: "The boom, not the slump, is the right time for austerity at the Treasury."[12] However, this remarkable success did not stop conservative pundits from trying to discredit this achievement. Their argument essentially goes like this: Although debt held by the public was reduced, the surplus funds paid into Social Security were used to pay those bondholders, in effect borrowing from one pocket (future Social Security program recipients) to pay down the other (current bondholders), such that total debt rose. However, while this is true, this is also how the proverbial "math works" for all the other modern Presidents as well. It is not accurate to discredit the exceptional fiscal austerity of the Clinton era relative to other modern Presidents, which nevertheless coincided with a booming economy by virtually any measure.[13] It is also relevant to point out that this booming economy occurred despite Republican warnings that such tax increases on the highest income taxpayers would slow the economy and job creation. Perhaps the boom would have been even greater if larger deficits had been run, but this was not the argument made at the time.

Welfare reform

The Personal Responsibility and Work Opportunity Act (PRWORA) of 1996 established the Temporary Assistance for Needy Families (TANF) program, which was funded by block grants to the states. This program replaced the Aid to Families with Dependent Children (AFDC) program, which had open-ended funding for those that qualified and a federal match for state spending. To receive the full TANF grant amounts, states had to meet certain requirements related to their own spending, as well as the percentage of welfare recipients working or participating in training programs. This threshold could be reduced if welfare caseloads fell. The law also modified the eligibility rules for means-tested benefits programs such as food stamps and Supplemental Security Income (SSI).[14]

CBO estimated in March 1999 that the TANF basic block grant (authorization to spend) would total $16.5 billion annually through 2002, with the amount allocated to each state based on the state's spending history. These block grant amounts proved to be more than the states could initially spend, as AFDC and TANF caseloads dropped by 40% from 1994 to 1998 due to the booming economy. As a result, states had accumulated surpluses which could be spent in future years. States also had the flexibility to use these funds for child care and other programs. CBO also estimated that TANF outlays (actual spending) would total $12.6 billion in fiscal years 1999 and 2000, grow to $14.2 billion by 2002, and reach $19.4 billion by 2009. For scale, total spending in FY 2000 was approximately $2,000 billion, so this represents around 0.6%. Further, CBO estimated that unspent balances would grow from $7.1 billion in 2005 to $25.4 billion by 2008.[15]

The law's effect goes far beyond the minor budget impact, however. The Brookings Institution reported in 2006 that: "With its emphasis on work, time limits, and sanctions against states that did not place a large fraction of its caseload in work programs and against individuals who refused to meet state work requirements, TANF was a historic reversal of the entitlement welfare represented by AFDC. If the 1996 reforms had their intended effect of reducing welfare dependency, a leading indicator of success would be a declining welfare caseload. TANF administrative data reported by states to the federal government show that caseloads began declining in the spring of 1994 and fell even more rapidly after the federal legislation was enacted in 1996. Between 1994 and 2005, the caseload declined about 60 percent. The number of families receiving cash welfare is now the lowest it has been since 1969, and the percentage of children on welfare is lower than it has been since 1966." The effects were particularly significant on single mothers; the portion of employed single mothers grew from 58% in 1993 to 75% by 2000. Employment among never-married mothers increased from 44% to 66%. The report concluded that: "The pattern is clear: earnings up, welfare down. This is the very definition of reducing welfare dependency."[16]


Studies done by Kate Bronfenbrenner at Cornell University showed the adverse effect of plants threatening to move to Mexico because of NAFTA.[17]
Studies done by Kate Bronfenbrenner at Cornell University showed the adverse effect of plants threatening to move to Mexico because of NAFTA.[17]

Clinton made it one of his goals as president to pass trade legislation that lowered the barriers to trade with other nations. He broke with many of his supporters, including labor unions, and those in his own party to support free-trade legislation.[18] Opponents argued that lowering tariffs and relaxing rules on imports would cost American jobs because people would buy cheaper products from other countries. Clinton countered that free trade would help America because it would allow the U.S. to boost its exports and grow the economy. Clinton also believed that free trade could help move foreign nations to economic and political reform.

The Clinton administration negotiated a total of about 300 trade agreements with other countries.[19] Clinton's last treasury secretary, Lawrence Summers, stated that the lowered tariffs that resulted from Clinton's trade policies, which reduced prices to consumers and kept inflation low, were technically "the largest tax cut in the history of the world."[20]


The three-nation NAFTA was signed by President George H. W. Bush during December 1992, pending its ratification by the legislatures of the three countries. Clinton did not alter the original agreement, but complemented it with the North American Agreement on Environmental Cooperation and the North American Agreement on Labor Cooperation, making NAFTA the first "green" trade treaty and the first trade treaty concerned with each country's labor laws, albeit with very weak sanctions.[21] NAFTA provided for gradually reduced tariffs and the creation of a free-trading bloc of North American countries–the United States, Canada, and Mexico. Opponents of NAFTA, led by Ross Perot, claimed it would force American companies to move their workforces to Mexico, where they could produce goods with cheaper labor and ship them back to the United States at lower prices. Clinton, however, argued that NAFTA would increase U.S. exports and create new jobs. Clinton while signing the NAFTA bill stated: "... NAFTA means jobs. American jobs, and good-paying American jobs. If I didn't believe that, I wouldn't support this agreement."[22] He convinced many Democrats to join most Republicans in supporting trade agreement and in 1993 the Congress passed the treaty.[23]

While economists generally view free trade as an overall positive for the nation's involved, certain groups may be adversely affected, such as manufacturing workers. For example:

  • In a 2012 survey of leading economists, 95% supported the notion that on average, U.S. citizens benefited on NAFTA.[24] A 2001 Journal of Economic Perspectives review found that NAFTA was a net benefit to the United States. A 2015 study found that US welfare increased by 0.08% as a result of the NAFTA tariff reductions, and that US intra-bloc trade increased by 41%.
  • In 2015, the Congressional Research Service concluded that the "net overall effect of NAFTA on the U.S. economy appears to have been relatively modest, primarily because trade with Canada and Mexico accounts for a small percentage of U.S. GDP. However, there were worker and firm adjustment costs as the three countries adjusted to more open trade and investment among their economies." CRS also pointed out that NAFTA to a great extent set rules for behavior already underway (e.g., U.S. manufacturing companies were already moving some jobs to Mexico, thus avoiding U.S. employment regulation and unions, in efforts to maximize profits.)[25]
  • The U.S. Chamber of Commerce credits NAFTA with increasing U.S. trade in goods and services with Canada and Mexico from $337 billion in 1993 to $1.2 trillion in 2011, while the AFL-CIO blames the agreement for sending 700,000 American manufacturing jobs to Mexico over that time.[26]

World Trade Organization (WTO)

Officials in the Clinton administration also participated in the final round of trade negotiations sponsored by the General Agreement on Tariffs and Trade (GATT), an international trade organization. The negotiations had been ongoing since 1986. In a rare move, Clinton convened Congress to ratify the trade agreement in the winter of 1994, during which the treaty was approved. As part of the GATT agreement, a new international trade body, the World Trade Organization (WTO), replaced GATT in 1995. The new WTO had stronger authority to enforce trade agreements and covered a wider range of trade than did GATT.


Clinton also held meetings with leaders of Pacific Rim nations to discuss lowering trade barriers. In November 1993 he hosted a meeting of the Asia-Pacific Economic Cooperation (APEC) in Seattle, Washington, which was attended by the leaders of 12 Pacific Rim nations. In 1994, Clinton arranged an agreement in Indonesia with Pacific Rim nations to gradually remove trade barriers and open their markets.

Clinton faced his first defeat on trade legislation during his second term. In November 1997, the Republican-controlled Congress delayed voting on a bill to restore a presidential trade authority that had expired in 1994. The bill would have given the president the authority to negotiate trade agreements which the Congress was not authorized to modify–known as "fast-track negotiating" because it streamlines the treaty process. Clinton was unable to generate sufficient support for the legislation, even among the Democratic Party.

Clinton faced yet another trade setback in December 1999, when the WTO met in Seattle for a new round of trade negotiations. Clinton hoped that new agreements on issues such as agriculture and intellectual property could be proposed at the meeting, but the talks fell through. Anti-WTO protesters in the streets of Seattle disrupted the meetings[27] and the international delegates attending the meetings were unable to compromise mainly because delegates from smaller, poorer countries resisted Clinton's efforts to discuss labor and environmental standards.[28]

That same year, Clinton signed a landmark trade agreement with the People's Republic of China. The agreement–the result of more than a decade of negotiations–would lower many trade barriers between the two countries, making it easier to export U.S. products such as automobiles, banking services, and motion pictures. However, the agreement could only take effect if China was accepted into the WTO and was granted permanent "normal trade relations" status by the U.S. Congress. Under the pact, the United States would support China's membership in the WTO. Many Democrats as well as Republicans were reluctant to grant permanent status to China because they were concerned about human rights in the country and the impact of Chinese imports on U.S. industries and jobs. Congress, however, voted in 2000 to grant permanent normal trade relations with China. Several economic studies have since been released that indicate the increase in trade resulting lowered American prices and increased the U.S. GDP by 0.7% throughout the following decade.[29]

Deregulation of banking

Clinton signed the Financial Services Modernization Act or GLBA in 1999, which allowed banks, insurance companies and investment houses to merge and thus repealed the Glass-Steagall Act which had been in place since 1932. It also prevented further regulation of risky financial derivatives. His deregulation of finance (both tacit and overt through GLBA) was criticized as a contributing factor to the Great Recession. While he disputes that claim, he expressed regret and conceded that in hindsight he would have vetoed the bill, mainly because it excluded risky financial derivatives from regulation, not because it removed the long-standing Glass-Steagall barrier between investment and depository banking. In his view, even if he had vetoed the bill, the Congress would have overridden the veto, as it had nearly unanimous support.[2]

Politifact rated Clinton's claim that repeal of Glass-Steagall did not have "anything to do with the financial crash [of 2008]" as "Mostly True," with the caveat that his claim focused on removing the separation of investment and depository banking and not the broader exclusion of risky financial instruments (derivatives) from regulation.[30] These derivatives, such as the credit default swaps at the core of the 2008 crisis, were basically used to insure mortgage-related securities, with AIG the major provider. This encouraged more mortgage-related lending, as AIG theoretically stood behind the mortgage securities used to finance the mortgage lending. However, AIG was not effectively regulated and did not have the financial resources to make good on its insurance promises when housing defaults began and investors began to claim the insurance payments on mortgage securities in default. AIG collapsed spectacularly in September 2008, and became a conduit for a large government bailout (over $100 billion) to many banks globally to which AIG owed money, one of the darkest episodes in the crisis.[31]

Economic results summary

U.S. cumulative real (inflation-adjusted) GDP growth by President.[32]
U.S. cumulative real (inflation-adjusted) GDP growth by President.[32]
The poverty rate declined from 15.1% in 1993 to 11.9% in 1999. The number in poverty fell from 39.2 million in 1993 to 32.8 million in 1999, a decline of 6.4 million.
The poverty rate declined from 15.1% in 1993 to 11.9% in 1999. The number in poverty fell from 39.2 million in 1993 to 32.8 million in 1999, a decline of 6.4 million.


Clinton presided over the following economic results, measured from January 1993 to December 2000, with alternate dates as indicated:

  • Average real GDP growth of 3.8%, compared to average growth of 3.1% from 1970-1992. The economy grew every quarter.[33]
  • Real GDP per capita increased from about $36,000 in 1992 to $44,470 in 2000 (in 2009 dollars), about 23%, roughly the same as it did from 1981-1989 during the Reagan administration.[34]
  • Inflation averaged 2.6%, versus 6.1% from 1970-1992 and 3.0% in 1992.[35]

Labor market

  • Non-farm payrolls increased by 22.7 million from February 1993 to January 2001 (236,000 per month average, the fastest on record for a Presidential tenure[36]) while civilian employment increased by 18.5 million (193,000 per month average).[37]
  • The unemployment rate was 7.3% in January 1993, fell steadily to 3.8% by April 2000 and was 4.2% in January 2001 when his second term ended. It was below 5.0% after May 1997.[38]
  • Unemployment for African Americans fell from 14.1% in January 1993 to 7.0% in April 2000, the lowest rate on record.[38]
  • Unemployment for Hispanics fell from 11.3% in January 1993 to 5.1% in October 2000, the lowest rate on record up to that point.[38]


  • Real median household income increased from $50,725 in 1992 to $57,790 in 2000, a 13.9% increase.[39]
  • The poverty rate declined from 15.1% in 1993 to 11.3% in 2000, the largest six-year drop in poverty in nearly 30 years. The number in poverty fell from 39.2 million in 1993 to 31.58 million in 2000, a decline of 7.6 million.[40]
  • The homeownership rate reached 67.7% near the end of the Clinton administration, the highest rate on record. In contrast, the homeownership rate fell from 65.6% in the first quarter of 1981 to 63.7% in the first quarter of 1993.[41]
  • Clinton worked with the Republican-led Congress to enact welfare reform. As a result, welfare rolls dropped dramatically and were the lowest since 1969. Between January 1993 and September 1999, the number of welfare recipients dropped by 7.5 million (a 53% decline) to 6.6 million. In comparison, between 1981–1992, the number of welfare recipients increased by 2.5 million (a 22% increase) to 13.6 million people.[42]


Clinton has been heavily criticized for overseeing the creation of the North American Free Trade Agreement (NAFTA), which made it more affordable for manufacturing companies to outsource jobs to foreign countries and then import their product back to the United States.

Some liberals and progressives believe that Clinton did not do enough to reverse the trends toward widening income and wealth inequality that began in the late 1970s and 1980s. The top marginal income tax rate for high-income individuals (the top 1.2% of earners) was 70 percent in 1980, then lowered to 28 percent in 1986 by Reagan; Clinton raised it back to 39.6 percent, but it remained far below pre-Reagan levels. Clinton's administration also afforded no benefit to unionized labor and did not favor strengthening collective bargaining rights.

Lower unemployment rates were another large part of Clinton's macroeconomic policies. Many argue that Clinton cost many Americans jobs because he supported free trade, which some argue caused the U.S. to lose jobs to countries like China (Burns and Taylor 390). Even if Clinton did cost Americans some jobs because of free trade support, he allowed for more jobs than were lost because the unemployment rate of his presidency, and especially his second term, were the lowest they had been in thirty years (Burns and Taylor 390). Others attribute this to sustained declines in interest rates, which fueled a booming stock market and job growth in a booming technology sector.

See also


  1. ^ a b "CBO Budget and Economic Outlook 2016-2026 Historical tables". CBO. Retrieved November 23, 2016.
  2. ^ a b "Bill Clinton fires back at critics of his financial regulatory policies". The Hill. May 14, 2014. Retrieved November 23, 2016.
  3. ^ Jack Godwin, Clintonomics: How Bill Clinton Reengineered the Reagan Revolution (Amacom Books, 2009)
  4. ^ "Memo to Obama Fans: Clinton's presidency was not a failure". Slate. Retrieved February 13, 2005.
  5. ^ Speech by President Address to Joint Session of Congress February 17, 1993 Archived March 26, 2007, at the Wayback Machine
  6. ^ "Asking American to 'Face Facts,' Clinton Presents Plan to Raise Taxes, Cut Deficit". The Washington Post. February 18, 1993. Retrieved May 22, 2010.
  7. ^ U.S. Senate Roll Call Vote – H.R. 2264 (Omnibus Budget Reconciliation Act of 1993)
  8. ^ U.S. House Recorded Vote – H.R. 2264 (Omnibus Budget Reconciliation Act of 1993)
  9. ^ Bryant, Nick (January 15, 2001). "How history will judge Bill Clinton". BBC News. Retrieved March 24, 2011. That he has presided over the longest economic expansion in US history is undeniable. The US entered its 107th consecutive month of growth last February.
  10. ^ Schifferes, Steve (January 15, 2001). "Bill Clinton's economic legacy". BBC News. Retrieved March 24, 2011.
  11. ^ "Government Shutdown Battle" – PBS
  12. ^ "Keynes was right". NYT. Retrieved December 30, 2016.
  13. ^ "Bill Clinton says his administration paid down the debt". September 23, 2010. Retrieved March 20, 2011.
  14. ^ "The Economic and Budget Outlook:Fiscal Years 1999-2008". CBO. January 8, 1998. Retrieved November 23, 2016.
  15. ^ "Testimony on CBO's Spending Projections for the TANF and Federal Child Care Programs". CBO. March 16, 1999. Retrieved November 23, 2016.
  16. ^ "The Outcomes of 1996 Welfare Reform". CBO. July 19, 2006. Retrieved December 31, 2016.
  17. ^ Kate Bronfenbrenner, 'We'll Close', The Multinational Monitor, March 1997, based on the study she directed, 'Final Report: The Effects of Plant Closing or Threat of Plant Closing on the Right of Workers to Organize'.
  18. ^ AFL CIO on Trade Archived 2011-05-11 at the Wayback Machine
  19. ^ Clinton on Foreign Policy at University of Nebraska Archived 2015-04-28 at the Wayback Machine
  20. ^ Address by Lawrence H. Summers, Deputy Secretary of the Treasury Archived September 27, 2007, at the Wayback Machine
  21. ^ North American Free Trade Agreement
  22. ^ Retrieved 02/20/2011
  23. ^ Roll Call Vote – H.R. 3450
  24. ^ "Poll Results | IGM Forum". 13 March 2012. Retrieved 2016-01-01.
  25. ^ "The North American Free Trade Agreement (NAFTA)" (PDF).
  26. ^ 2 Dec 2013"Contentious Nafta pact continues to generate a sparky debate" By James Politi
  27. ^ Security Increased for WTO Protests – PBS
  28. ^ Wrapping Up the WTO – PBS
  29. ^ Council on Foreign Relations (2007). U.S.-China Relations: An Affirmative Agenda, a Responsible Course, p. 62
  30. ^ "Bill Clinton:Glass-Steagall repeal had nothing to do with financial crisis". August 19, 2015. Retrieved November 23, 2016.
  31. ^ "Financial Crisis Inquiry Commission-Conclusions". January 2011. Retrieved November 23, 2016.
  32. ^ FRED-Real GDP-Retrieved July 1, 2018
  33. ^ "FRED Real GDP". FRED. Retrieved November 22, 2016.
  34. ^ "FRED Real GDP per Capita". FRED. Retrieved December 30, 2016.
  35. ^ "FRED CPI and 10-Year Treasury". FRED. Retrieved November 22, 2016.
  36. ^ "Job Creation by President". Politics that Work. 2015.
  37. ^ "Civilian Employment and Total Nonfarm Payrolls". FRED. Retrieved December 19, 2016.
  38. ^ a b c "Unemployment rates by race". FRED. Retrieved December 30, 2016.
  39. ^ "FRED Real median household income". FRED. Retrieved April 5, 2017.
  40. ^ "Historical Poverty Tables". Retrieved April 5, 2017.
  41. ^ Office of Management! and Budget; National Economic Council, September 27, 2000
  42. ^ HHS Administration for Children and Families, December 1999 and August 2000; White House, Office of the Press Secretary, August 22, 2000


External links

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