The Clinton economy, in charts

September 5, 2012

Former president Bill Clinton is speaking at the Democratic National Convention tonight, and is sure to spark a lot of commentary about the contrast between the economic boom times of the Clinton administration and the rough economy of the last decade. But what actually was Clinton's economic record?

The labor market was strong

Clinton came into office as the 1991 recession was subsiding and oversaw the subsequent recovery. But even given what you'd expect from a recovery, unemployment fell dramatically between January 1993 and January 2001, dipping to 3.9 percent at the end of Clinton's term:

What's more, labor force participation trended upward, from 66.2 when Clinton took office to 67.2 percent when he left. One percent may not seem like much, but given that in 2000 it amounted to 2.8 million people working who were previously outside the labor force, it's notable.

 Economic growth was strong

Clinton averaged 3.8 percent growth in real GDP:

Of the post World War II presidents, only Truman (4.8 percent), Kennedy (5.2 percent) and Johnson (5.1 percent) achieved higher average growth rates. Reagan, by contrast, averaged 3.5 percent, Carter 3.3 percent, Nixon 3.1 percent, Bush I and Ford 2.2 percent, and Bush II 1.65 percent.

Poverty shrunk, but extreme poverty grew

Poverty declined dramatically under Clinton's tenure, buoyed by the growing economy and the expanding labor force. What's more, the traditional metric excludes transfer payments from welfare food stamps and the Earned Income Tax Credit. Perhaps due to Clinton's expansion of the latter programs, poverty including transfers fell by 3.6 points, whereas poverty without transfers fell by 3.4 points:


An important caveat is in order, though. While poverty in general fell, Clinton's 1996 welfare reform caused extreme poverty — that is, the number of households living on less than $2 a day — to skyrocket, as this paper (pdf) by Luke Schaefer and Kathryn Edin found:


Source: H. Luke Schaefer and Kathryn Edin

The beige line is not including food stamps, while the blue line includes them. While most of the increase came during the Bush years and the recession, extreme poverty was rising by the end of Clinton's term, and to some extent the rise during the Bush years can be attributed to Clinton's welfare policy. It's worth noting that most of these households had multiple children, so the actual number of children in extreme poverty is about double the numbers in the chart above.

Inflation was stable

Inflation was generally under control during the Clinton years. Both the total inflation rate and the "core" rate, which excludes food and gasoline, averaged precisely 2.6 percent over Clinton's term:

That's slightly higher than the Fed usually likes it, but then again it contributed to unemployment going lower than many observers thought it even could go, as Chris Hayes noted in this 2009 paper.

Income inequality skyrocketed

The Clinton years saw the top 1 percent and top 0.1 percent pull away from the rest of the country more aggressively than they had before. Here's how the richest Americans' share of income grew during Clinton's term, using the Piketty/Saez dataset:

What's more, taxes didn't grow more progressive to combat this. According to data from the CBO, taxes and transfers at the end of Clinton's term did no more to reduce inequality than they did at the start of his term:

But median wages grew

The top income groups fared very well under Clinton but the median household also saw wages increase, from $661 a week to $700 a week, in inflation adjusted terms. But that number varies quite a bit by education level, as high school dropouts saw wages fall from $424 to $407 a week, according to Census data:

The financial industry exploded

The trend of finance taking up a greater and greater share of the economy continued apace during the Clinton years, as Bureau of Economic Analysis data shows:

 

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