The holes in the Clinton economic record that should worry Hillary


Does the Clinton economic record have holes? (Reuters)

At a time of continuing economic anxiety, one of Hillary Rodham Clinton’s best assets, should she run for president, may be her association with the prosperity of the 1990s. While the economy fell apart under George W. Bush and enjoyed only a meager recovery under Barack Obama, she can credibly say that she was part of the team that oversaw a period of broad-based growth, rising incomes and very low unemployment for Americans of all stripes.

Given the centrality of that argument, it’s no surprise that Clinton and her husband, former president Bill Clinton, are working hard to defend that economic record while also taking up the populist image that Sen. Elizabeth Warren (D-Mass.) has been able to claim on the left. As Amy Chozick of The New York Times notes, Bill Clinton gave a speech at Georgetown University on Wednesday, reminding people how well the economy performed under his tenure. “My commitment was to restore broad-based prosperity to the economy and to give Americans a chance,” he said, spending two hours defending policies that he said lifted millions out of poverty.

It would be unfair to deny credit to the Clinton administration for ushering in a set of policies that both helped fix the nation’s finances, bolstered the nation’s economy and helped the poor. Achievements like the expansion of the earned-income tax credit have played a central role in lifting people out of poverty.

But in the 13 years since Bill Clinton left the White House, holes in his economic record have emerged. To the extent she runs on the economic strength of the 1990s, Hillary Clinton may also have to play defense -- in at least these four areas.

Inequality: In his remarks at Georgetown, Clinton took pains to note that during his administration, Americans saw appreciable increases in their income – and the poor did even better than the rich. As everyone was enjoying the fruits of the economy's growth, he argued, inequality wasn't as much of a concern. No doubt that is true.

But looking back on that era, it's also true that inequality did rise during the Clinton years. For most of the administration, the top 1 percent of earners captured a fast increasing slice of national income.

Most of this was out of Clinton's control: The dotcom bubble and stock market boom had a big role to play. But policy was also relevant. The tax increases Clinton oversaw at the beginning of his term would have limited inequality, while the capital gains tax cuts he signed into law during his second term would have exacerbated it. At the time, it wasn't totally clear how much inequality was increasing: Only recently have researchers had access to tax records that make clear how much wealth was accumulated at the top. But as the highlighted portion of this chart shows -- based on data from the Saez-Picketty incomes database -- the ultra rich captured a disproportionate share of the gains from the Clinton era.


Deregulation: The Clinton record is also likely to draw flak for deregulating the financial markets – particularly dismantling the longtime wall between investment and commercial banking and refusing to regulate the exotic financial instruments known as derivatives.

Now, there has been much debate in the subsequent years about the extent to which those decisions helped cause or exacerbate the 2008 financial crisis and recession. Clinton and his top advisers have uttered varying degrees of regret for those decisions. But there's little doubt that the Clinton's economic record has a Scarlet D -- for Deregulation -- stamped on it. Today, many on the left revile Clinton's market-friendly advisers -- like Robert Rubin and Lawrence Summers -- who they blame for putting the interests of Wall Street over Main Street. Those concerns even cost Summers a nomination to be Federal Reserve chairman.

Ties to Wall Street: Both Clintons, who live in New York, retain deep ties to Wall Street. In 2008, the biggest contributors to Hillary Clinton's campaign were Citigroup and Goldman Sachs. Underscoring her closeness with the financial industry, POLITICO recently wrote that after New Jersey Gov. Chris Christie (R) and former governor of Florida Jeb Bush (R), many top financiers would prefer Clinton to any other Republican.

It's another one of the reasons Warren gets so much attention from the left. Citigroup features prominently in the careers of many Clinton-era advisers -- from Rubin on down. Warren recently questioned why so many Citigroup executives have made their way into the Obama administration.

As Chozick suggests, Hillary Clinton may also not have the street cred that her husband brought to the table in 1993, when he was the governor of a poor state. Today, the Clintons are millionaires who have been living the life of an ex-first family for a decade and a half.

Structural concerns: There's also an argument to be made that the Clinton administration, intoxicated with the technology boom, failed to do enough to address the structural problems with the U.S. economy that had already been building by the 1990s -- such as the decline of manufacturing and the problems that posed for workers with little education. Some analysts -- especially on the left -- would argue that his administration even exacerbated these problems through his advocacy of free trade agreements with Canada, Mexico and Asia, an issue that came up in Hillary Clinton's 2008 campaign and could come up again in 2016.

Zachary A. Goldfarb is a staff writer covering the White House, focusing on President Obama’s economic, financial and fiscal policy.
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