Budget Advice From the Clinton Era: Echoes Book of the Week

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By Nikolai Krylov

Since the early 1980s, the only time when the federal debt has declined as a share of gross domestic product was from 1997 to 2001, during President Bill Clinton's second term. As officials in the White House today struggle to turn the economy around, one book they might pick up is Clinton's 2004 memoir, "My Life."

It's tempting to look back on the Clinton years as a halcyon era. During his eight years in office, the economy expanded almost 4 percent annually. The unemployment rate fell to 4.7 percent in January 2001, when Clinton left office, from 8 percent in January 1993, when he took over as president. The federal budget went to a surplus of $128.2 billion in 2001 from a deficit of $203.2 billion in 1994, the first year for which Clinton signed appropriations bills. By 2000, federal debt as a percent of GDP had fallen to 57.3 percent from 66.1 percent in 1993.

There's considerable disagreement over who is responsible for these successes, of course. But the book suggests an approach to governing that favors growth.

First, it's clear that Clinton sympathizes with the businessperson and entrepreneur. He writes that he got his first job at the age of 13, stocking shelves at a grocery store. That wasn't enough for him: Clinton got the owner's approval to open his own stand in front of the store to sell comic books. The concerns of people on the ground were never far from his mind.

Second, Clinton mastered the art of the concession. Sometimes, giving in a little bit is exactly what's needed to get something bigger done. George H. W. Bush had negotiated the North American Free Trade Agreement, but it was Clinton who had to sign it. In his campaign, Clinton pledged to add protections for labor and the environment to Nafta, and that helped get the agreement through Congress, even with the continued opposition of many Democrats.

Although Congressional Republicans fought aggressively for budget cuts and forced a shutdown of the federal government in late 1995 and early 1996, Clinton writes with satisfaction about the 1997 budget he hammered out with them: "I was elated that the countless hours of meetings, begun in late 1995 under the threat of a government shutdown, had produced the first balanced budget since 1969, and a good one to boot.”"

The political wrangling wasn't pretty, but Clinton's experience shows that a president can work with a Congress dominated by the other party. Moreover, the Republicans' steadfastness helped Clinton push his own party in favor of fiscal restraint.

Clinton writes that his last State of the Union address "was criticized by one congressman who said I sounded like Calvin Coolidge in wanting to make America debt-free, and by some conservatives who said I was spending too much money on education, health care, and the environment."

Clinton was certainly no Coolidge. But his experience is instructive in another era of bitter budget battles.

(Nikolai Krylov is a contributor to the Echoes blog. The opinions expressed are his own.)

To contact the author of this blog post: Nikolai Krylov at nikolakrylov@gmail.com.

To contact the editor responsible for this blog post: Timothy Lavin at tlavin1@bloomberg.net.


-0- Jul/15/2011 13:34 GMT