Hillary Clinton's Bewildering Economics
Hillary Clinton can't keep her story straight. I'm not talking about her e-mail servers. She can't stick to a consistent line on the rather more central issue of the U.S. economy. It is leading to odd tonal shifts in her campaign, and to some foolish policy choices, too.
It's not entirely her fault. The last two Democratic presidents had comparatively simple tasks when designing their economic messages. Bill Clinton could run against 12 years of Ronald Reagan and George H. W. Bush, especially since the country still thought it was in a recession when he ran. Barack Obama could say the economy was in crisis mostly because of George W. Bush and secondarily because of decades of conservative policies.
Hillary Clinton has a harder task. She can't simply celebrate today's economy as the product of Democratic policies, because people aren't thrilled with it. She can't blame the economy's inadequacy on a Republican administration, because there hasn't been one for six and a half years. She can't say that the economy is subpar because of decades of bad policy choices, either: That period includes 16 years of Democratic presidencies, including her husband's, and she wants to associate herself with the prosperity of Bill's time in office.
Her solution has been to do all of these things at once. Terrible trends started around 1981 and the Democrats have made things better when they've been in charge and we have a good economy again and we need to change everything we've been doing for a long time. She sounded each of these notes in recent speeches at the New School and New York University.
The most consistent story she could tell would be that everything went wrong with Reagan. A lot of liberal thinkers have invested their intellectual labor in this story. Her argument would be that Reagan unraveled the postwar bargain between government, labor and business -- weakening the first two forces and strengthening the third -- and that the result has been stagnation or worse for most American workers.
This explanation seems to dominate the Clinton campaign's economic thinking. It informs her latest proposal, which is to hike capital-gains taxes except for very long-term investments. It lies beneath her complaints about the weakness of labor unions, too.
But the story doesn't really fit the facts. The booms of the 1980s and 1990s benefited most Americans, with compensation rising and most people saying they were satisfied with how things were going. The decline of unions was not mostly the result of Reaganite hostility: It's a trend that was already underway when John F. Kennedy was president, and seems to have had a lot to do with the inability of unionized companies to compete with non-unionized ones.
Perhaps worse from a political perspective, that story also makes Bill Clinton appear to have been ineffectual in protecting American workers from conservatism -- or, worse, to have collaborated with it. Viewing the Reagan-Bush and Clinton policies today, there seems to be more continuity than difference. Trade grew freer, unions declined and inequality grew under all three of them (and beyond their presidencies). Bill Clinton even cut the capital-gains tax that Hillary Clinton now seeks to raise.
Reconciling all these conflicting economic messages would tax even the most skillful of politicians. The Democrats are lucky that Hillary Clinton is such a natural.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
To contact the author on this story:
Ramesh Ponnuru at firstname.lastname@example.org
To contact the editor on this story:
Timothy Lavin at email@example.com