From: Pff5

Subject: What Clinton did for the Economy

Bartcop:

I saw your response to a misguided writer regarding what Clinton did for the
economy.  Although I agree with most of what you write (except the profanity
- but you are easing off that over the years, too), your answer appeared very
weak to me, as if you were grasping for straws.

My opinion:

1.  The major thing that Clinton did was, against withering right wing
attacks, increase taxes on the wealthy to pay down the deficit.
 

2.  Using short term bonds to cover the legacy deficit is part and parcel to
this approach.  If you really intend to pay down the deficit, then you can
get lower interest rates on short term notes, and thus lower debt financing
costs, without risking much higher interest rates in the near future.
 

I became a Clinton supporter early on, and started investing as much as I
could in the stock market, based on his campaign promise that he would reduce
the deficit by taxes "on those who did so well during the 1980s".  At the end
of the Reagan/Bush regime, we were under staggering deficits.  The U.S.
government was the major player in borrowing money - driving up interest
rates.  High interest rates choke off economic expansion, because businesses
expand by borrowing money for equipment, facilities, etc.  Reagan/Bush had
choked off the economy.
 

This was originally disguised in the early 80s, because another great drag on
the economy, imported oil prices, had declined dramatically (from >$45/bbl to
<$15/bbl).  Once this drag had been removed, the economy started to expand.
But Reagan/Bush pissed that away by cutting taxes on the wealthy and creating
huge deficits.  The deficits were also caused by an incredible increase in
military spending - I have no problem with that, AS LONG AS IT IS PAID FOR IN
TAXES.
 

Another important aspect of Clinton's approach was to put the increase
primarily on the upper income people.  Taxing the middle class or below is
another way to choke off an economy that relies primarily on consumer
spending.  For example, increasing the social security tax rate (which Reagan
did as his "solution" to social security), which is imposed only up to a
certain limit ($80K in 2001) is incredibly bad for a consumer economy,
because it is a regressive tax (rich people, and even I, pay less of their
income as a percentage than those below $80K).
 

The rebound from the oil recession could not disguise the ever increasing
debt forever, leading to the Bush recession.  There was also a Reagan
recession immediately after the tax reduction, because oil prices did not
collapse until 1982.  Then Clinton came along, removed the stress that
deficits were putting on the economy, without choking down the demand side
(which higher taxes on the middle class would have caused), and the economy
bloomed (well, DUH!!!).
 

Reagan got the government out of rich peoples pockets, and put the government
into our credit markets.
 

Clinton got the government out of our credit markets.
 

Businesses can't expand when credit is tight.
 

Clinton got the government off the back of business borrowing, and the
economy bloomed.
 

Most importantly, SUPPLY SIDE ECONOMICS IS A CRAP THEORY.
 

As an aside, with respect to my statement about starting to invest in stocks
as much as I could starting in 1982, I have done very well.  If Limbaugh
REALLY believed that Clinton's tax increase was going to cause a recession,
he should have invested in fixed interest bonds, because these increase in
value during downturns.  However, in hindsight, one can see that that would
have been the worst route to take, as Greenspan increased interest rates
several times from 1992 to 1994 to keep the Clinton economy from expanding
too fast.  (I can only hope that Limbaugh made this stupid mistake.)  Fixed
rate bonds were one of the worst investments during Clinton's first term.
 

I should also mention that it was Dr. Laura Tyson on the Clinton team who was
the principal advocate of this approach.  She's back to being a professor of
economics some where in California.  I don't think she teaches supply side
theory.  The only place that should be taught is at "universities" that also
teach creationism rather than evolution, and support the flat Earth theory.
Every once and awhile, you can see her testifying to Congress on C-SPAN.