Hillary Clinton Chooses Obama's Fiscal Legacy Over Bill Clinton's
Hillary Clinton stands at a fork in the federal fiscal policy road. In one direction, runs Bill Clinton's performance; in the other, Barack Obama's. Despite claiming both legacies, all indications are that Hillary is running toward Obama's.
There could not be a greater divide between the last two Democratic administrations than in fiscal policy. While Bill's Clinton's course was thrust upon by a Republican Congress, it proved his presidency's greatest legacy. In contrast, Obama has followed his own course and it has become one of his administration's weakest areas.
Bolstered by an economy already in recovery in 1992 and Clinton's tax hike (discussing it two years later, he said, "I think raised them too much"), revenues during Clinton's eight years in office, averaged $1.5 trillion -- $455 billion above their 1992 level. Federal spending averaged $1.6 trillion from 1993-2000 -- $205 billion above its 1992 level. The period's average deficit was just $40 billion -- $250 billion better than 1992's.
The economy did well. Real GDP growth averaged 3.9% from 1993-2000 — hitting 3.8% in 1996 and then staying well above 4% annually. The fiscal and economic combo produced dramatic results relative to GDP.
From 1993-2000, federal receipts averaged 18.4% of GDP. Spending averaged 19.2% of GDP — 2.3% below its 1992 level. Aided by surpluses beginning in 1998, the deficit averaged just 0.8%, a big swing from 3.8% in 1992. Most impressive was the effect on federal debt: It fell almost one-third, from 46.6% in 1992 to 33.6% in 2000.
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Eight years later, Obama chose a different course. While still not over, but using Congressional Budget Office estimates for 2016, its trajectory is clear.
With an economy already in recession, Obama waited on his tax hike. Together, these make 2009-2016's $2.7 trillion average revenue level (just $144 billion above 2008's) somewhat misleading. After Obama's tax hike in 2013, revenues jumped to $3.5 trillion in 2014 and are estimated at $3.9 trillion this year.
Federal spending has been Obama's real fiscal driver, averaging $3.6 trillion -- $596 billion above 2008's level. As a result, the deficit has averaged $911 billion -- $452 billion above 2008's.
With the economy's continuing weakness, averaging just 1.6% from 2009-2016 (even dropping 2009's contraction, it averages just 2.2%), the key fiscal variables look particularly poor relative to it. Revenues have averaged 16.25% (0.9% below 2008's), spending has averaged 22.1% (1.9% above 2008), and the deficit has averaged 5.8% of GDP.
All of these factors have had a hugely adverse impact on the federal debt, which is projected at $14.1 trillion this year — well over twice 2008's $5.8 trillion mark. As a percentage of GDP, it is projected to reach 76.6% this year, almost double 2008's 39.3%.
Facing these diametrically different courses, which will Clinton take? In her July 28th Democratic National Convention acceptance speech she described her route.
Clinton stated she would "pass the biggest investment in new, good-paying jobs since World War II … invest in infrastructure now … make college tuition-free … liberate millions of people who already have student debt … help more people learn a skill or practice a trade … make it easier to get credit … (and) provide affordable child care and paid family leave."
She also stated: "We're not only going to make all these investments, we're going to pay for every single one of them. And here's how: Wall Street, corporations, and the super-rich are going to start paying their fair share of taxes."
Even taking Clinton at her word — and not presuming these new federal programs follow history and outspend their funding — the effect would be spending and revenue hikes beyond Obama's levels.
When her husband took office, he was working off comparatively low levels of taxing, spending, deficits, and debt. Not so, now. What's more, today's levels are not static either.
According to CBO, assuming current policy remains in place, today's fiscal levels will grow absolutely and relatively. Revenues as a percentage of GDP are projected to rise to 18.2%, spending to 21.6%, deficits to 3.3%, and debt to 78.4%. All will occur without further policy additions.
When Bill Clinton confronted a Republican Congress after two years in office, he plotted his "third way" -- resisting tax cuts, despite increasing surpluses — and accepting Republicans' spending cuts, stating in his 1996 State of the Union Speech "the era of big government is over."
When Obama confronted a Republican Congress after two years in office, he pushed through a tax hike and already had his spending in place. http://www.investors.com/politics/commentary/hillary-clinton-chooses-obamas-fiscal-legacy-over-bill-clintons/
There could not be a greater divide between the last two Democratic administrations than in fiscal policy. While Bill's Clinton's course was thrust upon by a Republican Congress, it proved his presidency's greatest legacy. In contrast, Obama has followed his own course and it has become one of his administration's weakest areas.
Bolstered by an economy already in recovery in 1992 and Clinton's tax hike (discussing it two years later, he said, "I think raised them too much"), revenues during Clinton's eight years in office, averaged $1.5 trillion -- $455 billion above their 1992 level. Federal spending averaged $1.6 trillion from 1993-2000 -- $205 billion above its 1992 level. The period's average deficit was just $40 billion -- $250 billion better than 1992's.
The economy did well. Real GDP growth averaged 3.9% from 1993-2000 — hitting 3.8% in 1996 and then staying well above 4% annually. The fiscal and economic combo produced dramatic results relative to GDP.
From 1993-2000, federal receipts averaged 18.4% of GDP. Spending averaged 19.2% of GDP — 2.3% below its 1992 level. Aided by surpluses beginning in 1998, the deficit averaged just 0.8%, a big swing from 3.8% in 1992. Most impressive was the effect on federal debt: It fell almost one-third, from 46.6% in 1992 to 33.6% in 2000.
Get instant access to exclusive stock lists and powerful tools on Investors.com. Try us free for 4 weeks.
Eight years later, Obama chose a different course. While still not over, but using Congressional Budget Office estimates for 2016, its trajectory is clear.
With an economy already in recession, Obama waited on his tax hike. Together, these make 2009-2016's $2.7 trillion average revenue level (just $144 billion above 2008's) somewhat misleading. After Obama's tax hike in 2013, revenues jumped to $3.5 trillion in 2014 and are estimated at $3.9 trillion this year.
Federal spending has been Obama's real fiscal driver, averaging $3.6 trillion -- $596 billion above 2008's level. As a result, the deficit has averaged $911 billion -- $452 billion above 2008's.
With the economy's continuing weakness, averaging just 1.6% from 2009-2016 (even dropping 2009's contraction, it averages just 2.2%), the key fiscal variables look particularly poor relative to it. Revenues have averaged 16.25% (0.9% below 2008's), spending has averaged 22.1% (1.9% above 2008), and the deficit has averaged 5.8% of GDP.
All of these factors have had a hugely adverse impact on the federal debt, which is projected at $14.1 trillion this year — well over twice 2008's $5.8 trillion mark. As a percentage of GDP, it is projected to reach 76.6% this year, almost double 2008's 39.3%.
Facing these diametrically different courses, which will Clinton take? In her July 28th Democratic National Convention acceptance speech she described her route.
Clinton stated she would "pass the biggest investment in new, good-paying jobs since World War II … invest in infrastructure now … make college tuition-free … liberate millions of people who already have student debt … help more people learn a skill or practice a trade … make it easier to get credit … (and) provide affordable child care and paid family leave."
She also stated: "We're not only going to make all these investments, we're going to pay for every single one of them. And here's how: Wall Street, corporations, and the super-rich are going to start paying their fair share of taxes."
Even taking Clinton at her word — and not presuming these new federal programs follow history and outspend their funding — the effect would be spending and revenue hikes beyond Obama's levels.
When her husband took office, he was working off comparatively low levels of taxing, spending, deficits, and debt. Not so, now. What's more, today's levels are not static either.
According to CBO, assuming current policy remains in place, today's fiscal levels will grow absolutely and relatively. Revenues as a percentage of GDP are projected to rise to 18.2%, spending to 21.6%, deficits to 3.3%, and debt to 78.4%. All will occur without further policy additions.
When Bill Clinton confronted a Republican Congress after two years in office, he plotted his "third way" -- resisting tax cuts, despite increasing surpluses — and accepting Republicans' spending cuts, stating in his 1996 State of the Union Speech "the era of big government is over."
When Obama confronted a Republican Congress after two years in office, he pushed through a tax hike and already had his spending in place. http://www.investors.com/politics/commentary/hillary-clinton-chooses-obamas-fiscal-legacy-over-bill-clintons/
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As usual Hillary is making the wrong choice. But that's a given with her.