What is Clintonomics
Clintonomics refers to the economic philosophy and policies promulgated by William Jefferson Clinton, who was president of the United States from 1993 to 2001. Clintonomics applies to the fiscal and monetary policies employed during the period, which was marked by shrinking budget deficits, low-interest rates, and globalization. The primary form of globalization was in the form of the passage of the North American Free Trade Agreement (NAFTA), and encouraging China’s accession to the World Trade Organization (WTO).
BREAKING DOWN Clintonomics
Bill Clinton came to office while the United States was still recovering from the Great Recession that began in 1991. The country was suffering from rising interest rates and declining prices of U.S. government debt as a result of growing budget deficits. His first significant piece of economic legislation, the Deficit Reduction Act of 1993, enacted budget cuts and tax increases on wealthy Americans, a move that was politically unpopular, but which calmed bond markets.
The effort at deficit reduction allowed Federal Reserve Chair, Alan Greenspan, to keep interest rates relatively low, which helped lead to a boom in business investment which sent economic growth and stock markets higher throughout the 1990s. However, Greenspan would later be attacked for keeping interest rates too low, which critics argue helped encourage the real estate bubble of the 2000s.
Clintonomics and Free Trade
Another fundamental pillar of Clintonomics was a dedication to free trade. President Clinton inherited negotiations over the North American Free Trade Agreement (NAFTA), from his predecessor, George H.W. Bush. Free trade agreements, at the time, were more enthusiastically supported by the Republican Party, while Democrats and their labor allies worried about the effects of such transactions on jobs and worker pay.
Clinton’s signed NAFTA into law after amending the agreement with added labor and environmental protections. This change was another manner in which he distinguished himself from other Democrats of the day. Clinton was also a supporter of China’s accession to the World Trade Organization (WTO), which it joined in 2001.
Criticisms of Clintonomics
Clintonomics has come under attack after the 2008 financial crisis. Critics argued that President Clinton was too in favor of financial deregulation. Clinton’s dedication to free trade has also come under increasing attack, with critics claiming that the president did not do enough to secure the rights of U.S. workers and ensure that U.S. wages would not suffer from the passage of NAFTA. Clinton’s support of China’s accession to the WTO has also been criticized, especially in light of America’s large and increasing trade deficit with China, and the continued loss of manufacturing jobs since that time.