L22: Clinton and Bush: The Economics of the 1990s and 2000s

AgendaObjective:1. To understand and

evaluate the economic policies of Bill Clinton in the 1990s.

2. To understand and evaluate the economic policies of George W. Bush in the 2000s.

3. To evaluate the legacy of these policies.

Schedule: 4. Lecture & Discussion

Homework:1. Study for Test

(Multiple Choice & Discussion). Thursday 4/30!

Clinton Presidency (1992-2000)

• 1946-Present• Lawyer• Governor of Arkansas• Democrat (Centrist)• Economic Dimensions of

Presidency:– Balance the Budget /

Budget Surplus– Health Care Reform– NAFTA– Welfare-to-Work Act

Balance the Budget• Campaigned on promise to

reduce taxes for the middle class

• However, Clinton raised taxes.

• Critics complained that the tax increase would hurt the economy but this did not happen.

• Tax increases helped to not only balance the budget but achieve a budget surplus

• Presidency longest period of sustained economic growth in U.S. history

Health Care Reform • Health care costs were rising and tens of

millions of Americans had little or no health insurance.

• Hillary Clinton headed a special task force which proposed a government-sponsored program of universal health care.

• The plan was defeated after months of debate.

NAFTA(North American Free Trade

Agreement)• Expanded free market trade

between the US, Mexico, and Canada

• The U.S. Chamber of Commerce credits NAFTA with increasing US trade in goods and services with Canada and Mexico from $337 billion in 1993 to $1.2 trillion in 2011, while the AFL-CIO blames the agreement for sending 700,000 American manufacturing jobs to Mexico over that time.

Welfare Reform• Personal Responsibility and Work Opportunity Reconciliation

Act of 1996• Act provides temporary financial assistance while aiming to

get people off of that assistance, primarily through employment. Maximum of 60 months of benefits within one’s lifetime

• Recipients are required to find a job within 24 months of receiving aid

• Why the change?– Perception that people on welfare were not “deserving poor” (historically, widows and the elderly) but rather “undeserving poor” (people who didn’t want to work) who were living off of government benefits permanently.

Overview

• During the Clinton administration, the U.S. enjoyed more peace and economic well-being than at any time in its history.

• He was the first Democratic president since Franklin D. Roosevelt to win a second term.

• He could point to the lowest unemployment rate in modern times, the lowest inflation in 30 years, the highest home ownership in the country’s history, dropping crime rates in many places and reduced welfare rolls.

• He proposed the first balanced budget in decades and achieved a budget surplus.

George W. Bush Presidency (2000-2008)

• 1946-Present• Republican (Conservative)• Governor of Texas• Economic Dimensions of

Presidency– Tax Cuts– Privatization of Social

Security– National Deficit– Subprime Mortgage Crisis &

Recession of 2008

Tax Cuts• Believed the surplus

accumulated by Clinton represented the financial overreach of the US government

• Signed a series of acts that reduced all tax rates, reduced the capital gains tax, and increased child tax credits

Privatization of Social Security

• Advocated the partial privatization of Social Security, but was unsuccessful at achieving this reform because of strong congressional resistance

National Deficit• The Bush tax cuts in combination with

increased government spending to sustain two wars resulted in significant growth of the national deficit under Bush.

• Proportionally, Bush increased government spending more than

any President since LBJ

Subprime Mortgage Crisis & Recession of 2008

• In March 2008, Bear Sterns, a major US investment bank heavily invested in subprime mortgages, began to go under.– The U.S. government intervened with a loan

• In July, three other major investment banks looked like they were going to go under

• TARP (Troubled Asset Relief Program)– Package of financial supports given to failing banks and

industry to keep them from failing.

• The “Great Recession” saw…– Loss of jobs– Home Foreclosures– Drop in Consumption– Limited business investments