- The Washington Times - Friday, August 18, 2000

After watching the Democratic National Convention in Los Angeles, I was reminded of a famous quip by Mark

Twain: First get your facts straight, then you can distort them all you like.

President Clinton took credit for a long wave of economic prosperity that began 10 years before he was elected and for a balanced budget that he fought tooth and nail to prevent after Republicans took control of Congress. To borrow a phrase from Joseph I. Lieberman: That's chutzpah. But if we undistort the economic facts, we find Mr. Clinton's story of the current prosperity parts company with the reality.

The National Bureau of Economic Research reports that we are now in the 18th year of one long wave of prosperity. The expansion officially began in 1982 with the supply side policies of Ronald Reagan.

The centerpiece of these pro-growth policies was tax-rate reductions. But the then-controversial departure from Keynsian limits to growth orthodoxy included sound money, deregulation, reductions in trade barriers and creating peace through victory in the Cold War. Michael Cox of the Dallas Federal Reserve Bank has found that over the past 200 months, since the Reagan prosperity began, the economy has been in recession just eight months, or just 4 percent of the time.

The bullish stock market began in 1982, not in 1992. Then, the Dow Jones hit its nadir at 800. Even the most wild-eyed optimist would never have guessed that Reaganomics would lead to a Dow-Jones of 11,000 by 2000.

The historical performance of the stock market provides other surprising revelations. Between 1993 and 2000 the Dow-Jones has soared from 3,200 to 11,000. But in the two years of the Clinton presidency when the Democrats controlled Congress, the Dow rose by just 600 points, whereas in the nearly six years since the November 1994 elections the Dow has risen by more than 6,000 points. In other words, more than 92 percent of the increase in asset values occurred after voters repudiated Clintonomics in the landmark election of 1994.

The interest-rate story also throws a curve ball into Mr. Clinton's revisionist history. As the table shows, interest rates and inflation began their long-term tumble in the early 1980s. In 1980, mortgage-interest rates hit the oppressive level of 20 percent, and the inflation rate rocketed to 11 percent. Since the early 1980s, inflation has fallen by roughly a half a percent per year to the current 2 percent to 3 percent range. Three Americans were responsible for this monetary success story: Mr. Reagan, Paul Volker and Alan Greenspan.

Nor is it true that Mr. Clinton's world-record tax increase in 1993 lowered interest rates, as the White House boasts. Actually, from 1993 through November 1994 (when Republicans won control of Congress), interest rates rose by 50 basis points.

It's pretty much the same story with the budget deficit. After two years of Clintonomics, we were still issuing $200 billion of new debt every year. In 1994, the budget deficit was cratered at $203 billion, and the Congressional Budget Office predicted that $200 billion deficits would afflict us well into the 21st century. After two years, Mr. Clinton's $500 billion tax increase failed to balance the budget or even reduce red ink by much.

What changed this gloomy financial outlook? The Republican balanced-budget plan in 1995 played a big role. In 1995, Republicans forced Mr. Clinton to accept a balanced budget despite two government shutdowns. The White House was forced to submit five budget plans until he grudgingly proposed a balanced budget. And those are "just the facts, ma'am."

To be sure, Mr. Clinton has presided over what has arguably been the most prosperous years in this century. He deserves some of the credit for this astonishingly resilient expansion. Where his policies have been most productive for example, in promoting free-trade agreements, signing the Republican welfare reforms, cutting the capital gains tax and allowing Mr. Greenspan to smother the last remnants of inflation in the financial system he has sensible followed the economically liberating path laid out by Mr. Reagan. His most dimwitted economic ideas Hillary Rodham Clinton's health care plan and Robert Reich's fiscal stimulus plan in 1993 were mercifully killed by Congress. That has surely been a big part of the secret of Mr. Clinton's success: being saved from himself.

But Republicans better shake off their overconfidence. If American voters go to the polls in November believing that the Clinton-Gore policies have created peace, prosperity and trillion dollar surpluses, Al Gore will be the next president no matter how charismatically challenged he is.

It's the Reagan economy stupid. The Bush team better start reminding voters of that reality, or they're going to be unemployed in a few months.



Stephen Moore is president of the Club for Growth and an adjunct fellow at the Cato Institute.

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