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The Clinton Presidency: Historic Economic Growth
Publish Date:Monday, April 25, 2005
In 1993, President Clinton and Vice President Gore launched their economic strategy: (1) establishing fiscal discipline, eliminating the budget deficit, keeping interest rates low, and spurring private-sector investment; (2) investing in people through education, training, science, and research; and (3) opening foreign markets so American workers can compete abroad. After eight years, the results of President Clinton's economic leadership are clear. Record budget deficits have become record surpluses, 22 million new jobs have been created, unemployment and core inflation are at their lowest levels in more than 30 years, and America is in the midst of the longest economic expansion in our history.
In 1992, 10 million Americans were unemployed, the country faced record deficits, and poverty and welfare rolls were growing. Family incomes were losing ground to inflation and jobs were being created at the slowest rate since the Great Depression. Today, America enjoys what may be the strongest economy ever.
- Strong Economic Growth: Since President Clinton and Vice President Gore took office, economic growth has averaged 4.0 percent per year, compared to average growth of 2.8 percent during the Reagan-Bush years. The economy has grown for 116 consecutive months, the most in history.
- Most New Jobs Ever Created Under a Single Administration: The economy has created more than 22.5 million jobs in less than eight years -- the most jobs ever created under a single administration, and more than were created in the previous 12 years. Of the total new jobs, 20.7 million, or 92 percent, are in the private sector.
- Median Family Income Up $6,000 since 1993: Economic gains have been made across the spectrum as family incomes increased for all Americans. Since 1993, real median family income has increased by $6,338, from $42,612 in 1993 to $48,950 in 1999 (in 1999 dollars).
- Unemployment at Its Lowest Level in More than 30 Years: Overall unemployment has dropped to the lowest level in more than 30 years, down from 6.9 percent in 1993 to just 4.0 percent in November 2000. The unemployment rate has been below 5 percent for 40 consecutive months. Unemployment for African Americans has fallen from 14.2 percent in 1992 to 7.3 percent in October 2000, the lowest rate on record. Unemployment for Hispanics has fallen from 11.8 percent in October 1992 to 5.0 percent in October 2000, also the lowest rate on record.
- Lowest Inflation since the 1960s: Inflation is at the lowest rate since the Kennedy Administration, averaging 2.5 percent, and it is down from 4.7 percent during the previous administration.
- Highest Homeownership Rate on Record:The homeownership rate reached 67.7 percent for the third quarter of 2000, the highest rate on record. In contrast, the homeownership rate fell from 65.6 percent in the first quarter of 1981 to 63.7 percent in the first quarter of 1993.
- 7 Million Fewer Americans Living in Poverty:The poverty rate has declined from 15.1 percent in 1993 to 11.8 percent last year, the largest six-year drop in poverty in nearly 30 years. There are now 7 million fewer people in poverty than there were in 1993.
Establishing Fiscal Discipline and Paying off the National Debt
Between 1981 and 1992, the national debt held by the public quadrupled. The annual budget deficit grew to $290 billion in 1992, the largest ever, and was projected to grow to more than $455 billion by Fiscal Year (FY) 2000. As a result of the tough and sometimes unpopular choices made by President Clinton, and major deficit reduction legislation passed in 1993 and 1997, we have seen eight consecutive years of fiscal improvement for the first time in America's history. The surplus in FY 2000 is $237 billion — the third consecutive surplus and the largest surplus ever. Between 1998-2000, the publicly held debt was reduced by $363 billion — the largest three-year pay-down in American history. Under Presidents Reagan and Bush, the debt held by the public quadrupled. Under the Clinton-Gore budget, we are on track to pay off the entire publicly held debt on a net basis by 2009.
After increasing under the previous two administrations, federal government spending as a share of the economy has been cut from 22.2 percent in 1992 to 18 percent in 2000 — the lowest level since 1966. In 1993, the net interest payments on the debt held by the public were projected to grow to $348 billion in FY 2000. In 2000, interest payments on the debt were $125 billion lower than projected.
Because of fiscal discipline and deficit and debt reduction, it is estimated that a family with a home mortgage of $100,000 might expect to save roughly $2,000 per year in mortgage payments, like a large tax cut. Lower debt will help maintain strong economic growth and fuel private investments. With government no longer draining resources out of capital markets, private investment in equipment and software averaged 13.3 percent annual growth since 1993, compared to 4.7 percent during 1981 to 1992.
To Establish Fiscal Discipline, President Clinton:
- Enacted the 1993 Deficit Reduction Plan without a Single Republican Vote. Prior to 1993, the debate over fiscal policy often revolved around a false choice between public investment and deficit reduction. The 1993 deficit reduction plan showed that deficit and debt reductions could be accomplished in a progressive way by slashing the deficit in half and making important investments in our future, including education, health care, and science and technology research. The plan included more than $500 billion in deficit reduction. It also cut taxes for 15 million of the hardest-pressed Americans by expanding the Earned Income Tax Credit; created the Direct Student Loan Program; created the first nine Empowerment Zones and first 95 Enterprise Communities; and passed tax cuts for small businesses and research and development.
- Negotiated the Balanced Budget Agreement of 1997. In his 1997 State of the Union address, President Clinton announced his plan to balance the budget for the first time in 27 years. Later that year, he signed the Balanced Budget Act of 1997, a major bipartisan agreement to eliminate the national budget deficit, create the conditions for economic growth, and invest in the education and health of our people. It provided middle-class tax relief with a $500 per child tax credit and the Hope Scholarship and Lifetime Learning tax credits for college. It also created the Children's Health Insurance Program to serve up to 5 million children and made landmark investments in education initiatives including educational technology, charter schools, Head Start, and Pell Grants. Finally, it added 20 more Empowerment Zones and 20 more rural Enterprise Communities, included the President's plan to revitalize the District of Columbia, and continued welfare reform though $3 billion in new resources to move welfare recipients to private-sector jobs.
- Dedicated the Surplus to Save Social Security and Reduce the National Debt. In his 1998 and 1999 State of the Union addresses, President Clinton called on the nation to save the surplus until the solvency of Social Security is assured. He also repeatedly vetoed large Republican tax cut bills that would have jeopardized our nation's fiscal discipline. The President's actions led to a bipartisan consensus on saving the surplus and paying down the debt.
- Extended Medicare Solvency from 1999 to 2025. When President Clinton took office, Medicare was expected to become insolvent in 1999, then only six years away. The 1993 deficit reduction act dedicated some of the taxes paid by Social Security beneficiaries to the Medicare Trust Fund and extended the life of Medicare by three years to 2002. Thanks to additional provisions to combat waste, fraud and abuse and bipartisan cooperation in the 1997 balanced budget agreement, Medicare is now expected to remain solvent until 2025.
Clinton-Gore Economic Policy Has Dramatically Improved the Economy
"My colleagues and I have been very appreciative of your [President Clinton's] support of the Fed over the years, and your commitment to fiscal discipline has been instrumental in achieving what in a few weeks will be the longest economic expansion in the nation's history." -- Alan Greenspan, Federal Reserve Board Chairman, January 4, 2000, with President Clinton at Chairman Greenspan's re-nomination announcement
"The deficit has come down, and I give the Clinton Administration and President Clinton himself a lot of credit for that. [He] did something about it, fast. And I think we are seeing some benefits." -- Paul Volcker, Federal Reserve Board Chairman (1979-1987), in Audacity, Fall 1994
"On the policy side, trade, fiscal, and monetary policies have been excellent, working in ways that have facilitated growth without inflation. The Clinton Administration has worked to liberalize trade and has used any revenue windfalls to reduce the federal budget deficit." -- Goldman Sachs, March 1998
"Clinton's 1993 budget cuts, which reduced projected red ink by more than $400 billion over five years, sparked a major drop in interest rates that helped boost investment in all the equipment and systems that brought forth the New Age economy of technological innovation and rising productivity." -- Business Week, May 19, 1997
Opening World Markets to American Goods and Providing Leadership on Globalization: President Clinton's Record on Trade and Globalization
In 1992, 10 million Americans were unemployed, new job creation was slow, and wages were stagnant. Other nations' high trade barriers limited the ability of American businesses and farmers to sell their goods abroad and hampered economic recovery. Our trade policies failed to reflect our values by failing to take into account the responsibility to protect our environment, eliminate child labor and sweatshops, and protect the rights of workers around the world. But today:
- 300 Trade Agreements:President Clinton has opened markets for U.S. exports abroad and created American jobs through nearly 300 free and fair trade agreements.
- The Most U.S. Exports Ever: Between 1992 and 2000, U.S. exports of goods and services grew by 74 percent, or nearly $500 billion, to top $1 trillion for the first time.
- 1.4 Million More Jobs due to Exports: Jobs supported by American exports grew by 1.4 million between 1994 and 1998, with jobs supported by exports paying about 13 percent to 16 percent above the U.S. national average.
To Create Trade Opportunities and Expand the Benefits of Globalization, President Clinton:
- Won Ratification of the North America Free Trade Association (NAFTA) in 1993, creating the world's largest free trade zone of the U.S., Canada, and Mexico. U.S. exports to Mexico grew 109 percent from 1993 to 1999, while exports to the rest of the world grew by 49 percent.
- Won Approval of Permanent Normal Trade Relations with China. In 2000, Congress ratified permanent normal trade relations with China. The agreement will integrate China into the world economy through entry into the World Trade Organization (WTO), open Chinese market to U.S. exports, slash Chinese tariffs, and protect American workers and companies against dumping.
- Successfully Completed the Uruguay Round. The 1994 Uruguay Round transformed the world trading system, opening markets in a wide range of industries, enabling the U.S. to enforce agreements more effectively, and applying the rules for the first time to all WTO members (now 138 in total).
- Fought for the First-Ever African and the Caribbean Basin Trade Bills. The African Growth and Opportunity Act of 2000 will support increased trade and investment between the United States and Africa, strengthen African economies and democratic governments, and increase partnerships to counter terrorism, crime, environmental degradation and disease. The legislation will also create incentives for the countries of sub-Saharan Africa and the Caribbean Basin to continue reforming their economies.
- Promoted Trade Opportunities for High Technology. The Clinton Administration completed series of trade agreements on technology, including the WTO's commitment to duty-free cyberspace, keeping the Internet free of trade barriers, in 1998; the global WTO agreements on Financial Services and Basic Telecommunications in 1997; the global WTO agreement on Information Technology in 1996; and a series of bilateral agreements on intellectual property, high-tech products, services and other sectors. These efforts are the building blocks of the New Economy.
- Secured Historic Debt Relief. In March 1999, President Clinton presented a plan to a U.S.-Africa Summit in Washington that became the basis for the G-7 agreement in Cologne, Germany (known as the Cologne Debt Initiative). The plan would triple the amount of debt relief available for poor countries, reducing their debt by about 70 percent ($90 billion), in return for firm commitments to channel the benefits into improving the lives of all their people. In September 1999, the President announced that the U.S. would unilaterally exceed the terms of the G-7 initiative and entirely cancel the $5.7 billion in U.S. government debt owed by qualifying countries. In November 2000, President Clinton won $435 million from Congress for U.S. participation in the Cologne Initiative.
- Dramatically Expanded U.S. Efforts to Fight Child Labor and Expand Basic Education. In June 1999, the President traveled to the International Labor Organization (ILO) conference in Geneva, Switzerland, to urge adoption of an historic international convention banning the worst forms of child labor. He won $30 million for ILO enforcement of child labor laws and is fighting for a new initiative to promote basic education in areas of the world where child labor is widespread. In 2000, at U.S. urging, the G-8 countries endorsed the goal of universal basic education. President Clinton brought other issues to the forefront of the international economic agenda, including incorporating labor and environmental considerations in the work of major international economic institutions, increasing U.S. support for global efforts to fight HIV-AIDS and infectious diseases, and closing the digital divide.
- Defused International Economic Crises. In 1995, after Congress refused to act, President Clinton made $20 billion in emergency loans to Mexico to stabilize the country's financial markets. Mexico repaid the loans in full, with interest, three years ahead of schedule. Following the Asian and Russian financial crises in 1997 and 1998, the Clinton-Gore Administration led a global effort to re-capitalize the International Monetary Fund to allow it to more effectively deal with these problems. President Clinton also insisted that the G-7 develop a set of measures to restore confidence in the world financial system.
- Promoted U.S. Competitiveness. The Clinton-Gore Administration has made key investments in education and training for American workers and research and development. It has also maintained federal fiscal discipline, helping to reduce interest rates, encourage private-sector investment, and keep productivity high.
Rewarding Work and Empowering Communities
In 1992, unemployment reached 7.5 percent, the highest level in eight years. Unemployment and poverty rates for African Americans and Hispanics were alarming: unemployment reached 14.2 percent for African Americans and 11.8 percent for Hispanics, and poverty rates for both groups were nearly 30 percent. But today, all income brackets have experienced double-digit income growth since 1993. The bottom 20 percent saw the largest income growth at 16.3 percent. Since Congress passed President Clinton's Economic Plan in 1993, the poverty rate declined from 15.1 percent to 11.8 percent last year, the largest six-year drop in poverty in nearly 30 years. There are now 7 million fewer people in poverty than there were in 1993. The child poverty rate has declined more than 25 percent, the poverty rate for single mothers is the lowest ever, the African American and elderly poverty rates dropped to their lowest level on record, and the Hispanic poverty rate dropped to its lowest level since 1979. Under President Clinton, the poverty rate for families with single mothers has fallen from 46.1 percent in 1993 to 35.7 percent in 1999, the lowest level on record. Between 1980 and 1992, an additional 2.1 million households headed by single women were pushed into poverty. Under the Clinton-Gore Administration, the welfare rolls have dropped dramatically and are now the lowest since 1969. Between January 1993 and September of 1999, the number of welfare recipients dropped by 7.5 billion (a 53 percent decline) to 6.6 million. In comparison, between 1981-1992, the number of welfare recipients increased by 2.5 million (a 22 percent increase) to 13.6 million people. To Help All Americans Benefit from Prosperity, President Clinton ended welfare as we knew it. In 1996, President Clinton signed legislation requiring welfare recipients to work, limiting the time they can stay on welfare, and providing child care and health care to help them begin work. It also enacted tough new child support enforcement measures proposed by the President. In 1997, President Clinton won the welfare-to-work tax credit to encourage employers to hire long-term welfare recipients and $3 billion in additional resources to help communities move long-term welfare recipients into lasting, unsubsidized jobs. He also rewarded work by expanding the Earned Income Tax Credit. In 1993, President Clinton succeeded in winning passage of an expansion of the EITC, giving a tax cut to 15 million of the hardest-pressed American workers. In 1999, the EITC lifted 4.1 million people out of poverty, nearly double the number lifted out of poverty by the EITC in 1993. Clinton also created Empowerment Zones. The 1993 Clinton-Gore economic plan created nine Empowerment Zones and 95 Enterprise Communities to spur local community planning and economic growth in distressed communities through tax incentives and federal investment. The President won expansions of the program in 1994, 1997, and again in 2000. To date, the 31 Empowerment Zones and 95 Enterprise Communities have leveraged over $10 billion in new private sector investment, creating thousands of new jobs for local residents. In September 1994, the President signed legislation creating the Community Development Financial Institutions (CDFI) Fund, a Clinton campaign proposal to support specialized financial institutions serving often-overlooked customers and communities. The Fund has certified over 400 CDFIs. It has provided over $427 million to match investments in CDFIs and to encourage traditional financial institutions to increase their lending, investment and services in under-served markets. In 1995, the Administration updated the Community Reinvestment Act regulations to focus on banks' actual service delivery, rather than on compliance efforts. From 1993 to 1998, lenders subject to the law increased mortgage lending to low- and moderate-income families by 80 percent — more than twice the rate they increased mortgage lending to other income groups. In 1999, the President went on two historic "New Markets" trips to highlight the continuing need to bring investment to impoverished inner cities, rural communities and Native American tribal lands. In 2000, the President and Congress worked together to pass this bipartisan initiative to stimulate new private capital investments in economically distressed communities and build network of private investment institutions to funnel credit, equity and technical assistance to businesses in America's new markets. President Clinton and Vice President Gore fought for and won a 90-cent per hour increase in the minimum wage, helping 10 million workers. He also insisted that Congress pass the Work Incentives Improvement Act as a condition of the budget agreement. This bipartisan law allows people with disabilities to maintain their Medicare or Medicaid coverage when they work.
Modernizing for the New Economy through Technology and Consensus Deregulation To Capitalize on the Information Technology Revolution, President Clinton and Vice President Gore Have:
- Modernized Financial Services Laws. In 1993, the laws that governed America's financial service sector were antiquated and anti-competitive. The Clinton-Gore Administration fought to modernize those laws to increase competition in traditional banking, insurance, and securities industries and give consumers and small businesses more choices and lower costs. In 1994, the Clinton-Gore Administration broke another decades-old logjam by allowing banks to branch across state lines in the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. President Clinton fought for and won financial modernization legislation, signing the Gramm-Leach-Bliley Act in November 1999.
- Reformed Telecommunications. In 1996, President Clinton signed legislation to open up competition between local telephone companies, long distance providers and cable companies. The law also requires the use of new V-chip technology to give families greater control over which television programming comes into their homes.
- Created the E-Rate. With the leadership of Vice President Gore, the Telecommunications Act contained the E-Rate initiative, which provides low-cost Internet connections for schools, libraries, rural health clinics and hospitals. More than 80 percent of America's public schools have benefited from the E-rate, which has helped connect 30 million children and up to 47,000 schools and libraries to the Internet. The percentage of public schools connected to the Internet has increased from 35 percent in 1994 to 95 percent in 1999. The percentage of classrooms connected to the Internet has increased from 3 percent in 1994 to 63 percent in 1999.
- Increased Resources for Educational Technology by Over 3,000 Percent. President Clinton and Vice President Gore increased our investment in educational technology by over 3,000 percent, from $23 million in FY 1994 to $769 million in FY 2000, including training over 600,000 new teachers to use technology effectively in the classroom.
- Paved the Way for Electronic Commerce. President Clinton fought to eliminate legal barriers to using electronic technology to form and sign contracts, collect and store documents, and send and receive notices and disclosures, while ensuring that consumers on-line have the same protections that they have in the paper world. He signed the Electronic Signatures in Global and National Commerce Act on June 30, 2000.
- Creating Market Opportunities for Technology Firms. The Clinton-Gore Administration adopted a market-led approach on e-commerce, making spectrum available for digital wireless, and reforming Cold War export controls.
- Worked to Close the Digital Divide. Since 1992, the President and Vice President have tripled funding for Community Technology Centers, which provide access to computers and the Internet to low-income urban and rural neighborhoods. President Clinton also challenged the private sector to develop new business models for low-cost computers and Internet access to make universal access at home affordable for all Americans. The Technology Literacy Challenge Fund has provided $1 billion in federal resources to help schools work with businesses and community organizations to put modern computers, high-quality educational software, and affordable connections to the Internet in every classroom. The Taxpayer Relief Act of 1997 created a temporary tax deduction for donations of computers to elementary and secondary schools.
Investing in Educating and Training the American People President Clinton's Record on Investing in Americans:
- More Americans Are Enrolling in College: 66 percent of 1998 high school graduates enrolled in college or trade school the next fall, compared to 60 percent in 1990.
- More High School Students Are Preparing for College: The percentage of high school graduates who have taken four years of English and three years each of math, science, and social studies increased from 38 percent to 55 percent between 1990 and 1998. Research shows that high-quality academics in high school is key to college success.
- More Americans Are Earning College Degrees: Over 32 percent of 25- to 29-year-old high school graduates had earned at least a bachelor's degree in 1999, up from 27 percent in 1990. In particular, white and African American women have seen their college opportunities grow.
- Americans Are Becoming Lifelong Learners: 50 percent of adults participated in formal learning in the year prior to a 1999 survey, up from 38 percent in 1991.
To provide Americans with more, higher-quality education and training, President Clinton created the College Tax Credits, the largest single investment in higher education since the G.I. Bill. A $1,500 tax credit for the first two years of college, the Hope Scholarship will pay for nearly all of a typical community college's tuition and fees. The $1,000 Lifetime Learning Tax Credit reimburses families for 20 percent of their tuition and fees (up to $5,000 per family) for college, graduate study, or job training. Starting in 2003, the credit will reimburse families for 20 percent of their costs up to $10,000, for a maximum value of $2,000. This year, 10 million American families will save over $7 billion through the college tax credits. He also doubled student aid; students will receive over $50 billion in federal grants, loans, and work-study aid this year, up from $25 billion in 1993. President Clinton has consistently supported budget increases for Pell Grants; this year, over 3.8 million needy students receive a Pell Grant scholarship of up to $3,300, a $1,000 larger maximum grant than in 1993. The President won another increase for Pell Grants in the FY 2001 budget, bringing the maximum grant to $3,750. The President also won increases in work-study funding to help one million students pay for college. In the Student Loan Reform Act of 1993, President Clinton won the Direct Student Loan program to improve customer service and compete with guaranteed lenders. It has saved taxpayers over $4 billion so far by eliminating lender subsidies. President Clinton also fought to reduce interest rates and fees in the Student Loan Reform Act of 1993 and the Higher Education Amendments of 1998. As a result, students can expect to pay $1,300 less in interest and fees for the average $10,000 loan than they would have in 1992. The student loan default rate is now 6.9 percent, down from 22.4 percent eight years ago.
President Clinton won the new GEAR UP initiative in the Higher Education Amendments of 1998 which is already helping 700,000 low-income middle school students prepare for college. Over 150,000 Americans have earned money for college while serving their communities through President Clinton's AmeriCorps program, a campaign promise enacted in 1993. To help disadvantaged youth prepare for and succeed in college, the TRIO programs have grown by $342 million over the past eight years.
In 1994, President Clinton reformed federal education initiatives in the Improving America's Schools Act and the Goals 2000 Act. The President's new approach was grounded in the principles that all of America's students should meet high academic standards and the federal government should make new investments to help them meet those standards. The President has also fought to hire 100,000 teachers, promote educational technology, support charter schools, build K-16 partnerships, and focus on early reading through America Reads.
In 1992, President Clinton and Vice President Gore proposed to streamline and bring greater accountability to our nation's job training system. In 1998, they won legislation to meet the needs of both America's workers and businesses by encouraging local control of training and employment programs; helping customers locate assistance through one-stop centers; and empower adults to receive the training they need.
Reducing Tax Burdens for Average and Hard-Pressed Working Families.
In 1997, President Clinton secured a $500 per child tax credit for 27 million families with children under 17, including 13 million children from families with incomes below $30,000. President Clinton proposed tax credits for college tuition in 1996 and signed them into law in 1997 as part of the balanced budget agreement. The Hope Scholarship provides a tax credit of up to $1,500 for tuition and fees for the first two years of college, roughly equal to the cost of the average community college. It will save American families $4.9 billion this year. Also enacted in 1997, the Lifetime Learning tax credit provides a 20 percent tax credit on $5,000 of tuition and fees (to be raised to $10,000 in 2003) for college and graduate students and adults taking job training. It will reduce the cost of college and job training for American families by $2.4 billion this year. The 1997 balanced budget agreement also created Education IRAs. For each child under age 18, families may now deposit $500 per year into an Education IRA in the child's name. Earnings in the Education IRA accumulate tax-free and no taxes will be due upon withdrawal if the money is used to pay for college. The law also allowed taxpayers to withdraw funds from a traditional IRA without penalty to pay for higher education for themselves or their spouse, child, or even grandchild.
President Clinton signed the Taxpayer Relief Act of 1997 to simplify the tax laws and enhance taxpayers' rights. The law has saved families and businesses millions of hours by simplifying and reducing paperwork, such as allowing a tax exclusion for income from the sale of a home. To ensure that all taxpayers pay their fair share, the Clinton Administration addressed the use and proliferation of corporate tax shelters by proposing several remedies to curb the growth of such shelters by increasing disclosure of sheltering activities, increasing and strengthening the substantial understatement penalty, codifying the judicially-created economic substance doctrine, and providing consequences to all parties involved in an abusive sheltering transaction.