Comparing Obama economics to Clinton economics

Treasury Secretary Geithner speaks this afternoon at the liberal Center for American Progress. His staff have released two quotes to the press:

Secretary Geithner: Ultimately, fiscal policy is about getting the conditions right for economic growth, prosperity, and job creation. Over the past two decades, Washington ran an experiment on that front. In the 1990s, the government put an end to budget deficits, and America enjoyed a period of growth led by the private sector where prosperity was widely shared and job creation was robust. Over the next decade, Washington tried a new path, running up huge debts, while incomes for most Americans stagnated and job creation was anemic. We are living today with the damage that misguided policy caused.

So, as we look to a new decade, there’s some empirical evidence around what works and what doesn’t. Rather than creating a false prosperity fueled by debt and passing the bills on to the next generation, we need to restore America to a pro-growth tax and fiscal policy, where the middle class once again has a chance to prosper.

Secretary Geithner: Borrowing to finance tax cuts for the top two percent would be a $700 billion fiscal mistake. It’s not the prescription the economy needs right now, and the country can’t afford it.

It’s disappointing to see this from Secretary Geithner, whom I see as the least partisan member of the Obama economic team. Tradition suggests I should respond by engaging on the other side of the Secretary’s partisan comparison. This is not, however, a debate between two economic philosophies, but instead a debate among three: Clinton, Bush, and Obama. The Secretary makes an important mistake by suggesting that the Obama Administration is returning to the fiscal policies of the Clinton Administration.

In addition, Obama v. Bush debates are almost always colored by a heavy partisan tinge, so let’s see if we can learn anything by comparing Clinton to Obama on both fiscal policy and economic results.

Leaving out the Bush comparison, the Secretary’s logic follows three steps:

  1. the strong economic numbers during the Clinton Administration are a result of the fiscal policies of the Clinton Administration;
  2. the Obama policies are a return to the Clinton policies; and therefore
  3. the Obama policies will once again produce a strong economy like we saw in the 90s.

I disagree with (1) but today I want to focus on (2) and (3). I believe the following data will disprove both claims using the Obama Administration’s own numbers.

Here are the Clinton actuals vs. projections for the Obama tenure as projected by the Obama Administration.

Clinton Obama (projected by Team Obama)
1st term 2nd term 2 terms
Unemployment rate 5.2% 9.0% 6.1% 7.6%
Average real GDP growth 3.9% 1.1% 2.8% 1.4%
Spending / GDP 19.6% 24.0% 22.7% 23.5%
Taxes / GDP 19.2% 16.1% 18.9% 17.4%
Deficit / GDP 0.4% surplus 7.8% 3.9% 6.0%
Spending / GDP (without interest pmts) 16.9% 22.3% 19.9% 21.2%
Deficit / GDP (without interest pmts) 3.3% surplus 6.2% 1.0% 3.8%
Top effective tax rate on a successful small business owner (federal) 43.9% 43.9% 44.8% n/a

That’s a lot of numbers. Here are my data and sources. Since a two-term Presidency affects nine fiscal years rather than eight, that’s how I’m calculating the averages. For an explanation of this logic see this post. If you think my logic is bad, you can see the calculations for eight-year averages in my backup spreadsheet. You’ll see that the conclusions don’t change, and in most cases my preferred methodology actually makes President Obama’s numbers look slightly better.

Let’s turn these numbers into graphs, starting with the fiscal policies. Is President Obama proposing a return to the Clinton fiscal policies? Not on spending:

Team Obama projects that, if President Obama’s policies were implemented as he proposes them, average federal spending would be a dramatically larger share of the economy than it was under President Clinton.

Some will argue that President Obama’s average is unfairly high because he had to cope with a severe recession, while President Clinton faced a benign economic environment throughout his tenure. But spending in a hypothetical Obama second term, long past the financial crisis of 2008, would still be 16% higher as share of the economy than Clinton’s average. (22.7 -19.6) / 19.6 = 15.8%

Based on this graph I don’t see how Secretary Geithner can suggest that President Obama is returning to the fiscal policies of the 1990s.

As much as I’m trying to make this not about the Bush tenure, some smart reader is saying to himself, “Yes, but Obama has to pay interest on the debt accumulated during the Bush Administration.” So let’s remove interest payments from both Clinton and Obama’s spending and compare them.


All columns are lower, but the comparison looks the same. President Obama would have a federal government more than four percentage points larger than President Clinton had, measured as a share of the economy. If President Obama has only one term it would be 5.4 percentage points larger. The higher Obama spending cannot be blamed on the additional debt he inherited from policies implemented during the Bush Administration.

Now let’s look at deficits.


President Clinton averaged a surplus over his tenure. Using President Obama’s own projections of his policies, the budget deficit would average 7.8% of GDP over a first term, and 6% of GDP over two terms if he were reelected. Once again, it is absurd for Secretary Geithner to suggest that President Obama is returning to the Clinton fiscal policies.

Once again, I’ll remove interest payments and recalculate the deficits to show that the difference between Clinton and Obama deficits is not the fault of inherited debt:


I hope these graphs disprove the Secretary’s implication that, by supporting a tax increase effective January 1, President Obama is somehow returning to the Clinton Administration’s fiscal policies. If anything, leaving out interest payments makes Obama’s fiscal policies look relatively worse.

Now let’s examine two measures of results, the unemployment rate and the growth rate of real GDP.


Team Obama projects that the President’s policies would result in 9 percent average unemployment over the President’s first term, and 7.6 percent average unemployment over two terms. Compare that to the 5.2% average unemployment rate during the Clinton Administration. Even in a hypothetical second term, after the financial shock is more than four years behind us, the Obama team estimates unemployment would average more than six percent in a second Obama term, worse than the average over the entire Clinton presidency.

And how about real economic growth?


This graph depresses me. The Secretary’s op-ed yesterday was titled “Welcome to the Recovery,” yet he and his colleagues project an average of only 1.4% real GDP growth over a two-term Presidency.

The good news is that everyone (and I do mean everyone) is just making wild guesses about GDP growth and the unemployment rate beyond one year in the future. Nobody really has any clue what the economy will look like two, three, or six years from now.

Washington and the press corps gravitate to partisan fights like Bush v. Obama. The Secretary’s remarks today feed that tendency. I believe the claims of the Clinton team that their policies caused the strong economic growth are exaggerations, and some other time I will engage in that debate. For today what’s most important is that the Obama fiscal policies are vastly different than those of the Clinton Administration, and the Administration’s own estimates project economic results far worse than we saw in the 90s.

I agree with Secretary Geithner Secretary that we need to restore America to a pro-growth tax and fiscal policy. I just don’t think that government spending of 24% of GDP, budget deficits averaging 6% of GDP, and raising taxes on successful small business owners during a weak recovery are that policy.

28 thoughts on “Comparing Obama economics to Clinton economics

  1. Pingback: Instapundit » Blog Archive » KEITH HENNESSEY RESPONDS TO TIM GEITHNER: Comparing Obama economics to Clinton economics….

  2. Steve C.

    Following Geithner's logic, there are a few more things that the administration needs to do to begin re-creating the Clinton years.
    1. Reduce the price of gasoline to $1.25 a gallon
    2. Elect a Republican House and Senate

  3. Brett

    Where in your analysis do you mention Obama is dealing with a financial crisis that was the result of a deflating 8 trillion dollar housing bubble? Clinton didn't have to deal with any of those. You are comparing apples to a dump truck. There is no meaningful conclusion to be drawn from comparing debt, unemployment rate, spending, etc. between Clinton and Obama's terms.

  4. mojavewolf

    "Over the next decade, Washington tried a new path, running up huge debts, while incomes for most Americans stagnated and job creation was anemic. We are living today with the damage that misguided policy caused."

    The first two times I read this quote, I thought he meant the stimulus plans and their aftermath and thought it a very candid thing to say. He may as well have meant that.

  5. Just Me

    The flaw in Geithner's and your logic is that all you talk about is Clinton, Bush, and Obama. You completely ignore any possible impact on the budget by Congress.

    When Clinton "put an end to budget deficits", there was a Republican majority in the House. Did that not matter at all?

    In Jan 2007, the Democrats took over both houses of Congress. They started spending, and haven't stopped. Until they do, the projections on a second Obama term mean nothing.

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  7. Alan

    Need to add Carter, Roosevelt, and perhaps Wilson. Unemployment would be tricky to make apples-to-apples.

  8. Bob Schena

    The US economy doesn't exist on its own planet. Global capital flows to where it's treated best. The rest of the world had a very different tax structure twenty years ago. We have gone from one of the lowest tax rate countries to one of the highest. Unless we can get China and most other countries to raise their tax rates back to where they were at the beginning of the 90's, then arguing over the "Clinton rates" vs the "Bush rates" vs the "Obama rates" is silly. I'm sure IBM would like to go back to charging its 1980's prices for mainframes……..if only we could get rid of those darn PCs and laptops. The world's economy has moved on. Other countries copied a lot of the smart things we did and ignored many of the stupid things. There's no going back. We have to find the rates and behaviors that are competitive for today.

  9. Stuart Tulloss

    I believe the Clinton administration was projecting deficits early in the first term. After the 94 mid-term elections, the US ended up with a surplus because the new congress wouldn’t let him grow the budget as fast as he (Clinton) wanted to.

  10. Joe C.

    Everyone wants to make this about government policy, but in reality “The Clinton Economy” had several HUGE advantantages from which his economic legacy benefited (apart from 4 years of a conservative working majority in Congress to whom he deferred all economic policy):

    1. The productivity gains from the democratization and widespread adoption of computers and cellular technology–microchip, PCs, the Internet, Windows 95 rollout, fiberoptics, etc.–the innovations in which fluorished in a minimal regulation environment.

    2. The end of the Cold War, break up of the Soviet Union, unification of Germany, and varying degrees of adoption of capitalism in previously communist countries including China, all of which increased per capita GDP of previously closed markets and liberalized trade.

    #1 shifted the supply and #2 shifted the demand curves to the right, which made more products available to more people at a cheaper price.

    Policies that helped were: decreased spending (defense, Welfare reform), low taxes, free trade agreements, Fed policy, balanced budget. Of course, the ignoring of defense (especially intelligence), the expansion of the CRA, and lax oversight and enforcement of financials later came back to bite us big time.

  11. sjleonard

    Thanks for the post, I enjoyed reading this.

    I think President Clinton's surplus/defecit signs are reversed in your spreadsheet. Unless I'm reading this wrong the 1993 – 2001 average balance should be a defecit, not surplus.

  12. apetra

    Clinton didn't want a surplus. The Republicans forced it upon him by cutting spending.

    (Much more of the shift from deficit to surplus was spending cuts rather than tax increases).

    And now you're comparing Obama aspirations against Clinton era performance.

    And no mention at all of the Clinton Crash of 2000, which remains the worst stock market crash since 1929. In light of the stock market of the past two years, that's an incredible 'achievement'.

    1. CanTBaggersThink

      To blame the economic euphoria over the DotCom boom where people overly invested in companies that were making no money in the hope they would be on the ground floor when it took off when instead they were crushed when the house of non-existent cards collapsed on a presidential administration is just ignorant. The President doesn't control investor lunacy.

  13. richard40

    One important point you should have made about Clintons relitively good economic management. You correctly identified that the main area where policy under Clinton vs obama was different and better was the much lower level of spending vs GDP under Clinton. But one thing you didn't mention was one major reason why spending was so much lower under Clinton was he had a repub congress at the time that was sincerely committed to lower spending. So the real lesson to be learned from Clinton is any dem president should have a repub congress to keep spending under control.

    1. Brian

      Richard, that is patently false. The Republican Congress approved every budget that Clinton submitted except 1–when that happened, the government shut down, people blamed the Republicans, and they capitulated and approved that budget as well (check out for corroboration). The reason we had a balanced budget is because under Clinton, GDP grew every year at a rate of greater than 5.5% except the final year (2001), when GDP growth was a mere 4.4%. That sustained rate of GDP growth is unprecendented and certainly hasn't occurred since. Fact is, spending in real dollars increased slightly less than under Reagan/Bush, but because GDP was growing faster, the increased revenue caught up with the spending and resulted in the Clinton surpluses.

  14. Maerzie

    What would these graphs look like if Obama's deficits didn't include Bush's wars, (as Clinton's didn't)??

  15. Steven Hales

    Obama also has the unfortunate distinction of being the first president of the post retirement baby boom generation. If government tries to preserve discretionary spending it will be running massive deficits. Congress might as well go home and let the computers write the checks as our tax dollars cycle in and out. At least we wouldn't have to listen to Alan Grayson make a fool of himself.

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