Clinton may, or may not, be reason the 800-pound gorilla is behaving


THE ECONOMY'S humming. The country added another 250,000 jobs in August, and unemployment hit a seven-year low of 5.1 percent, the government said Friday.

Who gets the credit? Many Americans give it to President Clinton. A New York Times/CBS poll published Friday said that 55 percent of those questioned approved of the way Clinton is handling the economy. Seventy-two percent rated the economy as good; 27 percent said it's bad.

But the economy is the 800-pound gorilla, subject to its own whims and rhythms. Should Clinton get credit for taming it?

Kenneth Mayland

Chief economist, KeyCorp

There's no doubting that the performance of the economy has been pretty good along a number of dimensions. From 1992 to 1996, industrial production growth has averaged 3.9 percent per year; GDP growth has averaged 2.5 percent per year; the inflation rate measured by the consumer price index has been hovering a little bit less than 3 percent; by other measures it's even lower.

Who gets the credit? It's more a result of Clinton's good luck that his term of office coincided with the sweet spot of the economic expansion. If Bush were president now I would say exactly the same thing. There is such a thing as the business cycle always lurking in the background. The party that is in power doesn't exert a strong influence on economic performance, because business doesn't have the option of stepping aside for four years if it doesn't like the party elected. The job of business is to succeed no matter which regime is in place.

Clinton's term of office started not even two years into a business expansion. Business expansions on average last several years, and this one was slow to get started. So the economy was biased toward growth.

Mahlon Straszheim

Economics department chairman, University of Maryland

I would agree that he should [get credit], because the deficit-reduction package which allowed interest rates to go down really set the tone for sustained growth. There would have been some improvement in the economy, but it was already starting out of recession when Clinton took office. The problem that the '80s created was that the deficit was high and real interest rates were high.

The deficit-reduction package increased private investment. There's been an increase in productivity, and a lot of that is traceable to private investment, which is traceable to lower interest rates. Private investment has really skyrocketed in the last few years.

Maureen Allyn

Chief economist, Scudder, Stevens & Clark

Our view here at Scudder is that the economy controls politicians, and that it really is not so much the other way around. I guess I would give Clinton some credit for not really thrashing against the economic tide. He did change course early in his administration and did respond to signals that the bond market would not accept a large, activist government. Clinton's great strength is, he's amenable to being pressured; he didn't fight it.

On the point to which he came around to saying that the era of big government is over, I think he deserves some credit. Had he gone along the way of a more activist, fix-it type of government, the economy would probably not be in as good shape today.

The other thing he deserves credit for is carrying through with NAFTA, free trade and pushing for a global economy. That has been a tremendous help.

I think he got fairly lucky in timing his tax increases at a point when the economy could withstand them. It's unusual where a tax increase does not derail the economy.

Peter Canelo

Chief investment strategist, Dean Witter Reynolds

What actions we can attribute directly to Clinton have had a mixed effect. For example, the tax hike that was put in place in '93 obviously contributed to that very slow period the same year. On the other hand, the impact of a falling deficit has had a positive effect on interest rates, and particularly long-term interest rates. That certainly has been a benefit to the housing sector. But you probably can't give him all the credit for the deficit reduction, because it was put in place actually by a Democratic Congress and President Bush back in 1990.

I give a huge amount of credit for the relatively good performance of the economy to the Federal Reserve, and I think the fixed-income market deserves some of the credit for the good economy in 1996. So there are other authors to this good story, including the Fed and the Budget Control Act of 1990.

And this has not been one of the great economies on record, by any means. This has been a very stop-and-go economy. If you look at the average performance in these 3 1/2 years in comparison to other economic recoveries, it has by no means been a great achievement.

When things are good, presidents like to take credit. When things are bad, they blame the Fed.

There's nothing new in that.

Pub Date: 9/08/96

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