Why was the American economy prosperous under Clinton?

[Brian4Liberty]

The claim of surplus is a lie based on stealing Social Security funds and using a calendar year instead of a fiscal year. But there's no denying that the deficit got very close to zero even still, during the Clinton years.

Yeah. And the booming economy caused government revenue (taxes) at all levels to increase. They were giddy to spend every bit of it too.

[Zippyjuan]

Yeah lets not discount #2... Clinton got the deficit to its lowest.. like $17 billion one year... the democrats claim there was a budget surplus but you cant have a surplus and increase debt every year .. so we know there was no surplus

They were giddy to spend every bit of it too.

The budget US grew by the smallest percent under Clinton than under any other president since WWII (Republicans controlled Congress and congress writes all spending and tax bills). Meanwhile he also benefited by large amounts of money coming in from the Dot Com led stock market bubble. They resisted spending all the extra money coming in to government coffers. And actually the spending increases under Obama are lower than those under Clinton (the first Obama budget was the 2010 fiscal year- though he took office in 2009, the 2009 budget was a Bush budget which started in October 2008).

http://www.forbes.com/sites/rickunga...-barack-obama/

[Brian4Liberty]

They resisted spending all the extra money coming in to government coffers.

Bullshit. The California Legislature was giddy about spending the tiniest bit of surplus that we had for one year at the height of the bubble. The Feds likewise took full advantage of the excess revenue.

[misean]

First of all, the economy didn't boom all eight years of Clinton. The beginning and end weren't so hot. Secondly, you had a perfect storm of things coming together.

1. Baby boomers entered their peak earning and spending years in the late 90's. People earn the most and spend the most between 50 and 60. Spending in the short term does drive the economy.

2. These were also years that people started playing catch up with their retirement. The number 1 driver of markets isn't good earnings. Those are almost irrelevant over the short run. The number one driver (and its not even close) is fresh money flowing into the markets. You had people flowing money into the markets and there was good story. You had the internet to justify it in their minds. As crazy as it sounds a good story drives the share prices of younger companies more than fundamentals. Netflix stock was based on a story. Green Mountain Coffee stock was based on a story. Deckers Outdoors was a story. Eventually the story plays out and you get a bust and people rush to the exits.

3. You had a Fed Chairman who would ease at any trouble. He bailed out US banks who had exposure to Mexico when itwas having a currency crisis. The last leg of the stock market was fueled by massive Fed easing after Long Term Capital Management blew up. That fueled the market from late 98 to beginning of 00. He could get away with this because people erroneously use CPI to measure inflation. CPI doesn't take into account inflation in things like stock prices.


4. Other things that helped were gridlock in government, no major Wars on the horizon, deregulation of the banking sector and other things that I can't think of.


AND NO OBAMA ISN'T GOING TO REFLATE THE BUBBLE. Once a bubble bursts, it takes a LONNNNNNNNNNG time to repair. Japan had a major stock and real estate bubble in the late 1980s. They did all the same things we are doing now. Huge deficits, Zero interest. Their stock market is at 1983 levels. It is 80 percent of its 1989 high. So a 30 year flat market should concern us.

[Zippyjuan]

Bullshit. The California Legislature was giddy about spending the tiniest bit of surplus that we had for one year at the height of the bubble. The Feds likewise took full advantage of the excess revenue.

So how would you explain that government spending grew at such a slow pace? The boom in spending happened after Clinton left and Bush took over.

Chart:
http://en.wikipedia.org/wiki/File:CB...ercent_GDP.png



Clinton was president from January 1993 to January 2001. Note that spending is decreasing (as percent of GDP in the chart) and revenues are increasing. They are not both increasing.

[fisharmor]

If there was a credit expansion in the 90s, how come gold and oil both went down in price?

[misean]

If there was a credit expansion in the 90s, how come gold and oil both went down in price?

Think about it this way. There was a massive credit contraction in the late 1970's and early 1980's and gold and silver were in a mania. Fundamentals may drive stock prices or gold over the long haul, but the long run takes a lot longer than people think.

There was a huge credit contraction after 2008 but gold went up dramatically. It was pricing in the potential negative effects of QE and Fed intervention not the actual short term. Psychology and perception has a large effect on asset prices.

Read about Long Term Capital Management. The Fed went into overdrive to stop the market plunge.


http://www.investopedia.com/terms/l/...#axzz2BZ7Fr5Sb

[Zippyjuan]

Gold started to decline after hitting a peak during its bubble in 1980. That continued until roughly 2004. It was following a decline in the price inflation rate. It is true that the Fed severely contracted the money supply at that time and that caused the spike in gold prices.

[Brian4Liberty]

So how would you explain that government spending grew at such a slow pace? The boom in spending happened after Clinton left and Bush took over.

...

Clinton was president from January 1993 to January 2001. Note that spending is decreasing (as percent of GDP in the chart) and revenues are increasing. They are not both increasing.

First of all, I don't put any faith in government statistics, or the vast majority of statistics.

Now, the reason for any amount of reduced government spending during that boom is due to people voluntarily leaving government employment and joining the booming private sector. It was not a choice by the government. It was the result of the booming economy.

[Bruehound]

bubble.