As our amazingly good times roll, the rush is on to take credit for them while they last. Democratic partisans are calling this the Clinton boom. This is a common presidential practice. Reagan took credit for “morning in America” in the mid-’80s; Johnson for the prosperity of the mid-’60s. And the hapless George Bush could not run away from the recession of the early ’90s. Real causation does not matter. In presidential politics, conjunction passes for causation.
Republicans have countered the Clintonites by claiming today’s prosperity to be a supply-side Reagan boom. Both the Reagan and Clinton claims, however, suffer from the same endemic Washington problem: chronic exaggeration of the role of politics in our national life, particularly in our economic life.
If we are going to ascribe the economy to politics, we should, if anything, be calling this the Volcker-Greenspan boom, after the Fed chairmen who gave us two decades of sound currency. Paul Volcker, mind you, was appointed by Jimmy Carter. Maybe we should call this the Carter boom.
Nonetheless, while a stable currency is a necessary condition for prosperity, it certainly is not sufficient. Japan, for example, has had minimal inflation for the last six years, and its economy has tanked: low growth, rising unemployment and a financial system near implosion.
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The real source of our prosperity lies not with a president or even our politics but with an American entrepreneurial culture that has given us Bill Gates and Steve Jobs and Larry Ellison and the inventors of everything from FedEx and Starbucks to Amgen and cell phones.
Our success is the success of the American capitalist model, which lies closer to the free market vision of Adam Smith than any other. Much closer, certainly, than Asia’s paternalistic crony capitalism that so seduced critics of the American system during Asia’s now-burst bubble. The critics have fallen silent now.
America’s success should not surprise. After all, America is largely composed of people who left the rest of the world to seek their fortune. We are descended from gamblers and risk takers. Europe and Asia are populated by the folks the gamblers left behind.
This entrepreneurial drive with deep roots in an immigrant past is the long-range cause of our economic success. And in the last 20 years, it has produced the more proximate reason for our return to economic dominance: the computer revolution, born and bred in–practically owned by–America.
The computer has revolutionized our economy in two ways. First, as a product, mostly made-in-America. Not only do we lead in hardware, but software is practically an American monopoly. Having been matched and often surpassed in older industrial technologies from steel to shipbuilding, we invented a new industry–a new economy–uniquely suited to America’s unbureaucratic agility and commercial inventiveness.
But computers have rejuvenated the economy in another way: as a tool. One of the mysteries of the 1980s was why the huge investment in the new computer technology yielded so little increase in productivity. The answer, it turns out, is that it took a decade for individuals and business to figure out how to use the damn things. The payoff comes now.
Has politics, then, had nothing to do with our current prosperity? Not quite. Credit is due Clinton for his much-maligned 1993 tax hike. It helped bring the budget into balance and gave the global money traders confidence that the dollar would remain sound.
Give Congress credit for killing Clinton’s health-care plan that would have wrecked one-seventh of the economy. And give them both credit for their minimalism, their cynical make-work to-ing and fro-ing. The economy roared and they got out of the way, no mean feat for politicians. Why, even their egregious “balanced budget” bill, which, in fact, postponed a balanced budget, at least did so with minimal damage.
And finally, credit is due those presidents from Truman to Kennedy to Reagan and Bush for winning the Cold War. For the first time in 60 years we live in a world without a global tyranny. The abolition of that threat is the seminal geopolitical event of our time, and it has had a direct economic benefit. Defense spending today is 62 percent of what it was in 1985. That’s $160 billion of deficit reduction right there. People spent the early ’90s wondering where the peace dividend went. Now we know: into our pockets. Call it the Truman boom.