The Obama Recession

It was clear in last week's debate that McCain continues to cling to Republican "trickle down" tax theories, and the false assumption that cutting taxes is good for the economy and raising taxes is bad for the economy.

McCain would like to cause voters to fear an "Obama Recession." This is a challenge to begin with, since it's obvious we are already in a recession. So, the McCain campaign is now forced to say that Obama's tax proposals will "deepen" our recession, with no explanation of how his plan to renew the Bush tax cuts when they expire in 2010 will change things.

The same claims were made when Bill Clinton ran for office in 1992. We were just coming out of a recession and the massive deficit was hurting our economy. In spite of lukewarm support from Democrats and staunch opposition from Republicans, Bill Clinton pushed through the Omnibus Budget Reconciliation Act of 1993, which passed Congress (without a single Republican vote) and was signed into law in August 1993.

In many respects it was similar to the Obama tax plan, and Republicans claimed we would immediately be thrust back into a recession, jobs would be lost, factories would close, etc. McCain's economic advisor and (former) campaign co-chair, Sen. Phil Gramm offered a dire warning: "The deficit four years from today will be higher than it is today, not lower."

Well, the architect of the financial chaos we face today, Phil "mental recession" Gramm, was wrong even back then. The budget deficit in 1992 was $312 billion. In the next few years, the budget deficit didn't increase. It went steadily down and actually produced the first budget surplus since 1969. In fact, we continued to have budget surpluses for four consecutive years (1998-2001).

Not surprisingly, Clinton's success in balancing the budget led to the longest period of economic growth since the National Bureau of Economic Research (NBER) started measuring recessions:

The NBER's Business Cycle Dating Committee has determined that a peak in business activity occurred in the U.S. economy in March 2001. A peak marks the end of an expansion and the beginning of a recession. The determination of a peak date in March is thus a determination that the expansion that began in March 1991 ended in March 2001 and a recession began. The expansion lasted exactly 10 years, the longest in the NBER's chronology.

This annoyed the Republican Party, to put it mildly. The NPER is a private, nonprofit, nonpartisan research organization founded in 1920. They are also the organization that determines whether the U.S. economy is "officially" in a recession.

So the Republican Party came up with the phrase "Clinton Recession," and even tried (unsuccessfully) to have the official dates changed before Bush had to stand for re-election in 2004. It's a shame they didn't spend less time thinking about how to "spin" history, and more time thinking about how to make lasting improvements in the economy.

In fairness, an argument can be made that President Bush didn't cause the 2001 recession, since he'd only been in office a couple of months when it started. At the same time, it certainly wasn't caused by tax reforms Clinton put in place eight years earlier. Fears of an "Obama Recession" are unfounded, and we have recent history that proves it.

So, the next time you hear someone complain about the "Clinton Recession," you can make a few bucks on a side bet.... because there wasn't one.