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119 IRET Byline 1 (1993)

handle is hein.taxfoundation/iretbyln0119 and id is 1 raw text is: May 3, 1993 No. 119 Clinton's Clutch: Laying Eggs on Economic Stimulus and Economic History The day after the Easter egg hunt on the White House lawn, President Clinton laid two eggs of his own, one regarding economic history, the other, economic policy. In fielding questions from reporters following his proclamation on Monday, April 12, of National Preschool Immunization Week, Mr. Clinton charged: The Republicans had 12 years in which unemployment went down only when they IRET V Bylin recession, virtually no job growth, and elevated unemployment. The data from 1980 through 1992 show that job growth and unemployment did not follow changes in the deficit and defense outlays as Clinton claims. Contrary to Clinton's charge, unemployment generally rose when deficits were rising, and generally fell when deficits were were exploding the deficit and increasing the defense budget. Clinton then went on to promote his own proposal to increase federal taxes and spending on non-defense projects to create jobs. Clinton's cheap shot regarding jobs and deficit spending during the 1980s is not one for which lovers of truth in economics should turn the other cheek. The conclusion he draws, that government spending is good for job creation, is equally in error. Neither the Reagan nor the Bush years offer support for Clinton's Keynesian-style contentions falling. (See chart and table.) It is more plausible to infer that causation runs from the economy to the deficit, not vice versa: that real economic growth and job gains lead to a lower deficit, not that a higher deficit leads to growth and jobs. The facts regarding a link between government spending and jobs also do not support Clinton. The unemployment rate actually rose during the rapid initial stage of the defense build-up, fell as the build- up reached its peak, continued to fall after defense spending leveled off, and rose as defense spending Institute for Research on the Economics of Taxation about unemployment, defense spending, and the deficit. The eight years chiefly affected by Reagan's economic policies were 1981-1989. Unemployment rose early in the 1980s, a period when the real deficit and real defense outlays were rising sharply, and real domestic spending rose modestly. Employment rose and unemployment fell later in the 1980s, a time when the real deficit plateaued and then fell, real defense outlays rose further and then leveled off, and real non- defense outlays grew somewhat faster. The Bush years, 1989-1992, were a time of falling real defense outlays; they were also a time of sharply rising non-defense and total outlays, rising deficits, Directions of Change in Real Federal Deficit, Defense and Other Outlays, Unemployment: 1980-1992 by 3-year periods. Period 1980-83 1983-86 1986-89 1989-92 Deficit + _ + Defense Outlays + + 0 _ Other Outlays + + + + (ex-interest) Total Outlays + + + + (ex-interest) Unemployment rate +-t - + IRET is a non-profit, tax exempt 501(c)(3) economic policy research and educational organization devoted to informing the public about policies that will promote economic growth and efficient operation of the free market economy. 1331 Pennsylvania Ave., N.W., Suite 515, Washington, D.C. 20004 Phone: (202) 347-9570 i

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