On Wednesday August 4, the New York Times printed a chart constructed by former Treasury Secretary George P. Shultz which purported to illustrate the following: "President Clinton inherited prosperity; President Clinton bequeathed recession." Shultz's "Op-Chart" is extremely deceptive and misleading. The following memo explains the misleading components of his analysis and attempts to clarify the record:
1. The economy Clinton inherited: Shultz's contention that Clinton "inherited prosperity" is misleading; an objective assessment of late 1992 and early 1993 reveals a weak and highly uncertain economic environment.
- Overall economic growth was extremely shaky in late 1992 and early 1993: GDP growth when President Clinton took office in the first quarter of 1993 was essentially flat – recorded as negative for most of the last decade, and revised to an extremely anemic 0.5 percent growth in a benchmark revision in December 2003. [BEA]
- The unemployment rate stayed persistently high during 1992 and early 1993: Shultz's piece conveniently chose to ignore the unemployment rate, which hovered in the 7.6-7.8 percent range for much of 1992 and was at 7.3 percent when President Clinton took office. [BLS]
- In some states unemployment was 10 percent or higher: For example, in West Virginia the unemployment rate in January 1993 was a whopping 11.1 percent and in California it was 9.7 percent. [BLS]
- While job growth resumed in 1992, it was anemic: Average monthly job growth in 1992 was 118,000, half the 236,000 monthly job growth averaged for all eight years of the Clinton presidency. [BLS]
- Many of the nation's top economic analysts concurred with the interpretation of a weak and uncertain economy in the second half of 1992:
- James Cooper and Kathleen Madigan, Business Week: "To be sure, President-elect Bill Clinton inherits a struggling economy." [BusinessWeek 11/23/92
- Bruce Steinberg, Merrill Lynch: "The economy is comatose and shows only the faintest signs of life right now." [Quoted in the Washington Post, 9/26/92]
- Allen Sinai: "There are real signs here that the economy is sliding badly, surprisingly badly." [Quoted in the Washington Post, 9/26/92]
- Fortune Magazine's Annual Economic Forecast: 11/2/92 "Everywhere executives are grumbling in disappointment – they had expected things to be better by now…The economy could be even weaker than the official figures show."
- Washington Post, article by Steven Mufson and John Berry, 9/10/92: "Americans have been unable to mount a convincing economic recovery … the economy is crawling forward so slowly that it appears to be standing still … In some statistical categories .. there has even been a "triple dip."
2. The economy under President Clinton was exceptional, historic and record-breaking, not just the continuation of the status quo. Shultz's visual representation of the Clinton administration's economic record as somehow flat or ordinary is grossly misleading. President Clinton not only presided over the longest economic expansion in our nation's history, but broke from the previous period's trend and oversaw exceptional progress on nearly every major economic indicator:
- Sustained income growth, broadly shared: After seeing family incomes stagnate from 1979-1993 (growing only 0.7 percent over the entire period) family incomes rose 17 percent – or more than $7,000 per family – from 1993-2000. This growth represented a clear break from the preceding 12 years, not the continuation of a trend.
- In contrast to 1979-1993, when families in the bottom quintile saw their income decline by 13 percent in real terms, the period from 1993-2000 saw family incomes in the bottom quintile grow by 24 percent – faster than the median family. Again, the broadly shared quality of growth in the 1990s was fundamentally distinct from growth the 1980s.
- 23 million new jobs created – the most of any administration: The Clinton administration created more jobs than any administration in American history; 22.6 million, 92 percent of which were in the private sector.
- Revived growth in manufacturing jobs: After losing 1.9 million manufacturing jobs under Presidents Reagan and Bush I, President Clinton oversaw manufacturing job growth of 303,000 from 1993-2000.
- Near doubling of productivity growth: The fiscal discipline of the Clinton administration helped usher in a virtuous cycle of lower interest rates, stronger investment, and a shift in productivity growth that has been sustained in recent years. Between 1973 and 1995, productivity growth averaged 1.4 percent a year. Between 1995 and 2000, productivity growth accelerated to 2.5 percent a year, or nearly double the rate of the earlier period.
- Unemployment to its lowest level in 30 years – below 5 percent for 43 straight months: The unemployment rate fell by 42 percent over the course of the Clinton presidency and remained below 5 percent from July 1997 to the end of Clinton's second term in January 2001. The 4 percent unemployment rate in 2000 – the lowest in over 30 years – stands in contrast to an average unemployment rate of 7.1 percent under Presidents Reagan and Bush I.
- Record deficits turned to record surpluses: Under President Clinton, we went from a record nominal deficit of $290 billion in 1992 to the largest surplus in history – $236 billion in 2000. This dramatic fiscal turnaround was by no means a continuation of the status quo – In 1992, the Congressional Budget Office was projecting a $455 billion deficit in 2000.
3. Schultz distorts the recent recession and ignores the implications of his own chart:
- Inaccurately portrays 2001 recession: Further underscoring the biased nature of his chart, Shultz incorrectly displays the most recent recession as beginning in January 2001 – the last month President Clinton was in office – rather in March 2001 as the independent NBER Recession Dating Committee has established.
- Ignores the historic weakness of the current jobs recovery that his own chart displays: Shultz fails to acknowledge that by his own calculations, we are experiencing the weakest jobs recovery since the Great Depression:
- For nearly two years after the recession officially ended in November 2001 our economy continued to lose jobs – something that has not happened since the 1930s.
- The 1.4 million jobs created in the last year – the 20th to 31st months of the recovery – represent the weakest job growth for this period of any sustained recovery since before World War II.
- As a result, we are 7 million jobs behind where the Council of Economic Advisers projected we would be – a projection made in February 2002, after 9/11 and the recession. [Council of Economic Advisers, "2002 Economic Report of the President," February 2002.]
Gene Sperling is the director of economic programs at the Center for American Progress.