Benjamin Studebaker

Hillary Clinton has been getting reamed for being “out of touch” for comments she made regarding the Clinton family’s wealth.  The Clintons earned $109 million during their first 7 years out of office (for an average annual income of $15.5 million), but she nonetheless claimed that the Clinton family was “dead broke”and in debt when it left the White House in 2001, and that the Clintons are not truly “well off“. While Clinton badly misses the mark here, what’s far more disturbing is the role her husband’s administration played in enriching people like them at the eventual expense of the wider population.

A $15.5 million average annual income puts the Clinton’s not merely in the top 1%, the top 0.5%, or even the top 0.1%–it puts them in the top 0.01%. As it turns out, this income bracket benefited substantially from the first Clinton presidency in the 1990’s:

The top 0.01%’s share of income doubled during the Clinton administration, from 2.5% to 5%. In the meantime, inflation-adjusted wages did not do substantially better under Clinton than they did under Reagan and the Bushes:

In the United States, we often lionize the economy of the 90’s due to the legitimately low unemployment we enjoyed under Clinton:

But this fall in unemployment was not accompanied by substantial inflation-adjusted wage gains compared with the 50’s, 60’s, and early 70’s. The average annual growth rate during the 90’s reflects this–as a whole, the decade was little better than the 80’s, and both decades fell far short of performance in the 50’s and 60’s:

How did this happen? The Clinton administration made no effort to repeal or reverse the trends initiated in the 1970’s. Labor’s negotiating power was severely weakened because  the demise of capital controls coupled with soaring trade deficits in the wake of the Nixon shock allowed for an unprecedented level of outsourcing and labor market competition. This caused wage growth to stagnate, as American workers were forced to compete for wages with counterparts in developing countries. American workers need to buy goods and services for the economy to grow, and a decline in wage growth makes it difficult for the wider economy to grow. The administrations of the 70’s, 80’s, 90’s, and 00’s dealt with this by deregulating financial markets, so as to encourage additional leveraging and investment. In the 90’s, this resulted in massive investment in the stock markets, which grew much faster than the economy as a whole during this period:

This investment in the stock market, while it increased employment, failed to adequately increase wages to bring them in line with productivity. Consumption failed to keep up with output, and many of the companies that received investment in the 90’s struggled to make enough money to justify those investments. Eventually a market correction was in order, which followed immediately after Clinton left office:

The bottom did not drop out, however, because the Federal Reserve was able to lower interest rates to make the conditions of lending more favorable to borrowers, creating the perception that borrowers were able to assume more debt:

The new investment poured into the housing market, and the stock bubble became the housing bubble. Household debts, which were on the rise throughout the period, soared during the 00’s, leading to the crash in 2008:

The shift to the housing market was aided and abetted by the Clinton administration, which passed laws repealing regulatory oversight of the financial markets in 1999 and 2000. Unsurprisingly, in the decade since then, Hillary Clinton’s three largest donors have all been investment banks (Citigroup, Goldman Sachs, and JP Morgan) with many others rounding out her top 20 (Morgan Stanley, Lehman Brothers, Merrill Lynch, and Credit Suisse).

It’s not a problem in and of itself that the Clintons have a lot of money. It’s not even a problem that they’re out of touch–we would expect people who are rich, famous, and constantly surrounded by secret service guards to have lives that are very different from yours or mine. It’s not even a problem that the Clintons don’t feel “truly rich”–even the Clintons are closer in terms of raw income to you and I than they are to billionaires like Gates, Buffet, or Donald Sterling. Brooklyn Nets shooting guard Joe Johnson made $21.4 million last year (despite only averaging 15.8 points per game, but let’s not get into that)–the Clintons are still closer to the players than they are to the owners. They’re millionaires, not billionaires.

No, the problem is that the Clintons have a long history politically of enabling pervasive economic trends. They don’t challenge inequality growth, they don’t close the productivity-wage gap, they don’t properly regulate finance, they don’t restrain borrowing, they have been part of the problem, not part of the solution. The Clintons are part of an entire generation of politicians who served in the 70’s, 80’s, 90’s, and 00’s who have slowly but surely derailed the economic trajectory the country was on during the 50’s and 60’s through feckless incompetence.

There’s no evidence that these people have learned much of anything or revolutionized their thinking in the wake of the economic crisis. In the run-up to the 2016 presidential election, Hillary Clinton will surely try to convince us all that she understands the problems and can offer real solutions to them, but Bill Clinton’s track record should serve as a cautionary tale. What was taken to be a booming economy while Clinton was in office turned out to be smoke and mirrors, just another party for the very wealthy that the average American was not invited to and ultimately ended up having to pay for in the form of low growth rates, stagnant wages, and high household debts. Now the DNC seems to be preparing to ask us to vote for another Clinton. What was it George W. Bush said?