Bill Clinton and the politics of inclusion

Written by Andrew Szabo
Wednesday, 12 January 2011 23:00

We started this series, concerning American politics and economic policy, with Franklin Roosevelt’s New Deal. FDR built a political coalition and domestic policy that set the mold for all subsequent Democratic Presidents, including Truman, Kennedy, Johnson and Carter. To champion the common man, to rail against big business and special interests, to fashion massive federal programs to redistribute wealth toward the needy — these were the fuel that propelled the Democratic machine.

By the time of Bill Clinton’s presidential campaign in 1992, signs abounded that the Democrats’ tank of gas was running empty. The Southern Strategy, as pioneered by Richard Nixon, had blasted Democrats’ traditional lock on Southern states. Labor unions, a traditional bastion of Democratic strength, were shrinking in size and importance. Catholic voters had drifted toward the Republican Party, in part based on “family values” issues. Finally, the group of voters who would define themselves as “middle class” had swelled over the decades since the Great Depression, with unfavorable implications for Democrats.

Clinton portrayed himself as a “New Democrat,” pointing to his record as governor of Arkansas. He toned down the traditional Democratic rhetoric against “fat cats.” He talked of working with business to create incentives for investment. He sought and received support from some high tech entrepreneurs. He solicited disaffected Democrats who had voted for Reagan and Bush. His youth and charisma drew younger voters. Ross Perot’s insurgent third party candidacy probably also aided Clinton in defeating George W. Bush. (Perot played a lesser role in Clinton’s defeat of Bob Dole to win a second term, in 1996.)

The Democratic-controlled Congress passed legislation in 1993 that raised taxes for upper income taxpayers while relieving some lower income people from federal tax responsibility. The bill also aimed to balance the federal budget through a mandatory budget reconciliation process in Congress.

Clinton supported the North American Free Trade Agreement (NAFTA), which he signed in 1994. Clinton’s support for free trade was economically correct, but it took political courage for a Democrat to support it.

The first lady, Hillary Clinton, helped promote ambitious health care reform legislation. This failed to gain traction in Congress, and the flop helped bring large Republican gains in the 1994 mid-term elections.

Clinton made a notable accomplishment in welfare reform. It probably took a Democrat to bring credibility to these proposals, just as Nixon’s Cold War credentials allowed him to break with our China isolation policy.

In 1999, Clinton signed a bill that ended the division (inaugurated during the Great Depression by the “Glass-Steagall Act) between investment banking and commercial banking. Some say this change was one cause of the recent financial crisis, though in practice the wall between the two forms of banking had been crumbling for years before.

In foreign policy, Clinton came tantalizingly close to brokering a historic peace agreement between Israel and the Palestinian Authority that would have established a two-state solution. Clinton later wrote that it failed because PLO leader Yasser Arafat — a vacillating and pusillanimous figure — unwisely backed away. The Palestinian issue continues to fester today, aggravating our dismal relations in the Islamic world. Clinton supported (after excessive hesitation) a NATO bombing program against Yugoslavia, which ended the Serbian-led onslaught against ethnic Albanians in Kosovo.

Republican activists hated Clinton, comparable to the way Democrats had despised Nixon. Although Clinton suffered impeachment by the House of Representatives in the Monica Lewinsky matter, he was acquitted by the Senate. His end of second term popularity rating ran extraordinarily high. The Congressional Budget Office reported a federal budget surplus in 2000, and there was wild talk about problems if U.S. Treasury debt were gradually to disappear. The stars and planets seemed to line up, as inflation remained low, unemployment fell, capital investment was high, and the stock market soared — growing, however, into an unsustainable technology bubble that soon would burst.

Andrew Szabo is managing director of Greenwich Financial Management Inc. Securities offered exclusively through NewOak Capital, member FINRA/SIPC/MSRB. Write to This e-mail address is being protected from spambots. You need JavaScript enabled to view it . Copyright (c) 2011, Greenwich Financial Management Inc.