Why Voters Like Gridlock
by Bruce Bartlett (November 25, 2003)
.....In his new book, "In an Uncertain World," former Treasury Secretary Bob Rubin extols the Clinton administration's fiscal record. He correctly notes that the federal budget deficit was close to $300 billion when Clinton took office and had a surplus of more that $200 billion when he left. Nowhere in the book, however, does he credit the Republican Congress, which was elected in 1994, for the turnaround.
On the contrary, Rubin's book is filled with disdain for Republicans, especially Newt Gingrich, who blocked Clinton administration initiatives at every turn. And of course, Clinton returned the favor by blocking Republican initiatives, with the notable exceptions of welfare reform in 1996 and a tax cut in 1997.
Yet it was the combination of the two -- a Democratic White House and a Republican Congress -- that was really responsible for the budgetary turnaround. Each side was checked from enacting new spending programs. The result was that the budget was virtually on automatic pilot for most of the Clinton administration. In other words, we have gridlock to thank for the fiscal turnaround, not Clinton's leadership, which mostly involved sticking his finger in the wind to see which way the polls were blowing.
Rubin would also have us believe that the Clinton administration's fiscal policy is what led to the economic boom of the 1990s, primarily by bringing down interest rates. But the record tells us that rates didn't really fall until Republicans took control of Congress. In that month, long-term interest rates actually were higher than they had been when Bill Clinton took office. The Treasury's 30-year bond rate was 7.34 percent in Jan. 1993 and 8.08 percent in Nov. 1994. It was while Democrats and Republicans cohabitated in running the federal government that we really saw rates decline and the economy take off.
This is not surprising, given that Wall Street has long favored gridlock. Indeed, a number of economic conservatives suggested in 2000 that the best electoral outcome for growth and the stock market would be Al Gore as president with Republicans continuing to control Congress. As financial columnist Daniel Kadlec wrote: "The Dow has fared best when one party has controlled the White House and the other has controlled Congress, the optimum formula being a Democratic president and a Republican Congress. That combo has produced Dow gains, excluding dividends, of 10.7 percent a year.".....
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