Contrasting the Performance of the Economy in Two Consecutive Presidential Terms - Essay Example

Contrasting the Performance of the Economy in Two Consecutive Presidential Terms Introduction The economy of the United s of America is the single largest national economy in the world accounting for approximately a quarter of the nominal global Gross Domestic Product (GDP). The US maintains a mixed economy that has been experiencing relative growth over the years under many presidents with despite their different economic policies (Harold & John, 1995). The economic growth was, however, slower in some jurisdictions while it grew at a faster rate under other presidents. The country has maintained high levels of per capita investment, economic research, and moderate rate of unemployment over the years to remain as the world’s single largest economic powerhouse. The country also has vast natural resources, high productivity levels and advanced infrastructure to support economic growth. The main trading partners of the US are Canada, Japan, Mexico, China, and Germany. The US is the second largest producer of natural gas and the world’s third largest oil producer. The country is also home to some of the largest multinationals in the world, making it the greatest manufacturer and the second largest trading nation. The financial markets of the US such as The New York Stock Exchange remain the largest in the world with the country attracting high numbers of foreign investment. The US economy has been the leading economy since the late 1800s and has maintained the position to date (Fearon, 1987). The challenge for successive presidents is to maintain the economic growth and transfer the benefits of such economic growth to the American citizens through economic policies that touch on employment, tax, health, social welfare and improving the financial markets (Fearon, 1987). Different presidents have used different strategies in their regimes with some presidents being lauded for their success with high approval ratings while some have been blamed for major economic problems that the country has faced over the years. As from 2007, the US was caught up in the global financial meltdown that affected international trade. This financial problem is believed to have begun in the US with the unpopular economic policy of President George W. Bush and spread to the rest of the world. This essay is going to analyze the economic policies of two successive presidents of the US, Bill Clinton and George W. Bush. President Clinton took office in 1993 and ruled for two successive terms up to 2001. He was the first Democrat president after nearly 12 years of the Republican rule. After succeeding George H. W. Bush, President Clinton embarked on major socio-economic reforms that culminated in high economic growth during his two presidential terms (Harold & John, 1995). His successor George W. Bush, a republican ascended to power in 2001 and ruled for two consecutive terms up to 2008. During his presidency, the country encountered various challenges that posed economic problems to the American citizens especially in his second term that resulted in the global economic meltdown. The essay will try to assess the general economic performance under two the two presidents based on their economic policies and the impact they had. This will be achieved by examining the major economic changes the presidents initiated during their presidential terms as well as looking at the efforts they had to put in order to see these changes implemented. The economy under President Bill Clinton Bill Clinton is regarded as one of the most successful; presidents of the US in terms of economic growth and other social reforms. His presidency oversaw considerable economic growth. The GDP per capita rose from about $39000 when he took office to about $45000 when he was leaving. There was also a substantial decline in national debt from about 66% of the GDP to about 55%. The main economic policy of President Clinton encompassed both an overarching philosophy of governance and a set of economic policy objectives (Harris, 2005). The President’s approach entailed modernizing the federal government to make it friendlier to other enterprises while also giving more economic authority to state and local governments. The presidents main aim was to reduce the size of government and make it more flexible in responding to both national and international challenges (Harris, 2005). In 1993 when Clinton took office, the country was in its final stretch of a recession. There was a high rate of unemployment with about 10 million people lacking jobs, high poverty levels, reduction in family income and a huge number of people on the government’s social welfare program. Clinton’s economic policies have been hailed by a majority of the citizens for having fostered the economic recovery of the country’s economy leading to a national surplus. The president inherited a national budget deficit of 4.7% of the GDP when he took office and turned it around to a surplus of 2.4% of the GDP by the year 2000. There was also a reduction in federal spending during Clinton’s presidency from about 22.2% of the GDP in 1992 to about 18.4% of the GDP (Krugman, 2009). In general, the economic policy of President Bill Clinton was based on the following pillars; fiscal discipline in order to eliminate budget deficits, encouraging private sector investment through low interest rates, eliminating protectionist trade tariffs, and investing in human capital through research and education (Krugman, 2009). The economic growth witnessed during the presidency of Clinton was beneficial to the common citizens in general to the trickledown effect the policies of the president had on the economy in terms of employment, income, inflation, home ownership and poverty levels. Clinton’s administration oversaw the creation of the most number of jobs in the country by any single administration in the US history. About 25 million jobs were created in less than eight years of Clinton’s administration. Of the new jobs created, 92% of them, or 21 million jobs were created in the private sector. Median families in America also witnessed an increment in their incomes during Clinton’s presidency. Between 1993 and 1999, median family income had increased from $40500 to $48900 (Harris, 2005). The overall unemployment rate was also at its lowest at this time in almost 30 years. Clinton also ensured there was a lower inflation rate since the administration of J. F. Kennedy in the 60s. Inflation averaged 2.4% down from 4.7% in the previous regime. There was also a high home ownership rate in the country, which stood at 67% towards the end of Clinton’s presidency, the highest rate ever recorded. Poverty also reduced a great deal under the leadership of Bill Clinton with only about 6 million Americans were poor time he was living the presidency. In order to ensure all this success, President Clinton overcame many challenges in having his policies approved in the senate and House of Representatives. The first challenge was to pass a deficit reduction plan in both houses. The plan included more that $500 billion for debt reduction. The plan also included a framework for future investment in healthcare, education and technology. Republicans were opposed to the deficit reduction plan despite lobbying by the government, and the plan had to pass without any support of the republicans in both houses. In 1997, the president negotiated with the republicans to enact the Balanced Budget Agreement Act, which was a major bipartisan agreement to foster a move away from the budget deficit (Harris, 2005). The president also facilitated the creation of a market for American products and services on the global market by increasing trade with other countries. To do this, the president had to sign over 300 international trade agreements, which led to an unprecedented increase in exports from the US. The president managed to win ratification of the North America Free Trade Agreement (NAFTA), which was instrumental in creating a free trading zone between Canada, the US and Mexico. Another key success was getting approval for the Permanent Normal Trade Restrictions Agreement with China in 2000. The economic growth during Clinton’s presidency created a good environment for him to be able to improve on a lot of other areas such as child welfare, community development, national security and healthcare (Harris, 2005). The economy under President George W. Bush President George Bush came into office amidst great economic growth, which he hoped to take to another level. He however, took a different approach from his predecessor and employed different strategies to ensure his policies were implemented. The president encountered many challenges both within the country and externally, which threatened economic progression. As a result, when President Bush was leaving office in 2009, he had the lowest approval rate in terms of his economic performance (Bartels, 2008). During his leadership, the country witnessed its debt soar up significantly. Towards the end of his presidency, the American economy was at its lowest, characterized by the global financial crisis, the mortgage crisis, and high government spending necessitated to finance the wars in Iraq and Afghanistan (Bartels, 2008). Bush’s economic policy was based on a variety of factors including expenditure for financing two wars, tax cuts, the free market ideology, and the ownership society. The free market ideology was aimed at limiting the role of government in the private sector business while the ownership society was based on individual accountability and property ownership. The president was relatively successful in his first term (2001-2005) where he managed to get approval of congress for most of his policies to implement his tax cut policy. These legislation includes The Job Creation and Worker Assistance Act of 2002, the Economic Growth and Tax Reconciliation Act, 2001, Jobs and Growth Tax Relief Reconciliation Act, 2003 (Bartels, 2008). The statutes were very instrumental in reducing capital gains of tax, and decreasing taxes. The president also did away with marriage penalty and increased child tax credit. The president pursued free trade policies with the enactment of the Trade Act 2002 which enabled him to push for bilateral trade agreements with other countries. Bush spearheaded the Dominican Republic–Central America Free Trade Agreement (DR-CAFTA), which was one of his major successful international trade agreements (Krugman, 2009). After a terrorist attack in New York, the economy was hugely affected. The President declared a war on terror that culminated in the invasion of Afghanistan and Iraq. This was also costly for the government and contributed to increased national spending and other economic challenges such as high unemployment rates, loss of jobs, high inflation and high living standards. This led to a lot of criticism on the president’s policies as well as questioning his involvement in wars especially in his second term. Poverty levels also increased during Bush’s presidency, lack of incentive for small businesses, high costs of housing, healthcare problems, among other challenges (Krugman, 2009). Homeowners and workers also lacked incentive and were demoralized during the presidency of George Bush. Despite all these challenges, the president encountered many other challenges that made it difficult for him to revive the economy. The terrorist attack and security challenges for instance scared off investors; the global financial crisis was also instrumental in contributing to the economic problems the country faced. The president also encountered challenges in negotiating with the opposition in order to pass significant legislation to support his policies. The president had to make hard decisions and make tough choices in terms of security decisions of the country by going in to two wars and managing to get support for the wars. Comparison between the two Presidents and their economic policies Both President Clinton and President Bush had good intentions for ensuring sustained economic growth with the benefits trickling down to the common citizen. They both employed different approaches to ensuring this objective and in the end, Bill Clinton was more successful than Bush. The approach used by Bill Clinton aimed at bringing everybody ob board at both the federal and state or local level, giving everybody economic authority and empowering individuals to create jobs. The resulting effect of this is that there were more jobs created, the economy thrived at a good rate, and the US was engaged with meaningful business with other countries. Bush, on the other hand employed an approach that ensured free trade where the government had a limited role in private business. As a result, the people were less motivated to invest and do business. There was a sharp increase in unemployment thus posing a challenge to potential economic growth. Analysis and Conclusion These differences in the performance of the US economy between the tenures of President Bill Clinton and his successor president Bush shows just how diverse economic policies can have extreme impacts on the economy of a country. President Clinton witnessed great success with his economic policies where there was great economic growth and expansion throughout his two terms despite in some instances having less numbers in congress. This shows that Clinton was a good negotiator who managed to bring the opposition on his side when debating important legislation thus ensuring that there was relevant legislation in place for his policies to be effected. President Bush on the other hand, encountered a lot of challenges both from within and without the US that threatened the country’s economy. The sluggish economic growth and high deficits witnessed during his tenure indicate how his presidency was difficult in terms of managing to implement important policies to save the economy. In some cases, the president failed to bring on board the opposition when it mattered most. This analysis shows just how much different presidents can influence the economy with their different economic policies with a very short time. Bibliography Bartels, L. M. (2008). Unequal democracy: The political economy of the new gilded age. Princeton, NJ: Princeton University Press. Fearon, P. (1987). War, Prosperity, and Depression: The United States Economy, 1917-1945. Kansas: University Press of Kansas. Harold G. V., & John F. W. (1995). History of the US economy since World War II. Armonk, NY: M. E. Sharpe. Harris, J. F. (2005). The Survivor: Bill Clinton in the White House. New York: Random House. Krugman, Paul (2009). The Return of Depression Economics and the Crisis of 2008. W.W. Norton Company Limited. Read More