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Home Publications Blogs Beat the Press President Clinton, The Economy Started Losing Manufacturing Jobs While You Were in Office

President Clinton, The Economy Started Losing Manufacturing Jobs While You Were in Office

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Monday, 20 June 2011 09:52

If you ever wondered why manufacturing employment has not done well over the last 15 years, President Clinton gave us part of the answer in a column giving advice on job creation [thanks hapa]. His 13th item on job creation is "Enforce Trade Laws," where he tells readers:

"We lost manufacturing jobs in every one of the eight years after I left office. One of the reasons is that enforcement of our trade laws dropped sharply. Contrary to popular belief, the World Trade Organization and our trade agreements do not require unilateral disarmament. They’re designed to increase the volume of two-way trade on terms that are mutually beneficial. My administration negotiated 300 trade agreements, but we enforced them, too. Enforcement dropped so much in the last decade because we borrowed more and more money from the countries that had big trade surpluses with us, especially China and Japan, to pay for government spending. Since they are now our bankers, it’s hard to be tough on their unfair trading practices. This happened because we abandoned the path of balanced budgets 10 years ago, choosing instead large tax cuts especially for higher-income people like me, along with two wars and the senior citizens’ drug benefit. In the history of our republic, it’s the first time we ever cut taxes while going to war."

Okay, we have some real serious confusion here from the former president. First, it is true that the economy lost manufacturing jobs in the eight years after President Clinton left office, but the job loss began in his last three years in office. Here are the numbers:

                               Change in Manufacturing Jobs

1998                         -140,000

1999                         -170,000

2000                         -99,000

 

It is true that the pace of job loss picked up after Clinton left office, but this was due first and foremost to the recession caused by the collapse of the stock bubble. Blaming President Bush for that downturn would be like blaming Obama for the Lehman crisis if it happened to occur in February of 2009 rather than September of 2008. The downturn caused by the collapse of the bubble was the result of President Clinton's team failure to try to rein in the bubble. As a result of the collapse of the stock bubble, the country had at the time the longest period without job growth since the Great Depression. It only began to create jobs again once the housing bubble began to fuel a construction and consumption boom.

Now for the other part of Clinton story:

"Enforcement dropped so much in the last decade because we borrowed more and more money from the countries that had big trade surpluses with us, especially China and Japan, to pay for government spending."

Actually, if President Clinton paid attention to economic data he would have noticed that not only were we losing manufacturing jobs during his last three years in office, but the trade deficit was soaring. The trade deficit grew from just over 1 percent of GDP in 1996 to over 4.0 percent of GDP by the 4th quarter of 2000. President Clinton's team must have been doing one heckuva job enforcing trade laws.

More importantly, the rest of his story makes no sense either. The United States borrows from China, Japan and other countries because of our trade deficit, not our budget deficit. We were borrowing huge amounts from Japan and China at the end of the Clinton presidency, but most of their loans went to buy stocks, private bonds, and mortgage backed securities, not government bonds. In fact, by the end of the Clinton presidency, because of the large trade deficit, the country was accruing debt to foreigners at a then record pace.

Anyone who thinks that this didn't matter because the foreigners were holding private assets and not government debt should realize that if they desired for some reason to own government debt, any day of the week they could sell their stock, bonds, or mortgage backed securities and buy government debt. The issue is indebtedness to foreigners and the potential drain on future income. It matters not at all whether the debt is on the public or private side.

This raises the final point, why did the trade deficit soar in the last years of the Clinton administration (aside from the fact that President Clinton apparently was not paying attention)? The answer is simple. The value of the dollar soared.

This was the result of Treasury Secretary Robert Rubin's high dollar policy. This was a rhetorical point when he first took over as Treasury secretary in 1995. He put the muscle of the IMF behind it in the East Asian bailouts of 1997. These bailouts forced the East Asian countries to repay debts in full. This could only be done by allowing the value of their currencies to plunge against the dollar, making their exports hyper-competitive.

Also, the IMF bailouts were considered so onerous by the rest of the developing world that every country that could decided it had to accumulate massive amounts of reserves to avoid ever being forced to turn to the IMF. This meant pushing down the value of their currencies against the dollar as well. In the late 90s, the normal flow of capital from rich countries to poor countries was reversed in a major way, with developing countries becoming massive lenders to the United States.

This was definitely bad policy, but it was President Clinton's policy, not President Bush's. The dollar actually depreciated moderately under President Bush. He certainly should have done more to push down its value, which would have corrected the imbalances built up in the Clinton years, but President Clinton has events seriously backward in this piece.

Comments (17)Add Comment
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written by izzatzo, June 20, 2011 12:08
Clinton has responded to this baseless rant from Whose Your Nanny Baker noting that he did not have textual trade relations with China and Japan during moments of personal weakness since all communications were conducted orally over the telephone.
The original weenie gets it wrong!
written by Joe K, June 20, 2011 12:24
You'd think the former President would be lying low until the Weiner storm blows over. But no, another addition to the senseless commentary pile of hog wash.
...
written by vorpal, June 20, 2011 12:38
Sad and pathetic so read such ill-informed material from what is considered to be one of our more intelligent presidents.

Evidently, the elites just can't understand that they don't know what they are doing. The land of the blind, indeed.
NAFTA did it to me
written by denim, June 20, 2011 1:01
I helplessly watched as my co-workers jobs went to Mexico and Asia. Then they came after mine.
Clinton and other elites live in ivory towers insulated from contact with people who have the facts and might even discuss them in a helpful manner.
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written by Steve LaBonne, June 20, 2011 1:01
Slight correction to vorpal's comment: our elites are well paid to not understand that they don't know what they are doing. "It is difficult to get a man to understand something when his salary depends on not understanding it."
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written by Arne, June 20, 2011 1:42
Clinton missed the loss in manufacturing because everything else was going up faster and to new records as far as how many were employed. Many people were busy justfying how an economy based on people selling stuff to each other was a good thing.
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written by In Hell's Kitchen (NYC), June 20, 2011 2:47
Compared to Dumbya's record (who really lowered manufacturing's coffin into the ground) Clinton's record is as good as he thinks it is. See here: http://tinyurl.com/6d3m8qg
...
written by hapa, June 20, 2011 3:22
copyedit correction: in the first sentence, the question mark should be a comma.
Yet more reasons to allow currency competition
written by floccina, June 20, 2011 4:30
Yet more reasons to allow currency competition.
...
written by Doc at the Radar Station, June 20, 2011 9:27
Bingo! Spot-on analysis. I recall being in the FIRST BIG-layoff meeting in 1998 (The Asian/Russian crisis), having worked in manufacturing since 1978. Fortunately, there was a reprieve in 1999, but then we got whacked again and again in 2001, 2003, 2007. At least we had the Plaza Accord agreement with Japan in 1987 to keep the dollar from appreciating too much. After that, it has been nothing but domestic manufacturers hitching up all the stage coaches and heading for the borders as fast as possible.
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written by Calgacus, June 21, 2011 2:00
The issue is indebtedness to foreigners and the potential drain on future income. It matters not at all whether the debt is on the public or private side. This ignores the immediate deflationary effect -possibly creating unemployment - of foreign purchase/holding of government debt, as opposed to purchase of private debt or securities. In the second case, the Chinese dollars are returned to the US economy.
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written by Doc at the Radar Station, June 21, 2011 6:41
Check out this Charlie Rose interview with James Goldsmith from 1994:
http://video.google.com/videop...76641728#
The banter between Goldsmith and the Clinton administration official is priceless.
...
written by skeptonomist, June 21, 2011 1:02
Not that this vindicates Clinton's version of history, but Dean fails to mention again (or maybe has not realized) that the value of the dollar began dropping in 2002 and this had no apparent effect on the trade deficit, which kept growing until 2006. There is no justification in the real world for the claim that reducing the value of the dollar will automatically reduce the trade deficit.
...
written by S. D. Jeffries, June 22, 2011 12:48
It has been evident for quite a while that Clinton has begun to believe all his own press releases.
NAFTA
written by farang, June 22, 2011 3:41
While it certainly is true that Bush can't be blamed for the dot.com bubble bursting, the country was not in recession when he took office, sorry, your facts are incorrect. We did not have the technical factors necessary to declare a recession officially, growth slowed, not stopped and declined.
But this is way off: "Blaming President Bush for that downturn would be like blaming Obama for the Lehman crisis if it happened to occur in February of 2009 rather than September of 2008. The downturn caused by the collapse of the bubble was the result of President Clinton's team failure to try to rein in the bubble." The job loses were of Clinton carrying Poppy Bush's NAFTA to fruition, and there went US jobs, that "giant sucking sound" everyone thought so quaint. Hahahaha, he looks funny.

The cause of the "downturn" was Bush handing the top 1% income earners a "temporary tax break" of almost 3 trillion dollars, throwing the balanced budget out the window and running up more debt than all presidents before him....and handed this sh!t sandwich to Obama...and he just continues Bush policies...and extended this giveaway of the assets of the US to the top 1%...that's the reality.
...
written by farang, June 22, 2011 3:51
"written by skeptonomist, June 21, 2011 12:02 PM
Not that this vindicates Clinton's version of history, but Dean fails to mention again (or maybe has not realized) that the value of the dollar began dropping in 2002 and this had no apparent effect on the trade deficit, which kept growing until 2006. There is no justification in the real world for the claim that reducing the value of the dollar will automatically reduce the trade deficit. "

Not when the other concurrent "strategy" is to ship jobs off-shore and give multinational corporations tax breaks for doing so....because we aren't making the stuff other nations want any more...and with less jobs...we have less income to make purchases....thank you Bill "This will level the playing field of Mexican, Canadian and US workers" Clinton. He actually said that. NAFTA....think Big Dog gave a rat's ass about the life of a Mexican laborer? Or how he was screwing the standard of living for Middle Class America?

He knew...and was happy to do it.
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written by paine, June 26, 2011 2:14
god bless you briny dean

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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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