International Economics -- Clinton I and Obama
The first four years of the Clinton presidency featured two signal achievements in the field of international trade. Clinton continued the NAFTA negotiations that had been initiated by George H.W. Bush brought them to a conclusion and drove them through the Congress in 1995.
He also continued and finished the "Uruguay Round" of world trade liberalization negotiations which had been started in 1986, resulting in congressional passage of implementing legislation in 1995. It was a signal achievement of his administration that those were concluded and the Uruguay Round Agreements were passed by Congress in 1995, along with NAFTA. This launched the World Trade Organization and paved the way for the global economic growth that followed. This last round in particular led to more liberalization than had been seen in any previous trade round.
By contrast, the Obama administration entered into office with three trade agreements already signed -- Panama, South Korea and Colombia. Despite every effort, the administration refused to move these through Congress until very recently. Obama administration changes (at the behest of labor unions) deprived the final agreements of significant free trade benefits.
The wheels started to come off the bipartisan consensus on trade at the end of Clinton's second term. With Al Gore running for president and the labor unions on the streets in Seattle in 1999, Clinton famously said that he could foresee trade sanctions for labor violations -- a comment that he well knew would kill the negotiations.
Some 13 years later, they are still in the doldrums, despite a brief moment when the horror of 9/11 brought the world together to launch the Doha Development Agenda in 2001. This was the time that the second Clinton White House chose political expediency over global economic growth but it came at the end of his administration, not at the beginning.
Given Obama's failure to support trade liberalization, we cannot expect further trade negotiations, or liberalization in a second Obama term. Indeed Obama has put no new trade negotiations on the table, at a time when other countries are pursuing an ambitious set of negotiations.
Domestic regulatory issues
Clinton's first administration continued a domestic regulatory reform effort initiated by Ronald Reagan and carried on by George H.W. Bush. This essentially required more extensive cost-benefit analysis prior to new regulations being issued to ensure that they were not unduly burdensome. The Clinton-era approach was built on and further refined by George W. Bush.
Obama has moved in a different direction, blurring costs and benefits in its own executive order, and moving away from an analysis that would assess market impact as a way of testing new regulations. The result has been an increase in regulations that anti-competitively distort markets. A good example of this is the Obama administration's approach to Buy America, a long-term U.S. policy.
The regulations have been altered in fundamental ways that lead to much greater levels of distortion that harm consumers' economic interests by increasing costs for U.S. firms in unjustified ways. In many sectors, the newer Buy America provisions of the stimulus bill in 2009 have led to the creation of monopolies all over the supply chain.
On taxes, both Clinton administrations and the Obama White House have also differed. Recognizing that capital gains tax cuts would stimulate investment, presidents of both parties have lowered the rate.
Clinton's second administration (in 1997) cut the capital gains tax rate from 28 percent to 20 percent. His critics in his party's extreme left wing said it would benefit the wealthy and the lost tax revenue would drive up the deficit.
On the contrary, Clinton's capital gains tax cut fueled an investment boom in the technology sector and the rest of the economy, taxable capital gains nearly doubled over the next three years that led to a budget surplus. Notably, as a result of an explosion in new jobs, unemployment fell to less than below 4 percent.
By contrast, a second Obama administration would increase the capital gains tax from its current level, thus choking of investment when it is most needed.
In these three areas alone, we can see that Obama has pulled from the Elizabeth Warren brand of economic populism and rejected the policies of the Clinton administration.
It isn't surprising that some of the more populist statements to come from Obama himself (the famous "you didn't build that" statement, the emphasis on government being something we are all a part of) are drawn from speeches given by candidate Warren herself.
Given that the second Clinton White House was unable to resist a pull toward populism, it is reasonable to suppose that a second Obama term would veer in a similar direction. The only difference is that Clinton's first term started from a much more economically savvy position.
Despite the magic of seeing the old master again and despite what use the Obama administration will make of him in the run-up to the election, Obama's economic philosophy as evidenced by what he has done are markedly different from Clinton's.
The American people will likely realize that Obama espouses through his actual policies, if not his statements, a brand of economic populism that was rejected by his Democrat predecessor in office. And that economic populism is likely to get more extreme if he is granted a second term, as Obama chooses to "get things done" by executive fiat, even if faced by a Republican House and Senate.
Our economy has suffered serious harm from the first dose of this brand of economic populism -- a second dose could be fatal.
(Shanker Singham is the chairman of the International Roundtable on Trade and Competition Policy and a partner at global law firm, Squire Sanders.)
(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)
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