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Clinton Myths

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Bill Clinton got rave reviews for his speech at the Democratic National Convention. My wife said: "Clinton was great. He made Republicans look like liars and losers." Clinton, now a sainted elder statesman, also gets credit for the booming economy of the '90s.

Today, he appears in an Obama commercial — in full "I feel your pain" mode — saying that Obama "has a plan to rebuild America from the ground up."

When someone claims anyone can rebuild a society from the ground up, I say he is arrogant and delusional.

Clinton then tries to scare viewers by telling them that Republicans want to "go back to deregulation. That's what got us in trouble in the first place."

Ah, the progressives' George W. Bush deregulation myth: Bush's anti-regulation crusade caused our problems. This is a lie that seems true because of constant media repetition. In fact, Bush talked deregulation but vastly increased the regulatory state. He hired an astounding 90,000 new regulators. Under Democrats and Republicans, regulation grows.

A rare exception was repeal of the Glass-Steagall Act, which forbade financial companies from offering both commercial and investment banking services. You know who signed that?

Bill Clinton.

He was right to sign it (backed by Treasury Secretary and later Obama adviser Larry Summers) because outlawing full-service banking put American banks at a competitive disadvantage.

Five years earlier, Clinton supported the Riegle-Neal Interstate Banking and Branching Efficiency Act, which finally legalized interstate branch banking. Federal and state laws that forbade intrastate and interstate branch banking — that is, diversification — were one of the worst features of American finance. They made banks highly vulnerable to failure of specific business centers and farm communities, helping to make the Great Depression what it was. (By contrast, Canada had no such restrictions and no bank failures.)

So Clinton — not Bush — was the bank deregulator. Were those acts responsible for the financial debacle of 2008? No. Bear Stearns, Lehman, etc. were not affiliated with commercial banks.

Banks got in trouble because they filled their portfolios with securities built on shaky mortgages.

And here is where Clinton does bear responsibility.

His secretary of housing and urban development was Andrew Cuomo, now governor of New York and apparent presidential wannabe.

Cuomo, as Wayne Barrett wrote in the Village Voice in 2008, made a series of decisions that "helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments. He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded 'kickbacks' to brokers that have fueled the sale of overpriced and unsupportable loans. Three to four million families are now facing foreclosure, and Cuomo is one of the reasons why."

Barrett goes on: "Perhaps the only domestic issue George Bush and Bill Clinton were in complete agreement about was maximizing home ownership, each trying to lay claim to a record percentage of homeowners, and both describing their efforts as a boon to blacks and Hispanics. HUD, Fannie and Freddie were their instruments, and as is now apparent, the more unsavory the means, the greater the growth. ... (Cuomo) did more to set these forces of unregulated expansion in motion than any other secretary and then boasted about it, presenting his initiatives as crusades for racial and social justice."

Naturally, when Clinton's HUD secretary became New York's attorney general, he vowed to prosecute unscrupulous lenders. I'm waiting for him to prosecute himself.

President Clinton happily takes credit for reducing America's budget deficit and presiding over a period of strong economic growth. But this happened not because of wise leadership. Clinton had the good fortune to reside in the White House just as the high-tech information revolution kicked in and a Republican Congress stopped him from spending what Democrats wanted to spend.

Progressives say that his increase of the top tax bracket did not prevent economic growth, but it never occurs to them that growth would have been even stronger had government not confiscated that money.

Sadly, most who watched St. Bill at the DNC will never know the truth.

John Stossel is host of "Stossel" on the Fox Business Network. He's the author of "No They Can't: Why Government Fails, but Individuals Succeed." To find out more about John Stossel, visit his site at <a href="http://www.johnstossel.com" <http://www.johnstossel.com>>johnstossel.com</a>. To read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.

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Comments

3 Comments | Post Comment
"Clinton had the good fortune to reside in the White House just as the high-tech information revolution kicked in and a Republican Congress stopped him from spending what Democrats wanted to spend."
Republicans are quick to make the excuse that Clinton wasn't responsible for the good times, but it was the Rebublican Congress that stopped him. But here's the facts. When Reagan was president and there was a Republican Senate, debt and government mushroomed along with the deficit. GDP growth faltered. Fact, Clinton campaigned for a balanced budget and welfare reform. Unlike every Republican president since I learned to talk, he delivered. GWB years were perhaps not as bad as Democrats would have you think, but they were years of contracting GDP growth rate, ballooning spending, deficits, and debt. Oh, and a whole new welfare program, Medicare drug benefits, which is fiscally unsustainable.
OK, I'll grant that the recent economic problems were not caused solely by Republican deregulation. It was their failure to regulate along with unchecked spending. They had at least six unfeddered years to correct any errors of the Clinton HUD but did nothing but spend like drunken sailors.
"Progressives say that his increase of the top tax bracket did not prevent economic growth, but it never occurs to them that growth would have been even stronger had government not confiscated that money."
This is an easy assertion since it cannot be disproven, but GDP growth during Reagan and Bush years is unremarkable even with tax rate cuts and pumping billions into the economy by deficit spending.
At this point I'm going with the party that has done the least harm.
Comment: #1
Posted by: Mark Pomeroy
Thu Sep 13, 2012 11:50 AM
I keep hearing three main reasons why the financial collapse was Bush's fault and none of them make any sense. Not that Bush deserves no blame but the type of blame he gets is incorrect. He should be blamed for his cooperation in the ongoing push for increased home ownership for those who could not afford the size of loans they were taking on. But that is very different than the reasons people talk about. There are usually three reasons given for why Bush should be blamed.
First, he cut taxes for the rich. Well, he did. He also cut taxes for everyone else. But let's put that aside and accept that when you cut taxes across the board, those who are already paying more will see the greatest benefit because they already pay a greater portion of their earnings in taxes. In other words, the rich did benefit from Bush's tax cuts. Could somebody explain how that led to or encouraged the inflation of the housing bubble? I know no body likes talking about what actually caused the 2008 economic down turn but it was the burst of the housing bubble. How does rich people keeping more money cause the housing bubble to pop? And for those who assume that may be his tax cuts added to the deficit, just keep in mind that federal revenues increased under Bush out pacing the previous revenue trends after he cut taxes. In other words, the tax cuts more than paid for themselves. And even if you want to argue that they did add to the deficit (you'd still be wrong but we'll go with it for the sake of argument) you would have to conclude that the 2008 economic downturn was caused in part by deficit spending. If you believe that, how could new deficit spending possibly be the answer?
Next, he is accused of getting us here by waging war in Iraq. While I am against the war in Iraq, I certainly would not claim that it had any effect on the housing bubble. If it hurt the economy it was by diverting capital away from the private sector and increasing the national debt. How many people who think more stimulus will help our economy would ever complain about the Iraq war for that reason? It certainly makes no sense to link the wars to the housing bubble. If you are against a war it should be on the merits of the war itself. Iraq was a terrible idea and a terrible war but blaming the housing bubble on the Iraq war is more than a stretch.
The last reason people give for why our economy is Bush's fault is the one Stossel is talking about here: that Bush deregulated the banks. This fascinates me because it is taken as indisputably true but no one ever bothers to point out when this happened. He may have made certain adjustments to some banking laws but nothing that could be called a notable deregulation. In fact, over all he greatly increased regulations on banks. Sarbanes Oxley anyone? Where does this narrative come from? People speak about Bush deregulating the banks with as much certainty as they speak about the fact that the sky is blue. It is simply self evident and deserves no discussion or proof. Can someone point to where Bush actually deregulated the banks in some significant way. I give bonus points for anyone who can show how that deregulation led to (or had any effect on) the 2008 economic down turn.
I don't write this as a defense of Bush. He is responsible for imposing new regulations and should be held accountable for that (among other things.) But I write it because the inherent assumption is that because Bush cuts taxes on the wealthy and deregulated banks that means the solution to our current economic state is to increase taxes on the wealthy and to increase regulations on the banks. But those things didn't actually cause this mess. If people blame Bush for our economy they should at least blame him for the right things. But that's not what people on the left want. If people realized that government intervention in the housing market got us into our current economic mess then our conversations about what to do would be very different. Cutting taxes did not get us here and deregulation never happened. But people on the left have created this narrative because they have been wanting to raise taxes and impose further regulations all along. They have simply taken this as an opportunity to confuse Americans to get what they already wanted. The last thing they would ever do is to actually inform people about the real cause of our economic situation: government intervention in the housing market and monopolistic monetary policy by an nontransparent central bank.
Comment: #2
Posted by: Zack
Thu Sep 13, 2012 12:08 PM
I agree with much of what you say. Now days people latch on to ideas without regard to whether they can be supported. Bush was (partly) responsible because he failed to regulate. If you have banks that are insolated from market forces, as Amercian banks are, then regulation is imperitive. Also, you cannot allow hugh financial institutions to sell the riskiest insurance without regard to actuarial reality, then say they are too big to fail. You can't let institutions protected by government to get around regulation by renaming insurance to credit default swaps. You can't let government protected institutions expose themselves to hugh amounts of mortgage backed securities; their management has no incentives to avoid risk. If the CDA and HUD were poorly administered by Clinton, Bush was obligated to correct it as problems arose. Bush's government explosion and huge debt, placed the Fed in a precarious position with few remaining options to stablize the economy during a panic. I'm not a big fan of the Fed, but we have to work with what we've got. On another point, you appear to have made the mistake that many people make. It's not the tax cuts that increased revenue, it's the huge increase in spending that went to government contractors, etc. who have employees and stockholders that pay income tax. When you add in velocity, its a hugh boon to tax receipts. That's just an example, there are many ways the government taxes back it's spending. It's safe to say that net income, receipts minus spending, went down during the Bush administration. I also submit that when you factor in the value removed from Americans through inflation, Bush raised taxes. Republicans love to tax through inflation and claim they are cutting taxes. One reason is that inflation taxes the poor and middle class, while affecting their contributer base much less.
Comment: #3
Posted by: Mark Pomeroy
Fri Sep 14, 2012 7:45 AM
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