The debate among the Democratic presidential candidates has become stuck in the past. When they are not debating the alleged shortcomings of the 15-year-old North American Free Trade Agreement, they have been sparring over the economic record of the 1990s.
Not surprisingly, front-runner Hillary Clinton touts the economic success of the previous decade, when her husband Bill Clinton was president and she was exercising influence down the hall in the West Wing.
“Sometimes an opponent of mine [read Barack Obama] says we talk about the 1990s too much,” Clinton said recently on the campaign trail, according to this morning’s Financial Times. “That is because in the 1990s we had the greatest economic performance in decades. I like to talk about what works because I want to get back to doing what works.”
Yet candidate Clinton and her fellow Democratic candidates also routinely trash NAFTA, which the former President Clinton shepherded through a Democratic Congress in 1993. They blame the trade agreement with Canada and Mexico for costing the U.S. economy million of manufacturing jobs.
So what was the real record of the 1990s? Was it a time of unprecedented growth and prosperity presided over by a generally pro-trade, Democratic president? Or was it a time of stagnation and job losses caused by a trade agreement that now, according to Hillary Clinton, must be reopened and revised?
The right answer is that the 1990s were a good time for the U.S. economy, and expanding trade and globalization—including NAFTA— were among of the reasons.
As I noted in a recent study for Cato, titled “Trading Up,” the economic record of the U.S. economy during the past decade, including the late 1990s, offers yet another reason to support further trade liberalization:
Rising real wages and compensation during the past decade pose a serious challenge to the “trade is making us worse off” thesis. If we are to believe that expanding trade and competition with low-wage countries have eliminated high-laying manufacturing jobs and depressed the earnings of U.S. workers, how do the critics of trade explain the remarkable labor-market gains of the past decade? Since 1997, during a period of rapidly increased trade and globalization, the number of workers employed in the U.S. economy jumped by more than 16 million, while the unemployment rate is now slightly below what it was a decade ago at a similar stage in the business cycle. And those employed workers, as we’ve seen, are earning significantly higher real hourly compensation than workers a decade ago when the U.S. economy was less globalized. That record is not an indictment of more liberal trade but a vindication.
What works is a more open, efficient and competitive U.S. market.