As President Bush's State of the Union address fades from memory, attention now turns to Hillary Clinton's White House campaign. If, as Hillary's husband famously said in 1992, the issue really is the economy, stupid, then we can expect the 2008 election to be a referendum on whether the nation should return to Clintonomics.
The Republican nominee, for better or worse, will be stuck defending Bush's record. That will be no easy task, at least before an audience of voters who want more freedom and less government. To paraphrase Clinton treasury secretary Lloyd Bentsen, George Bush is no Ronald Reagan. And as Hillary will no doubt say in her campaign, Bush isn't even Bill Clinton.
Last week, President Bush told us we needed to "impose spending discipline in Washington."
Yet on Bush's watch, and with his signature, the burden of federal spending rose to 20.3 percent of GDP in 2006, up from just 18.5 percent when he took office.
During the Clinton years, by contrast, federal spending fell as a share of GDP, from 21.4 percent in 1993 to 18.5 percent in 2001.
White House apologists argue that these spending numbers are skewed, since Clinton benefited from the "peace dividend" and Bush had to rebuild the defense budget to fight terrorism. They also explain that Bush reduced tax rates, offsetting the economic damage caused by excessive government spending, whereas Clinton presided over a big tax increase.
These certainly are mitigating factors, but even when defense spending is excluded, Clinton reduced the burden of government, while Bush has expanded it. And while Bush's tax policy has been an improvement, his overall economic policy does not reflect well on him.
According to the Congressional Budget Office, entitlement spending has increased from 10.9 percent of GDP when Bush took office to 11.9 percent of GDP in 2006. During the Clinton years, spending on so-called mandatory programs fell from 11.2 percent of GDP to 10.9 percent of GDP.
The domestic discretionary spending numbers tell a similar story: during the Clinton years, these programs dropped from 3.4 percent of GDP to 3.2 percent. Since Bush took office, they have risen to 3.5 percent.
Bush's record on taxes is better. His 2001 tax package was dominated by Keynesian provisions -- rebates, child tax credits, etc. -- that did not improve incentives to work, save, and invest, but his 2003 legislation reduced marginal tax rates on both labor income and capital income. These "supply-side" policies have boosted economic performance.
Clinton presided over an increase in marginal tax rates in 1993, and while he subsequently approved a 1997 bill that included a reduction in the capital gains tax rate, on balance, the internal revenue code became more punitive as a result of his actions.
If Clinton and Bush were graded solely on the basis of fiscal policy, one could argue that their tax and spending records offset each other. But there are other important issues, and Clinton clearly wins the tiebreaker.
Take trade, for example. At best, Bush has a mixed record. The Central American Free Trade Agreement is a step in the right direction, but his steel tariffs and agricultural subsidies are examples of anti-trade initiatives. Clinton policy was unambiguously pro-trade, however, largely because of the approval and implementation of the North American Free Trade Agreement and the General Agreement on Tariffs and Trade that also launched the World Trade Organization.
Clinton gets a better grade on regulatory policy, as well. Bush signed into law the prohibitively expensive Sarbanes-Oxley law, as well as a market-distorting energy bill. The Clinton years, by contrast, saw the burden of regulation reduced on numerous sectors of the economy, including agriculture, financial services, and telecommunications.
Clinton also beats Bush on federalism. He signed a welfare reform legislation that ended an entitlement program and reduced the central government's power and authority. On education, Bush went the other direction. His No Child Left Behind Act increased federal control over an area that properly belongs under the purview of state and local governments.
A net impact of other policy choices – especially if appointments to the courts and regulatory agencies are added to the equation – would reduce Clinton's score. Yet a more comprehensive analysis would also include the long-term negative impact of Bush's new prescription drug entitlement, which single-handedly saddled taxpayers with trillions of dollars of unfunded liabilities.
Of course, this analysis only addresses what happened during each President's tenure, not whether he himself deserves credit for it. Clinton, for instance, hardly relished some of the policies he signed into law, including welfare reform and the lower tax rate on capital gains.
Nor does this analysis give Presidents credit or blame for policies they proposed but failed to get enacted. Bush's score would doubtlessly jump if Congress had approved personal retirement accounts, and Clinton's would drop precipitously if Congress had approved his government-run health care scheme.
But results matter, not intentions. Bush has allowed federal spending to climb by nearly $800 billion in six years, and he hasn't once used his veto power to control the size of government. Hillary will still have to tack right to capture conservative centrists on the economy, but if she can convince voters that she'll govern like her husband, she's got a good case.