President Bill Clinton & the American Economy

Instructor: Mary Ruth Sanders Bracy

Mary Ruth teaches college history and has a PhD.

This lesson will look at the American economy under President Bill Clinton. During his presidency, the economy grew and the country flourished. Economic growth increased, the federal deficit was reduced, and the American economy was strengthened overseas.

Unprecedented Economic Growth

''It's the economy, stupid.'' Bill Clinton's 1992 presidential campaign slogan got right to the point: he was running to fix a broken American economy. And, by many measures, he succeeded. The 1990s saw a lot of economic growth, reduction in the federal deficit, and strengthening of the American economy overseas.

Let's look at each of these areas in more detail.

Economic Growth

Economic growth is one of the most important measurements of the health of an economy. It is measured by looking at change in Gross Domestic Product (or GDP), which is the value of everything produced in an economy during a particular period.

When President Bill Clinton took office in 1993, economic growth in the United States was stagnant. Under Clinton's economic policies, growth increased to roughly 4.0 percent per year, which is above average. Economic growth leads to other measure of a strong economy, because it increases confidence and encourages consumers to participate in the economy. There are a few ways this happened in the 1990s:

  • New jobs were created--over 22 million of them during Clinton's term.
  • Median income increased
  • Unemployment shrunk from roughly 7% to 4%
  • The rate of inflation went down
  • Increased rate of homeownership
  • Decreased poverty rate

Economic growth is the best indicator of how healthy an economy is, and under Clinton's presidency, all of the major measurements of economic growth were positive.

U.S. GDP Growth, 1950-2000
GDP Growth

Reducing the National Deficit

The national deficit is the difference between what the federal government takes in and what it pays out. If the federal government spends more than it makes, there is a deficit; if it makes more than it spends, there is a surplus. During the early years of the Clinton administration, the government went from having a $290 billion deficit (in 1992) to a $237 billion surplus by 2000. During Clinton's presidency, the federal government also paid off billions of dollars worth of debt and reduced its spending. This meant that the federal government was spending less and keeping more of what it earned in taxes.

Additionally, President Clinton emphasized the fiscal responsibility of the federal government. This meant both cutting wasteful spending and smartly investing the government's resources. Clinton's administration pursued this in a few different ways:

  • Expanded the Earned Income Tax Credit, which provided economic incentives for low-income Americans by offering a refundable tax credit
  • Created programs to help expand educational opportunities, especially the Direct Student Loan Program, and tax credits for college student and their parents
  • Vetoed tax cut bills that would have hurt economic growth
  • Passed The Welfare Reform Act to reduce entitlement spending

By doing all of these things, Clinton promoted fiscal responsibility in the federal government and limited spending on smart investments. The result was decreased federal spending and a budget surplus for the first time in many years.

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