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Why Bill Clinton's Favorable View of Obama's Tax Deal Should Be Disregarded

Robert Reich @ The Huffington Post - Bill Clinton seems the perfect validator for Barack Obama -- which is why the president is utilizing the former president for selling his tax deal. After all, the economy boomed when Clinton was president and 22 million net new jobs were created. From a more narrow political perspective -- and this is important to Democrats in Washington -- Bill Clinton was reelected, even though he lost both houses of Congress in the 1994 midterms.

But the analogy falls apart as soon as you realize Clinton's economy was vastly different from Obama's. The recession Clinton inherited was relatively small, and caused by the Fed raising interest rates too high to ward off inflation. So it could be reversed by the Fed lowering interest rates -- as the Fed did in 1994. By 1995, the so-called "jobless recovery" had morphed into a full-blown jobs recovery. By 1996, at pollster Dick Morris's urging, Clinton could proclaim to the American people "you've never had it so good, and you ain't seen nothing yet."

The Great Recession has been far larger, caused not by the Fed raising interest rates but by the bursting of a giant housing bubble. In 2008, the biggest asset of most middle-class people, upon which they borrowed and that they assumed would be their nest eggs for retirement, collapsed. Housing prices continue to fall in most parts of the country. The Fed has lowered interest rates all it can, and unemployment remains sky high.

Bill Clinton presided over an economic boom engineered by Fed chair Alan Greenspan, who felt confident he could drop interest rates far lower than anyone expected without risking inflation. The result was 4 percent unemployment in many parts of America, as well as the best jobs recovery in history.

Those days are over. The Democratic Party can no longer ignore critical investments in the productivity of average workers. Nor can it ignore the increasing concentration of income and wealth at the very top, and the inability of America's middle and working class to get the economy moving again. Read more.

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