Government Surplus Wasn’t the Problem; It’s the How That Matters

In his daily flurry of tweets, WPRI reporter Ted Nesi linked to an interesting article by Joe Weisenthal in Business Insider. Weisenthal’s conclusion is that the government surpluses of President Bill Clinton’s second term were, themselves, the cause of the late ’00s’ economic bust:

The bottom line is that the signature achievement of the Clinton years (the surplus) turns out to have been a deep negative. For this drag on GDP was being counterbalanced by low household savings, high household debt, and the real revving up of the Fannie and Freddie debt boom that had a major hand in fueling the boom that ultimately led to the downfall of the economy. …
So while Clinton will be remembered nostalgically tonight, for both the performance of the economy and his government finances, they shouldn’t be remembered fondly.

As if for authority, Weisenthal prints a PNG image of an economic formula (in a special formula font, even), but then he and his economist sources proceed to assert causation where there was only a temporary correlation in the parts of the equation during the Clinton era.
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Dan
Dan
9 years ago

“The economist’s lag is the politician’s nightmare.”

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