Financial Policy Of The Clinton Government

Fiscal policy is an important means of being used to deal with economic problems of a country. Since the beginning of Roosevelt’s New Deal, either the "Compensatory Fiscal Policy" in 1950s or the "Growth Fiscal Policy" in 1960s, were both the fiscal policy oriented by Keynes Doctrine, which made the America get out of the Great Depression successfully and become a economic overlord in the world after the World War Ⅱ. However, this kind of fiscal policy also in 1970s made American’s economy fall into a situation of stagflation. When coming to power, President Reagan abandoned the Keynes Doctrine and turned to the New Conservatism Economics such as Monetarism, Supply School, which brought an economic growth, but meanwhile also produced a many serious problems like "the High Five" in American. When Clinton took office, facing him was the grim situations of the challenge of globalization and the domestic economic recession. On the base of absorbing the experience of his predecessors, he adopted the New Structural Fiscal Policy.On what is the source of the Clinton government’s financial policy, it is the New Keynesianism that made up the theoretical foundation of Clinton’s fiscal policy. The New Keynesianism not only pay much emphasis on the policy of requirement and management, which included in the old Keynesianism, but also stress that we should increase investment on infrastructure and talent capital from supply aspect, at the same time, regulate the economy in width and depth, so that the economy would be able to have a long period of progress. While talk about the content of the policy of Clinton government, it generally was embodied in these three aspects of increasing income, cutting expenses and investment. Clinton government increase income by raising personal income tax, corporate income tax and other tax, for example, raising the personal income tax rate of the people who make money more than 180 thousand dollar one year to 36 percent, and raising the corporate income tax rate of the company who make money more than 10 million dollar one year to 36 percent, too. When come to the issue of cutting expenses, Clinton government simplified the departments of government and cut down the staff, decrease the spending of military, at last, change the system of social welfare, for example, Clinton government had cut 380,000 people who work in federal government from 1993 to 1999, and cut the cost of military to 237.4 billion dollar in 1997 from 286.2 billion dollar in 1993.They also cut the supply of the people who is poor or didn’t achieve the Green Card. On the issue of investment whose purpose is to promote the progress of economy, Clinton government spend a lot on the fields of high-tech and educations, for example, to take the National information infrastructure plan and the Advanced Technology Plan, raise the funds on initial education and elementary education, provide the student loans and stipend for those who is poor. When we take a whole look on the financial policy of Clinton government, there reflected the characteristics of being tight, structured and comprehensive in it. The tight characteristic can be seen from the content cut spending sharply, the structured characteristic exist in there are not only cutting but increasing in the policy, and the two above and the theoretical foundation make up the comprehensive characteristic.Clinton fiscal policy has gotten a great many achievements. During his 8 years of being in power, the American economy showed a booming scene of so-called "one high two lows ", which was the high economic growth rate, low unemployment rate and low inflation rate. Clinton fiscal policy not only maintained an economic growth period of 120 months long, which was the longest period of growth in the history of America, but also balanced successfully the budget, solving the deficit problems that failed to be solved by all the previous administrations since the World War Ⅱ. Nonetheless it was in nature a policy of "ants gnawing bone" kind, with the shortcomings of resulting the excessive national consumption and the high-rising trade deficit in its implementation process.Clinton’s fiscal policy had the two aspects of great achievements and shortcomings prospectively. What its essence was? This paper will start by examine the budget struggles between the president and the congress during the "the budget crisis" and then study the means, objectives, achievements and shortcomings of Clinton’s fiscal policy, and try to find out the different understandings of the two parties to the fiscal policy, and then go further to discover the essence of Clinton’s fiscal policy and discusses briefly its impacts to the world, by using the research methods of history and economics.