The last shutdown of the federal government, in 1995-96, happened in a very different economic environment than today. In November 1995, when the standoff between President Bill Clinton and the Republican-controlled Congress resulted in major portions of the government suspending operations, unemployment stood at 5.6 percent. Gross domestic product grew at a rate of more than 4 percent. Productivity was strong, and for the first time since the 1970s compensation for all income quintiles was poised to make real gains in the coming years. On Wall Street, the longest bull market in modern history was in high gear. The United States was in the middle of the longest, strongest economic boom of the post-World War II era.
The nation was different then. It was at peace. We hadn’t borrowed heavily to finance two wars. The. modest Clinton tax increase had prepared the way to leave a federal surplus in 2000. Federal debt as a percentage of GDP was around 64 percent, as opposed to 102 percent in January of this year. That shutdown was felt in National Park closings, not the specter of default. We were recovering smartly from the 1991 recession, which had been brought on by the savings-and-loan scandal and the oil-price spike from Iraq’s invasion of Kuwait. The Conference Board’s Consumer Confidence Index was nearly 102 vs. 79.7 this month. The notion that Americans would come to believe that their children would not enjoy as good a standard of living as they did would have seemed laughable.
The structure and dynamics of the economy were very different, too.
Although the North American Free Trade Agreement was new, hopes were high that it would not only be a boon to almost all segments of the economy and most workers — Ross Perot’s “giant sucking sound” prediction had been dismantled in a debate with Vice President Al Gore, or so it seemed. The United States was the world’s largest trading nation and the World Trade Organization hadn’t been born. After falling through the 1980s, employment in high-wage manufacturing jobs had stabilized above 15 percent of the workforce (10.5 percent today). The massive re-engineering of the Rust Belt in the 1980s had produced a new, highly competitive heartland.
Not only that, the economy was on the crest of the tectonic change from the personal computer and, soon, the Internet. Microsoft was young, dominant and one of the hottest stocks on Wall Street. It was leading a historic shift, minting millionaires out of secretaries and creating jobs. The economy was alive with creative destruction that worked both ways. Jobs were lost, but jobs were created. I knew many people who lost a job and had multiple offers of better-paying jobs within 24 hours — and not just in technology sectors.
As D.C. hurtles toward another shutdown, the landscape is very different. For one thing, big money has created the most polarized Congress in a century. To the extent that the economy is recovering from the Great Recession, it is very slow. Unemployment remains high with three job-seekers chasing every open position. Jobs were lost at the deepest rate since the Great Depression and are nowhere near a path to recovery; most jobs created are low-wage and many are part-time. The median household makes less today than in 1989. Government austerity and the sequester have already slowed growth.
When the radical House of Representatives forced a shutdown in 1995, it was ultimately Speaker Newt Gingrich who walked into the propeller. The American economy went on to new highs. Now, especially with the risk of default, it is the entire nation that it being pushed into disaster.