Clintonomics Revealed

This file is a single polemical economic essay by Murray N. Rothbard. Its scope is tightly focused on the early Clinton administration’s budget program, especially the February 17 budget message and the prospect of health-care reform. Rothbard presents the essay as an exposure of “Clintonomics”: not merely a mistaken policy package, but a rhetorically disguised expansion of state power under the language of moderation, sacrifice, investment, and deficit reduction.

Rothbard first situates Clinton against the recent history of presidential “nomics.” Reaganomics, in his telling, was internally divided among classical liberals, monetarists, supply-siders, and conservative Keynesians; Bushonomics narrowed that mixture into conservative Keynesianism. Clinton’s program is worse because Rothbard denies it even the status of a coherent doctrine.

Such an accolade cannot be accorded to Clintonomics, which does not deserve the quasi-honorable label of "economics" at all.

The essay’s central thesis is that Clinton’s fiscal plan rests on contradiction: it invokes deficit panic to justify tax increases, while simultaneously proposing large spending increases to stimulate the economy and fund public “investment.” Rothbard’s core conceptual move is to reject the implied separation between taxation, spending, deficits, production, and investment. Against this compartmentalized view, he insists on economic interconnectedness: taxes affect saving and production; spending affects deficits and the private sector; government “investment” is not the same as private capital formation.

The proposal is schizoid because it implicitly assumes that the economy, or the political economy, is separated into two hermetically sealed compartments, with neither influencing the other.

From this premise, Rothbard develops a libertarian and Austrian critique of both the short-run and long-run claims made for the Clinton program. Tax increases, especially on corporations, higher incomes, and energy, are said to reduce saving, raise business costs, weaken competitiveness, lower profits, and increase unemployment. He rejects the common view that firms can simply pass higher costs to consumers, emphasizing instead that cost increases damage production and investment as well as prices.

The deficit argument receives the same treatment. Rothbard contends that modern tax increases have not reduced deficits, because higher revenue enables or accompanies higher spending. The only serious remedy, in his view, is expenditure reduction rather than fiscal “sacrifice” imposed through taxation.

The only practical way to lower the deficit is to cut government spending.

The essay’s most important theoretical distinction is between private investment and government spending. Clinton’s language of “investment” is, for Rothbard, a political euphemism that conceals the transfer of resources from productive private uses to bureaucratic and political allocation. This is where the essay becomes not just a budget critique but a critique of political language itself.

The Clinton regime tries to get around this problem by semantic trickery: by renaming government spending as “investment,” just as it dares to relabel taxation as “contributions.”

Rothbard also invokes Austrian business-cycle theory to explain the recession of 1990, attributing it to bank-credit expansion in the 1980s rather than to moralized explanations such as “greed.” On that basis, he rejects Keynesian stimulus: recession should be met by liquidation of unsound investments and by reduced government taxation and spending, not by bailouts or public demand management. The same policy prescription—more genuine saving and investment—addresses both recession and long-term stagnation.

The essay’s final movement shifts from economic analysis to ideological diagnosis. Rothbard calls Clintonomics “Orwellian” because it relies on verbal inversions: spending becomes investment, taxes become contributions, and sacrifice becomes public virtue. The rhetorical target is not only Clinton but the political capacity to rename coercion as social responsibility.

Thus, Clintonomics is really Orwellian economics.

The concluding claim is that the contradictions are not accidental. Rothbard argues that beneath the incoherence lies a consistent political tendency: the expansion of government at the expense of the private market. His relevance lies in this fusion of fiscal critique and semantic critique. The essay is less about line-item budgeting than about how democratic-socialist policy can be sold through the vocabulary of moderation, deficit control, and national renewal.

In short, Clintonomics is, in essence, a Great Leap Forward, American style, not toward Maoist communism but toward Democratic Socialism, toward Marxism without the Leninism.