AMSCO 9.4 A Changing Economy

Overview

AMSCO Topic 9.4, "A Changing Economy," covers the Clinton presidency and the economic transformation of the 1990s: the election of 1992, Clinton's budget battles with the Republican Congress, the tech and dot-com boom, globalization through NAFTA and the WTO, and growing income and wealth inequality. This chapter sits in Period 9 (1980-present) and answers a core APUSH question: what caused the longest peacetime economic expansion in US history, and who actually benefited from it?

The short version: technology and global trade made the economy bigger and more productive, but real wages stagnated for working and middle-class Americans while wealth concentrated at the top.

The Election of 1992 and the Clinton Presidency

Bill Clinton, the young governor of Arkansas, defeated President George H. W. Bush in 1992 by running as a moderate "New Democrat" focused on jobs, education, and health care. His campaign's famous internal slogan said it all: "the economy, stupid!"

Why Bush lost:

• After the Cold War ended (covered in AMSCO 9.3), voters cared more about the economy than foreign policy
• Bush seemed out of touch with average Americans (he was famously surprised by supermarket barcode scanners)
• Texas billionaire Ross Perot ran a serious third-party campaign that split the vote

The results: Clinton won 370 electoral votes with 43 percent of the popular vote, to Bush's 168 electoral votes and 37 percent. Clinton was the first baby boomer nominated for president, and he won back the South, the elderly, and blue-collar workers for the Democrats.

Early Legislative Wins

Senate Republicans used filibusters to block Clinton's bigger plans (economic stimulus, campaign finance reform, health care reform), but several "incremental" reforms passed:

• The Family and Medical Leave Act required businesses to allow unpaid leave for medical reasons
• The "motor voter" law let citizens register to vote when getting a driver's license
• The Brady Bill mandated a five-day waiting period for handgun purchases
• The 1994 Anti-Crime Bill provided $30 billion for police and crime prevention and banned the sale of most assault rifles, angering the National Rifle Association (NRA)
• A deficit-reduction budget combined $255 billion in spending cuts with $241 billion in tax increases

The Republican Revolution of 1994

In the 1994 midterms, Republicans won control of both houses of Congress for the first time since 1954. Newt Gingrich of Georgia became Speaker of the House after Republicans campaigned on a focused list of policy priorities called the "Contract with America." Voters were also unhappy that the Democratic Congress had raised taxes and limited gun ownership.

Clinton adjusted fast. In his 1995 State of the Union, he declared, "The era of big government is over." This is the move to remember for the exam: Clinton co-opted popular Republican positions like balancing the budget and reforming welfare while painting Republicans as extremists.

Balanced Budgets and Reelection

In 1996, Clinton and Congress compromised on a budget that:

• Left Medicare and Social Security benefits intact
• Limited welfare benefits to five years under the Personal Responsibility and Work Opportunity Act
• Set some curbs on immigration
• Increased the minimum wage
• Balanced the budget

The spending cuts, tax increases, and a booming economy eliminated the federal deficit by 1998, producing the first federal surplus since 1969. Across his two terms, Clinton's four deficits and four surpluses added up to a total $63 billion surplus, unlike any other modern president.

Helped by an economy that created more than 10 million new jobs in his first term, Clinton became the first Democrat reelected president since Franklin Roosevelt. Republicans kept both houses of Congress, something they hadn't done since the 1920s.

After 1996, the debate shifted to what to do with projected surpluses ($4.6 trillion over ten years). A 1997 compromise cut estate and capital gains taxes and added tax credits for children and higher education. Republicans pushed for more cuts (eliminating the "death tax" and "marriage penalty"); Clinton wanted the surplus to support Social Security, expand Medicare, and pay down the national debt.

One more fact to know: in 1999, the Republican House impeached Clinton for lying under oath about sexual relations and related abuses of power, but the Senate did not convict him.

Technology and the Boom of the 1990s

The US enjoyed the longest peacetime economic expansion in its history during Clinton's two terms, with annual growth above 4 percent. Most of the boom came from productivity gains driven by technology.

The Tech Revolution

The Internet, personal computers, software, and wireless mobile communications fueled a productivity gain of more than 5 percent in 1999 and made e-commerce part of everyday American life. Other innovations included GPS, digital photography, solar panels, and wind turbines.

Established high-tech companies (Apple, Intel, Microsoft) were joined during the "dot-com" boom by Amazon, AOL, Yahoo, and Google. Medicine transformed too: DNA testing and sequencing, human genome mapping, MRI, robotic and laser surgery, and drugs tailored to individual genetics.

Thomas Friedman captured the global side of this in The World Is Flat: rapid advances in technology and communications linked people everywhere, created new wealth in the developing world, and "flattened" competition globally. Cellular communication grew from zero to over four billion mobile users.

Boom Numbers Worth Knowing

• Inflation stayed below 3 percent a year as US businesses got better at cutting costs
• The stock market posted record gains of more than 22 percent
• Millionaire households quadrupled in the 1990s to over 8 million (one in 14 households)
• Unemployment fell from 7.5 percent in 1992 to a 30-year low of 3.9 percent in 2000, with the lowest recorded unemployment for African Americans and Hispanics to that point
• From 1997 to 1999, middle- and lower-income Americans saw their first real income gains since 1973

The boom ended by 2001, when investors and wage earners faced another recession.

Globalization

Globalization means the surging increase in trade, communications, and movement of capital around the world. It produced new global and regional economic institutions:

• NAFTA created a free-trade zone with Canada and Mexico. Clinton signed it over objections from union leaders who feared job losses to low-wage Mexico
• The World Trade Organization (WTO), established in 1994, oversees trade agreements, enforces trade rules, and settles disputes
• The International Monetary Fund (IMF) and World Bank made loans to poorer nations with debt troubles and supervised their economic policies
• The Group of Eight (G8) (Canada, France, Germany, Italy, Japan, Russia, the UK, and the US) controlled two-thirds of the world's wealth in 2000, though China, India, and Brazil would soon surpass many older industrial powers

Globalization created tension. Poor nations resented debts owed to powerful banks and rich countries, and workers and unions in wealthy nations resented losing jobs to cheaper labor markets abroad. This connects directly to the bigger Period 9 pattern: service-sector jobs grew, manufacturing jobs shrank, and union membership declined.

Digital Security and Privacy

The Internet age raised new privacy concerns. Companies like Facebook and Google grew wealthy by extracting and analyzing personal data from hundreds of millions of users for targeted ads and resale to third parties. The government, afraid of discouraging innovation, regulated the industry lightly. Congressional hearings exposed companies' failures to monitor data use or protect against cyber attacks. Critics called this "surveillance capitalism" and saw it as a threat to privacy, security, and self-government.

Income and Wealth Inequality

The economy generated enormous wealth, but it wasn't shared evenly. This is the chapter's most exam-relevant theme: real wages stagnated for working and middle-class Americans while inequality grew.

The good news first. Homeownership climbed to 67.4 percent of households, and per capita income (in inflation-adjusted dollars) rose from $12,275 in 1970 to $22,199 in 2000.

Now the inequality data:

• In 1999, the top fifth of households received more than half of all income
• Average after-tax income for the lowest three-fifths of households actually declined between 1977 and 1997
• Median family income in 2000: $53,256 for White families, $35,054 for Hispanic families, $34,192 for Black families
• High school graduates earned only half the income of college graduates

Concentration of Wealth

Wealth (property and investments minus debts) was even more concentrated than income. By 2007:

• The wealthiest 1 percent held 35 percent of the nation's wealth
• The next 19 percent held 50 percent
• The bottom 80 percent owned only about 15 percent

By the late 2010s, the top 1 percent held 43 percent of the nation's financial wealth. Meanwhile, 62 percent of single-parent households had no savings or financial assets. The US was the richest country in the world, but it had the largest gap between lowest and highest paid workers among industrialized nations.

Economist Joseph Stiglitz argued that the decline of strong unions since the 1970s drove rising inequality. The concentration of wealth reminded some observers of the Gilded Age, and scholars worried that extreme inequality was incompatible with democracy and could push the country toward oligarchy. Increased immigration in the 1990s and 2000s (covered in AMSCO 9.5) was one debated cause of wage stagnation.

Key Terms to Know

Practice and Next Steps

For the College Board's framing of this topic, read the 9.4 A Changing Economy course-topic study guide, which pairs well with these chapter notes. Continue through the unit with AMSCO 9.5 on migration and immigration and AMSCO 9.6 on 21st-century challenges, and browse all chapters on the APUSH AMSCO notes page.

To check your understanding, try guided multiple-choice practice on Period 9 content, or write a practice essay with FRQ practice and instant scoring. When you're closer to exam day, a full-length APUSH practice exam will show you how Period 9 questions fit into the whole test.