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CHAPTER 15: BRIDGE TO THE 21ST CENTURYOUTLINE OF U.S. HISTORYing the presidential campaign, hesubmitted to Congress a budgetcalling for a general tax increase.It originally included a wide taxon energy consumption designedto promote conservation, but thatwas quickly replaced by a nominalincrease in the federal gasolinetax. It also taxed social securitybenefits for recipients of moderateincome and above. The big emphasis,however, was on increasing theincome tax for high earners. Thesubsequent debate amounted to arerun of the arguments betweentax cutters and advocates of “fiscalresponsibility” that had marked theReagan years. In the end, Clintongot his way, but very narrowly. Thetax bill passed the House of Representativesby only one vote.By then, the congressional electioncampaigns of 1994 were underway. Although the administrationalready had made numerous foreignpolicy decisions, issues at home wereclearly most important to the voters.The Republicans depicted Clintonand the Democrats as unreformedtax and spenders. Clinton himselfwas already beleaguered with chargesof past financial impropriety inan Arkansas real estate project andnew claims of sexual impropriety. InNovember, the voters gave the Republicanscontrol of both houses ofCongress for the first time since theelection of 1952. Many observers believedthat Bill Clinton would likelybe a one-term president. Apparentlymaking a decision to conform tonew political realities, Clinton insteadmoderated his political course.Policy initiatives for the remainderof his presidency were few. Contraryto Republican predictions of doom,the tax increases of 1993 did not getin the way of a steadily improvingeconomy.The new Republican leadershipin the House of Representatives, bycontrast, pressed hard to achieveits policy objectives, a sharp contrastwith the administration’s newmoderate tone. When right-wingextremists bombed an OklahomaCity federal building in April 1995,Clinton responded with a tone ofmoderation and healing that heightenedhis stature and implicitly leftsome doubts about his conservativeopponents. At the end of the year,he vetoed a Republican budget bill,shutting down the government forweeks. Most of the public seemed toblame the Republicans.The president also co-opted partof the Republican program. In hisState of the Union address of January1996, he ostentatiously declared,“The era of big government is over.”That summer, on the eve of thepresidential campaign, he signed amajor welfare reform bill that wasessentially a Republican product.Designed to end permanent supportfor most welfare recipients andmove them to work, it was opposedby many in his own party. By andlarge, it would prove successful inoperation over the next decade.THE AMERICAN ECONOMYIN THE 1990SBy the mid-1990s, the countryhad not simply recovered from thebrief, but sharp, recession of theBush presidency. It was entering anera of booming prosperity, and doingso despite the decline of its traditionalindustrial base. Probably themajor force behind this new growthwas the blossoming of the personalcomputer (PC).Less than 20 years after its introduction,the PC had become afamiliar item, not simply in businessoffices of all types, but in homesthroughout America. Vastly morepowerful than anyone could haveimagined two decades earlier, ableto store enormous amounts of data,available at the cost of a good refrigerator,it became a common appliancein American homes.Employing prepackaged software,people used it for bookkeeping,word processing, or as a depositoryfor music, photos, and video.The rise of the Internet, which grewout of a previously closed defensedata network, provided access toinformation of all sorts, created newshopping opportunities, and establishede-mail as a common modeof communication. The popularityof the mobile phone created a hugenew industry that cross-fertilizedwith the PC.Instant communication andlightning-fast data manipulationspeeded up the tempo of many businesses,greatly enhancing productivityand creating new opportunitiesfor profit. Fledgling industries thatfed demand for the new equipmentbecame multi-billion-dollar companiesalmost overnight, creatingan enormous new middle class ofsoftware technicians, managers, andpublicists.A final impetus was the turn ofthe millennium. A huge push to upgradeoutdated computing equipmentthat might not recognize theyear 2000 brought data technologyspending to a peak.These developments began totake shape during Clinton’s firstterm. By the end of his second onethey were fueling a surging economy.When he had been electedpresident, unemployment was at 7.4percent. When he stood for re-electionin 1996, it was at 5.4 percent.When voters went to the polls tochoose his successor in November2000, it was 3.9 percent. In manyplaces, the issue was less one of takingcare of the jobless than of findingemployable workers.No less a figure than FederalReserve Chairman Alan Greenspanviewed a rapidly escalating stockmarket with concern and warnedof “irrational exuberance.” Investorexuberance, at its greatest since the1920s, continued in the convictionthat ordinary standards of valuationhad been rendered obsoleteby a “new economy” with unlimitedpotential. The good times wererolling dangerously fast, but most326327