The Big Lie: Clinton's Tax Increases Did Not Create The 90s Boom & 22 Million Jobs

M2RB:  The Black-Eyed Peas

And I lie and I lie and I lie and I lie
And now our emotions are drained
Cos I lie and I lie and a little lie lie
And now your emotions are drained

And I lie and I lie and I lie till there's no turning back
I don't know why, (and I lie and I lie till I don't know who I am)

"If tax cuts are supposed to lead to growth, then how come 8 years of Bush tax cuts didn’t create more growth than 8 years of Clinton with tax increases?"

    Dave Rywall on September 4, 2012 at 10:26 AM

The growth came from a tech boom and the CGR cut, as was admitted by the CBO and the Washington Post.  As the Post opined: 

"Clinton, in essence, was lucky to become president just as a revolution in computer and information technologies was unleashed."

Clinton signed the tax increases into law on 10 August 1993.  Let's look at the numbers as to how things were following the downturn of two decades ago.

*  The economy was out of recession in March of 1991.  This is em, er...before Clinton announced in October of that year that he was running for president, and almost two and a half years before President Clinton signed his tax law.

*  In the twelve months leading up to the tax signing (August 1992-July 1993), the economy gained 2,023,000 jobs, which is 168,000 jobs per month. 

*  In the six months (February-July 1993) leading up to the tax signing, the monthly average job gain was already 208,000, which shows that the economy was growing stronger by the month, well before the bill was signed.

*  The unemployment rate peaked July 1992 -- more than six months before Clinton stepped into the Oval Office, and more than twelve months before Congress voted on the tax bill.  In fact, the rate lost almost a full percentage point in the twelve months leading up to the tax signing.

*  The Dow Jones Industrial Average reached a low (of less than 2,400) in October 1990, and then things turned around, which is em...say...three years before your Clinton taxes "gave us" a good economy!

*  From its recession low of minus 2,400, the Dow grew almost 50% to approximately 3,600 before we got to August 1993.  This amounts to a 16% annual gain if any Dem had his/her money in an Index fund piggybacked to the Dow.

*  From 1992 to 1997, CBO estimated, revenue increased at an annual average of 7.7 percent in nominal terms, or about 2.4% points faster than the growth of the gross domestic product, the broadest measure of the economy.  In 1998, CBO Deputy Director James L Blum testified that the CBO could only attribute 1 percentage point of that extra tax revenue to the 1993 budget deal. The rest, he said, came from capital gains.

*  According to the original Treasury Department estimates, the Clinton tax hike was to raise federal revenues by 0.36% of GDP in its first year and by 0.83% of GDP in its fourth year, when all provisions were in effect and timing differences associated with near-term taxpayer behaviours had normalised. Tax receipts were relatively static in 1993 and 1994, so I wouldn't read that as a positive created by the 1993 tax rises. 1, 2.

 

In the four years following the Clinton tax hike (from 1993 through 1996):

*  The economy grew at an average annual rate of 3.2% in inflation-adjusted terms, 3.

* Average real hourly wages rose a total of five cents per hour, according to the Bureau of Labour Statistics' data on average hourly earnings for non-supervisory employees;  and

*  Total market capitalisation of the S&P 500 rose 78% in inflation-adjusted terms, 4.

* Economic growth was solid, but hardly spectacular in the years immediately following the 1993 tax increase. This is not really that surprising. The rule is “the deeper the recession, the stronger the growth in the post-recessionary period.“ Compared with the economic performance after the 1981-1982 recession, it was very mild, indeed. Job growth was strong, as expected. 

*  The stock market performed well, but real wage growth was nearly non-existent. 

*  The economy started to slow at the end of 1994 and early 1995 and by the end of the year, GDP had nearly returned to its 1993 level.

*  In 1995, the annual report of the United States Trade Representative was already claiming that "[T]he United States market has hard limits on its growth; we have a mature economy and economic growth is beginning to slow," 4.

* Industrial production—output of factories, mines, and utilities—leveled off, 5.

* October industrial production index barely exceeded its January 1995 value, 5.

* Payroll employment in manufacturing decreased by an average of 16,500 jobs per month, according to the BLS' payroll survey on total non-farm payrolls.

* Business inventories rose relative to sales.

* Production slowed due to excess inventory and soft sales figures, 6.

* Real GDP was down to 2.0% down from 4.1% the previous year, 7. 

The big expansion happened when Clinton CUT the capital gains rate...

In 1995, the total amount of venture capital invested was $8 billion. By 1998, the first full year in which the lower capital gains rates were in effect, venture capital activity reached almost $28 billion, more than a three-fold increase over 1995 levels, and by 1999, it had doubled yet again.

The 1997 Tax Cut & Its Affect On Taxable CG Income (billion dollars)

1993: 36…..(emergence from recession)
1994: 36
1995: 44
1996: 66
1997: 79
1998: 89
1999: 112
2000: 131….(Dot-com bust, 10 March 2000 and recession begins followed by 9/11.

* The economy averaged 4.2% real growth per year from 1997 to 2000–a full percentage point higher than during the expansion following the 1993 tax rise, 7.

* Employment increased by 11.5 million jobs, which is roughly comparable to the job growth in the preceding four-year period, according to the BLS' payroll survey on total non-farm payrolls.

* Real wages, however, grew at 6.5%, which is much stronger than the 0.8% growth of the preceding period, according to the BLS' payroll survey of average hourly earnings for non-supervisory employees.

* Total market capitalisation of the S&P 500 rose an astounding 95%.

* Between 1994 and 1999, realised capital gains nearly quadrupled, the CBO concluded, with taxes on those gains accounting for about 30% of the increased growth of individual income tax liabilities relative to the growth of GDP, 8.

One must be utterly ignorant of economics to argue that tax increases lead to growth and higher employment.  By definition, even to Keynesians, tax rises are contractionary.  They cannot result in increased employment and growth because they take money out of the economy.   There may be other arguments for tax rises such as paying off debt or the asinine "it's not fair that some people have more than others," but employment and growth are not two that can be made by any sensible person with a modicum of understanding of even basic economics.

As an aside, I would like to remind some that Barack Obama believes that tax rises "for the purposes of fairness" are beneficial and necessary even if they result in less revenue to the government.  Stupidity knows no bounds on the Left.

As for Bush, when the GOP was last in control of Washington, it had racked up 52 straight months of economic expansion, 10.777 million jobs created, a 3.2% GDP, a 4.5% unemployment (which means full employment), a DJIA at 12,398.01, etc….. then the Democrats took over Congress on 3 January 2007.

Don't Lie - Black-Eyed Peas

[WILL]
Sorry, sorry, sorry, sorry
Hey, baby my nose is getting big
I noticed it be growing when I been telling them fibs
Now you say your trust's getting weaker
Probably coz my lies just started getting deeper
And the reason for my confession is that I learn my lesson
And I really think you ought to know the truth
Because I lied and I cheated and I lied a little more
But after I did it I don't know what I did it for
I admit that I have been a little immature
Fucking with your heart like I was the predator
In my book of lies I was the editor
And the author
I forged my signature
And now I apologise for what I did to you
Cos what you did to me I did to you

[FERGIE]
No,no, no, no baby, no, no, no, no don't lie
No, no, no, no, yeah, you know, know, know, know, you gotta try
What you gonna do when it all comes out
When I really see you & what you're all about

No, no, no baby, no, no, no, no don't lie
Yeah, you know, you know, you know, you know, you know, you gotta try

[APL]
She said I'm leaving
Cos she can't take the pain
It's hard to continue this love it ain't the same
Can't forget the things that I've done inside her brain
Too many lies committed too many games
She feeling like a fool getting on the last train
Trying to maintain but the feeling won't change
I'm sorry for the things that I've done and what I became
Caught up in living my life in the fast lane
Blinded by lights, cameras, you know the fame
I don't know the reason why I did these things

[APL and FERGIE]
And I lie and I lie and I lie and I lie
And now our emotions are drained
Cos I lie and I lie and a little lie lie
And now your emotions are drained

[FERGIE]
No, no, no, no baby, no, no, no, no don't lie (no, don't you lie)
No, no, no, no, yeah, you know, know, know, know, you gotta try (got to try, got to try)
What you gonna do when it all comes out (what you gonna do baby)
When I really see you & what you're all about
Nonono babe, no, no, no, no don't lie
Because you know, you know, you know, you know, you know, gotta try

Ooh ooh ooh, ooh ooh ooh ooh
Ba da ba da ba da ba da badabada

[TABOO]
Yo, I'm lying to my girl
Even though I love her
And she all in my world
I give her all my attention and diamonds & pearls
She's the one who makes me feel on top of the world
Still I lie to my girl, I do it

[APL and FERGIE]
And I lie and I lie and I lie till there's no turning back
I don't know why, (and I lie and I lie till I don't know who I am)