In the national media and leftist circles, the Clinton Administration receives much credit for the economy of the 1990s. But, I will dig a little deeper and dispel the myths and expose the Bill Clinton Lie. A more detailed look on this subject during the George W. Bush years is on an earlier post ”Bush Tax Cuts Worked”. But before we go to Clinton, we need to understand the economic conditions prior to his administration.
A mild recession came in 1990 during George H. W. Bush administration. The unemployment rate held steady between 5%-5.5% until July 1990 when it stood at 5.5% and started to slowly creep up. Bush had a democrat controlled House and Senate in Congress. He made a deal with the democrat controlled Congress with the Omnibus Budget Reconciliation Act of 1990 which did modestly raise ,taxes. However, the tax increases from the OBRA of 1990 did not trigger the increase in unemployment rate. It was signed into law in November 1990 when the unemployment rate for November 1990 stood at 6.2%. The unemployment rate from July1990 through November 1990 and beyond was going up BEFORE the OBRA of 1990 was passed.
What triggered the Recession of 1990 was an expansion of the money supply and deficit spending.
In the 1990s, the unemployment rate peaked in June 1992 at 7.8%. Bill Clinton took office in January 1993 with the unemployment rate at 7.3%. So, now we see a downward trend in the unemployment rate before Clinton took office. We can hardly give Clinton the credit for that, now can we? The economy was already expanding under the Reagan’s tax reforms. The Economic Recovery Tax Act (ERTA) of 1981 and the Tax Reform Act of 1986. The unemployment started to drop in March 1983 which stood at 10.3% and continued to drop passed his last term and into the George H.W. Bush administration to March 1989 when the rate bottomed out at 5%.
As mentioned above, the unemployment rate was going up before Clinton took office; peaked to 8.2% (unadjusted) in Feb 1993 and 8.1% (unadjusted) in Jan 1993 and the started to go down before the tax increases of The Omnibus Reconciliation Act of 1993 was signed in to law in August 1993. The unemployment rate for August 1993 stood at 6.8%. So, how do you conclude that “Clinton’s tax increases stimulated the economy or lowered the UNRATE“? Next, the Republicans took back Congress in 1994. In 1997, the Tax Relief Act of 1997 was signed into law in August 1997. The unemployment rate stood at 4.8%. The economy really took off and expanded. The computer and technology sector drove the markets, i.e., the dotcom boom. The unemployment rate stood at 3.9% from September 2000 to December 2000. There was a lot of hiring in the dotcom boom because of the Year 2000 which brought about a lot of preparation for possible computer issues because of potential computer time software problems. So… in conclusion, who really gets credit for the 1990s boom?
Furthermore, Dr. J.D. Foster published a more detailed analysis of this subject.
SOURCE: Bureau of Labor Statistics http://www.bls.gov
St. Louis Federal Reserve