The Bubble Economy (test post)
There is a frequently told tale in Washington of the 1990s prosperity, and Bill Clinton is its hero. In this story, President Clinton performed the hard work of bringing down the deficit and balancing the budget. He raised taxes and contained spending, but the pain was rewarded by low interest rates and a growth boom that delivered the lowest unemployment rates in more than three decades. It‟s a great morality tale, but it has little to do with the actual economic history of the decade.
During the first half of the Clinton era, the economy experienced very modest growth. Workers saw little benefit because wages were essentially stagnant. Then, in the late 1990s, a stock bubble emerged, and growth took off and real wages started to rise. This extraordinary period of bubble-driven growth was the main factor in flipping the government‟s budget from deficits to surpluses. The Congressional Budget Office‟s (CBO) projections from May 1996 (after all the tax increases and spending cuts had been put into law) showed the government running a deficit of 2.7 percent of GDP in 2000. Instead, that year saw a surplus equal to 2.1 percent of GDP, which translated into a shift from deficit to surplus of more than 5 percentage points of GDP (about $750 billion in 2011 dollars). Not one dollar of this shift was attributable to fiscal restraint. (pg. 38 Dean Bakers, the end of loser liberalism Making markets progressive.)
"According to CBO, the net effect of legislated changes over this period was to increase the fiscal year 2000 deficit by $10 billion Pg.38 . Rather than higher taxes or spending cuts, the entire cause of the shift from deficit to surplus was better-than-expected growth and lower-than-expected unemployment. In its 1996 projections, CBO assumed that the unemployment rate would be 6.0 percent in 2000." (pg. 39 Dean Bakers, the end of loser liberalism Making markets progressive)
There is a frequently told tale in Washington of the 1990s prosperity, and Bill Clinton is its hero. In this story, President Clinton performed the hard work of bringing down the deficit and balancing the budget. He raised taxes and contained spending, but the pain was rewarded by low interest rates and a growth boom that delivered the lowest unemployment rates in more than three decades. It‟s a great morality tale, but it has little to do with the actual economic history of the decade.
During the first half of the Clinton era, the economy experienced very modest growth. Workers saw little benefit because wages were essentially stagnant. Then, in the late 1990s, a stock bubble emerged, and growth took off and real wages started to rise. This extraordinary period of bubble-driven growth was the main factor in flipping the government‟s budget from deficits to surpluses. The Congressional Budget Office‟s (CBO) projections from May 1996 (after all the tax increases and spending cuts had been put into law) showed the government running a deficit of 2.7 percent of GDP in 2000. Instead, that year saw a surplus equal to 2.1 percent of GDP, which translated into a shift from deficit to surplus of more than 5 percentage points of GDP (about $750 billion in 2011 dollars). Not one dollar of this shift was attributable to fiscal restraint. (pg. 38 Dean Bakers, the end of loser liberalism Making markets progressive.)
"According to CBO, the net effect of legislated changes over this period was to increase the fiscal year 2000 deficit by $10 billion Pg.38 . Rather than higher taxes or spending cuts, the entire cause of the shift from deficit to surplus was better-than-expected growth and lower-than-expected unemployment. In its 1996 projections, CBO assumed that the unemployment rate would be 6.0 percent in 2000." (pg. 39 Dean Bakers, the end of loser liberalism Making markets progressive)
