The Clinton Tax Hikes

Discussion in 'Politics' started by Wiseacre, Nov 18, 2012.

  1. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    Lib/dems have made a living boasting about the Clinton tax hikes in 1993, and how the economy took off as a result. Obama has made his pitch for raising taxes now almost soley based on that. But how true is it? Below is a snippet or 2 from a piece written by Joel Harris back in 2010, the last time Obama tried to get his tax hike on the rich. It presents a different picture from the one painted by Obama and the lib/dems. The thrust of the article is that

    " it's worth taking a look at the actual engine of 1990s growth: improved productivity in information technology (IT) manufacturing and increased investment in IT equipment. The research examining the IT-led expansion from 1995-2000 shows it to be a unique and surprisingly unanticipated event that has no bearing on the tax decisions confronting Congress today.

    First, it is important to recall the relatively poor performance of the U.S. economy in the early 1990s. From 1990-1995, real gross domestic product (GDP) grew at an average annual rate of just 2.4% per year (down from 4.3% real annual growth from 1983-1989), and multi-factor productivity gains – the most comprehensive measure of productivity – limped along at an average of 0.5% per year. (Productivity had slumped since the 1970s, despite the diffusion of personal computers. This led to Nobel laureate Robert Solow’s famous observation that “you can see the computer age everywhere but in the productivity statistics). "
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    " After a slight dip in 1995, GDP growth took off – averaging 4.3% a year in real terms from 1996-2000. Multi-factor productivity rose at an annual clip of 1.3% (over the 1995-2000 period), while labor productivity increased as well: a 2004 Brookings Institution study estimated that from 1995-2001 labor productivity grew at an average annual rate of 2.6% in services (a major source of overall improvements in workers’ efficiency) and 2.3% in manufacturing.

    So what explains the productivity surge and the sharp rise in economic growth during the late 1990s? In a 2007 paper, a team of economists lead by Harvard’s Dale Jorgenson found the economic expansion was driven by efficiency increases in the production of IT, including computers, software and telecommunications components. Improvements in IT production “resulted in higher rates of decline in IT prices, stimulating decisions by firms, households, and governments to invest in IT equipment and software.”
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    " The story of the 1990s economy holds an important lesson for today’s tax debate, but it’s not the one the Administration intends by invoking it. While the Clinton-era expansion did indeed take place under higher tax taxes, it was largely due to crucial changes in IT production and investment that led to growth and once-in-a generation productivity gains. The lesson here is a basic but important one: the past doesn’t predict the future. If the Administration believes there are similar productivity gains on the horizon that will lift the U.S. economy out of its financial crisis-induced hangover, it should explicitly identify the source of these gains. Otherwise, the 1990s experience provides no guidance for what to do about the tax policy set to expire on January 1. "

    The Story of the 1990s Economy | e21 - Economic Policies for the 21st Century
     
  2. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    snippet:

    " The economic defense of the Clinton tax hikes does not hold up against the historical facts. The economy did exhibit economic growth during the 1990s, but it was well below potential.

    Moreover, rapid growth did not occur soon after the tax hike—it came much later in the decade, when Congress cut taxes. After the 1993 tax hike, the economy actually slowed to a point below what one would expect, considering the once-in-a-generation favorable economic climate that existed at the time.

    As for the overall economic recovery, it started well before President Clinton took office. In January 1993, the economy was in the 22nd month of expansion following the recession from July 1990 to March 1991. "

    Clinton Tax Hikes Slowed Growth


    There are times when a tax rate increase could be a good thing: to slow down a hot economy, save up some money for the inevitable bad time that eventually arrives, pay off debt, maybe slow inflation. None of which apply today, and in fact a tax rate increase at a time when the economy is veryy sluggish could be a very bad idea.
     
  3. Katzndogz
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    Katzndogz Diamond Member

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    Democrats are convinced that high taxes increases growth. High taxes are the way to prosperity and taxes at 100% would explode the economy into unprecedented growth.
     
  4. bucs90
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    bucs90 Gold Member

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    But..........I thought increased taxes are supposed to cripple innovation and business?

    So, how, under Clinton's tax hikes, did the private sector explode in innovation, profit, etc, etc, etc, through the 90's? Shouldn't those tax hikes have crippled them?

    Or..maybe like some say if you "lead a horse to water" for the poor on handouts......maybe raising taxes does the same thing- it motivates business to do better, innovate and strive to survive, and in the end, they excell.

    So, raising taxes must may be GOOD for business. It hurts at first, but in the end, it makes them innovate and strive for better.
     
  5. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    You're an idiot. What it does is make it less likely to get startups or expansions. It convinces big corps to move jobs overseas and discourages foreign entrepeneurs from coming here int he first place. It drives small businesses out of business.
     
  6. Greenbeard
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    Greenbeard Gold Member

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    So, to be clear: the Clinton tax rates stifled growth and innovation, but fortunately for him that effect was masked by the unprecedented wave of innovation and economic growth that occurred while they were in effect?

    Dodged a bullet, that guy.
     
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  7. Mr. H.
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    Mr. H. Diamond Member

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    The 90's economy was built on cheap oil.
     
  8. Rozman
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    Rozman Gold Member Supporting Member

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    DotCom bubble....:tongue:
     
  9. bucs90
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    bucs90 Gold Member

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    Yeah, I guess thats what he is trying to say.

    That higher taxes will cripple business and halt growth. So...that theory should prove true in real life. Like the 90's when Clinton raised taxes...and the US economy saw a massive explosion in growth, innovation, investment, profit.

    Likewise, when Bush cut taxes in the 2000's, that should've led to huge innovation, an explosion of growth and profit and investment. But instead....it ended in 2008 when the damn country almost imploded.

    Im not sure what to believe: The lab theory ideal, or the field experiment results.
     
  10. Rozman
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    Rozman Gold Member Supporting Member

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    I have seen posts here boasting about how great the country was when the tax rates were 90%...

    Ah the Libs wish we could go back to those days...
     

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