James Pethokoukis

Politics and policy from inside Washington

Relitigating the 1990s boom

October 19, 2010

Over at e21, former Bush administration official Joel Harris provides a nice reminder about the real  foundation of the 1990s boom. And it was not the Clinton tax increases:

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.

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