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Explaining the 1990s Economic Boom — Before Hillary Does
Were the 1990s really the best decade ever? Kurt Andersen makes the case in the New York Times, citing everything from economic stats to political cooperation in Washington to better TV shows to the emergence of the consumer digital age. If Hillary Clinton does run for president, we’ll probably hear a lot more about the prosperous ’90s. And if Americans think of a Hillary presidency as a continuation of hubby Bill’s, that would probably be OK with her campaign team. Andersen, for one, disagrees with Jeb Bush’s statement that “if someone wants to run a campaign about ’90s nostalgia, it’s not going to be very successful.” Well, that doesn’t have to be the whole of her message, of course. It does set a good foundation, yes? Better than 2000s nostalgia at least.
Anyway, here is his rundown of the 1990s economy:
The United States economy grew by an average of 4 percent per year between 1992 and 1999. (Since 2001, it’s never grown by as much as 4 percent, and since 2005 not even by 3 percent for a whole year.) An average of 1.7 million jobs a year were added to the American work force, versus around 850,000 a year during this century so far. The unemployment rate dropped from nearly 8 percent in 1992 to 4 percent — that is, effectively zero — at the end of the decade. … From 1990 to 1999, the median American household income grew by 10 percent; since 2000 it’s shrunk by nearly 9 percent. The poverty rate peaked at over 15 percent in 1993, then fell to nearly 11 percent in 2000, more or less its postwar low. During the ’90s, stocks quadrupled in value — the Dow Jones industrial average increased by 309 percent. You could still buy a beautiful Brooklyn townhouse for $500,000 or less. And so on.
1.) I could pick at those numbers, I suppose. For instance: GDP growth over the decade wasn’t quite 4%. From 1990 through 1999, annual growth averaged 3.2%. Or, alternately, from 1991 through 2000, growth averaged 3.4% — pretty much the post-war average. But during the fat years, as Andersen notes, growth was spectacular with four-consecutive years of 4% or faster growth for the first time since the 1960s.
2.) With so many stats, strange that Andersen fails to offer even a single one about rising inequality. The top 1% US income share in 1992 — which Andersen cites as the start of the good times — was 13.5%, according to the World Top Income Data Base. When Bill Clinton left office in 2000, the share had risen to 16.5%. Actually, high-end inequality rose more during the Clinton presidency, 3.01 percentage points, than during the Bush presidency, 1.4 percentage points. Goes to show you that if all the boats are rising — unlike today — no one cares how the yachts are doing.
3.) But to get back to GDP growth, why was it so strong? My take:
The US economy entered the 1990s after undergoing a huge revamp in the 1980s: marginal tax rates were lowered from 70% to 28%, the inflation menace slayed, regulations reduced, and Corporate America got restructured. Then in the 1990s, government spending and debt were reduced, investment taxes cut, and — this is massive, of course — a technological revolution kicked into high gear. Oil prices fell by a third. Wal-Mart. A compliant Fed. Plus the Soviet Empire collapsed and the cloud of possible nuclear holocaust was lifted. Market capitalism was on the march. People were optimistic as heck about the future. Recall that The Matrix came out in 1999 and called the era “the peak” of human civilization.
Did I miss anything?
Published in General
You know what I remember about the 90s?
Anti-globalization protests and mucho hand-wringing about “Affluenza”.
We were just too darned rich. All that wealth was bad for our health and needed to be curtailed.
Amazing how things change (or don’t change, depending on your point-of-view).
The problem with Hillary running on Bill’s record is that recreating the 90’s would mean essentially repudiating the entirety of Barack Obama’s presidency. Bill Clinton was the most shamelessly poll tested president of my lifetime. He was a man who took the 1994 midterm election as the repudiation it was, and moved to the center. The refusal to do this is precisely what is exciting the Democrat base about Obama, and a suggestion to return to that would doom Hillary in the primaries.
Speaking of the Matrix.
What if I told you the 90s were great because the dot-com bubble hadn’t burst yet?
Sure, there were real gains in the 90s from the peace dividend, lowering regulation, lower marginal rates, all that fun stuff. But a lot of it was fluffy optimism that came crashing down when we figured out that adding .com to your company name didn’t actually raise the value of your company by 500%.
No mention of Newt.
In manufacturing, all of the debottlenecking and increase in production capacities was due to installing new digital controls and replacing the old analog and/or pneumatic ones. That is how 1991 and 1992 kicked off the decade. The contractors who did this were almost exclusively from Louisiana where in the previous decade the state had opened new trade skills schools for process controls training.
I think the strongest point in that most concise explanation is that conservative policies work, and they work over the long run. I may be way off, but Keynesian theory used to at least be seen by the left as a short term fix (stimulus etc), but 2008 should have disproved that for this generation. The work of deregulation and making the tax code less progressive in the 80’s boomed in the 90’s.
Conservatives get the albatross hung around our neck because the market does exactly what we say it will, boom and bust.