Landrieu as VP

The economic definition of a recession is 2 consecutive quarters of negative GDP growth. Flat GDP, growth at a lesser rate, or non growth is not a recession by definition.

For example, despite what every jackass on TV says we are not presently in a recession. The 1st quarter 08 growth was a weak .9 percent, but it was positive. The second quarter should also see positive growth. In this recession that isn't we are yet to see even one month where the GDP has shrunk.

 

That's correct. I was wrong. Thanks for correcting that misinformation.

 

It can be argued it did. The answer can be found by looking at the economic environment at the time of the tax hike.

"Tax policy aside, much in the context of the 1990s was conducive to prosperity. The end of the Cold War brought a new sense of hope and greater certainty to the global economy. The price of energy was astoundingly low, with oil prices dropping to about $11 per barrel and averaging under $20 per barrel compared to prices above $90 per barrel today. (That $90 sure looks good today!) The Federal Reserve had finally succeeded in establishing a significant degree of price stability, with inflation averaging less than 2 percent during the Clinton Administration. And, of course, a tremendous set of new productivity-enhancing technologies involving information technologies and the World Wide Web burst on the scene."

Here's a summary of an article that's talks about this but I recommend reading the entire article to get a better picture.

"Coming out of a recession into a period when the economy should grow relatively rapidly, President Clinton signed a major tax increase. The average growth rate over his first term was a solid 3.2 percent. In 1997, at a time when the expansion was well along and economic growth should have slowed, Congress passed a modest net tax cut. The economy grew by a full percentage point-per-year faster over his second term than over Clinton's first term.

The evidence is fairly clear: The tax cuts, especially the reduction in the capital gains tax rate, made a major contribution to a strong economy. Given this observation, it seems likely, though admittedly less certain, that the tax increases in 1993, while not derailing the economy as many had forecast at the time, did indeed slow the recovery compared to what the economy could have achieved."

Source:
Tax Cuts, Not the Clinton Tax Hike, Produced the 1990s Boom

 

At what point was the economy the strongest during the Clinton years? Before or after the tax cuts?

 

ok, children. am i the only one that realizes that its difficult. if not impossible. to absolutely assign credit or blame for the economy on one political party or branch of the government. there are way too many variables. you cant even really say "tax cuts did _____ "or "reduced spending did ____"

 

Nice spin. During Clinton's term the economy was stronger after the tax cuts were enacted just as the economy was stronger after the Reagan tax cuts and just as the economy was stronger after the Bush tax cuts.

"It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now ... Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus."

– John F. Kennedy, Nov. 20, 1962, president's news conference

"Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government."

– John F. Kennedy, Jan. 17, 1963, annual budget message to the Congress, fiscal year 1964

 

LA,

Tax cuts can and have been used temporarily to put money back in consumers hands, to let them spend it and to stimulate the economy. Is this always the true? I don't think so.

It depends on a lot of things. You point to the Reagan tax cuts and increase in GDP. There was a LOT going on in the economy in the early 80's, such as Paul Volker raising interest rates to 12%, which produced a DEEP recession in 81-82, which BROKE THE BACK OF HORRIBLE INFLATION. After that deep recession, and after INTEREST RATES STARTED COMING DOWN, any activity would look like GDP growth.

Also, after the 1970's legislation mandating improved fuel efficiency in cars (which Detroit opposed) by the 80's folks bought more fuel efficient cars, oil stockpiles grew, the price of oil fell from $30 to $12 a barrel (forcing me to leave NOLA), and this helped the economy boom in the 80's. This long term drop in energy prices had a HUGE stimulative effect on the economy, just as the HUGE rise is now putting a drag on our economy today.

There was a LOT going on, and I don't think anyone can look at that era and say "the Reagan tax cuts caused the growth".


When tax cuts occur, if there is no spending restraint, then the budget deficit swells. When that happens, without end in sight, the dollar falls. When that happens, all imported goods rise in price (inflation), which is a negative effect that we are currently experiencing.

With the Bush tax cuts in 2001 (directed primarily at the rich) and again in 2003, if they had the stimulative effect you want to attribute to them, why did the federal reserve have to leave the fed funds rate at 1% in 2003 and 2004, the lowest rate in 40 years, and 3 years after the recession ended in 2001? This irresponsible action by the fed contributed to the housing bubble, which has burst and is hurting the economy so badly now. I contend the tax cuts did not stimulate the economy in 2001-2003 and the fed had to drop rates to the floor to try and get Bush re-elected, even if it created dangerous imbalances in the economy (see housing).

You have to be careful with cause and effect relationships. Just because something happened first does not mean it caused what happened second. I snapped my fingers last night, and the sun came up this morning. I snap my fingers every night, and the sun comes up the next morning, but I never "caused" it to happen.