Job creators, or return seekers?

The almost two decades since the Clinton tax increase in 1993 have constituted a mighty experiment in macroeconomics. That period — more than a quarter of the entire postwar era — is divided into two periods of almost one half each, the first being a period following tax increases and the more recent period following two large tax cuts. The empirical evidence shows that the period following the tax increase experienced the largest peacetime expansion in U.S. history and the creation of 23 million jobs. The period following the tax cuts produced the most anemic growth and job creation, even before the Great Recession wiped out employment, growth and wealth across the economy. The positive labor market participation rates in the first period was paralleled by net private investment increases and uptrends on the National Federation of Independent Business' business conference and hiring indicators — all of which were more favorable following the Clinton tax increases.

By David W. Wise

October 22, 2012