The Graph That All Tax Hike Mystics Need to Grapple With

Romina Boccia / May 25, 2011

People often remember the entire decade of the ’90s as a period of robust economic growth. Economic growth was so impressive in the latter half of the ’90s, in fact, that some claim the Clinton-era tax hikes spurred the economy to prosper. But was that actually the case? Did tax hikes really lead to a stronger economy?

The data tell a different story. Growth in the first half of the decade following the Clinton tax hike was clearly subpar, and real wages actually fell. The economy didn’t take off until later in the decade, and not coincidentally after a 1997 Republican-sponsored tax cut.

Ezra Klein featured a graph by the Center on Budget and Policy Priorities (CBPP) in The Washington Post last week that purports to show, according to CBPP’s Chad Stone, that:

Job creation and economic growth were significantly stronger in the recovery following the Clinton tax increase than they were following the 2001 Bush tax cut. And the Clinton policies produced a balanced budget. (more…)