The following is a fact-check from the August 1, 2010 episode of Meet the Press:
GOV. ED RENDELL (D-PA) | Starting in 1993, after raising taxes on the wealthiest 2% of Americans and cutting the budget, the Clinton administration produced over 23.5 million new jobs over the next 7 years – HALF TRUE
GOV. RENDELL: The debt commission. Both parties have to get together and say, “We’re going to do this together, we’re going to make the changes. They’re not going to be popular, but they’re necessary.” But you have to have increased taxes along with those reductions. And this fairy tale that increased taxes on the rich is going to hurt the economy, well, we don’t have to look any further than 1993. What Bill Clinton did, without one Republican vote, is essentially the same thing. He raised taxes on the top 2 percent in, in America. That was combined with budget cuts that the president and the Republican Congress did together, and it produced 23.5 million new jobs in the seven years that followed.
The Omnibus Budget Reconciliation Act of 1993 raised the individual income tax to 39.6% for the top 1.2%, not the top 2%, as Mr. Rendell states. Not a single Republican in either the House or Senate voted for the bill, as Gov. Rendell also stated. As we pointed out in an earlier fact-check and according to the Bureau of Labor Statistics, a total of 22.7 million jobs were created during the Clinton administration. But the bill didn’t become law til August of 1993, so if we get technical, only 21.4 million jobs were created, from the passage of the bill to the end Of Clinton’s term.
According to Politifact, unemployment fell from 6.8 percent to 3.9 percent between passage of the bill and the end of Clinton’s term. After the bill’s passage, personal income increased by about 7.5 percent a year, compared to about 5.2 percent a year prior to passage. Industrial production rose by about 5.6 percent per year after passage, compared to 3.2 percent per year before passage. From the passage of the bill until the end of Clinton’s term, the Dow Jones Industrial average rose 26.7 percent per year, from 3,651 to 10,788. It’s clear that the economy bloomed after the passage of the Omnibus Budget Reconciliation Act of 1993, but it’s impossible to prove that the bill caused the economy to grow so substantially.
Naturally, with any economics question comes differing opinions. Here is a Politifact interview with J.D. Foster, a senior fellow with the conservative Heritage Foundation:
J.D. Foster argues that the 1993 tax hikes “probably slowed the economy compared to the growth it would have achieved” and counters that the 1997 tax cuts were what kept the expansion chugging along after one would have expected it to wane.
Here is Politifact with Gary Burtless, a senior fellow at the liberal Brookings Institution:
“Many people, including me, think this was because financial markets began to take seriously the new administration’s determination to be fiscally conservative,” Burtless said. “People buying and selling stocks and bonds on Wall Street were evidently more impressed by the appearance of fiscal discipline than they were upset by the hike in top marginal rates.” This, Burtless argues, spurred business investment because it “gave investors confidence that the drop in long-term interest rates was sustainable.” And this, in turn, “helped boost industries producing business equipment, including high-tech firms and new and old companies that supply communications and computer equipment. Of course, lower long-term borrowing rates made it cheaper to buy a house and to obtain credit for household consumption.”
And Daniel Mitchell, a senior fellow at the libertarian Cato Institute, pointing to other factors that spurred the economy:
“The economy did do well under Clinton, but that was because of other policies he adopted and in spite of the ’93 tax increase,” Mitchell said, citing lower government spending as a share of gross domestic product, approval of the North American Free Trade Agreement and the World Trade Organization, welfare reform, farm-subsidy reform. “These are the policies that boosted the economy. The tax increases in 1993 hurt, but were more than offset by other changes.”
21.4 million jobs were created between the passage of the Budget Reconciliation Act of 1993 and the end of Clinton’s term, not 23.5 million, as Mr. Rendell states. Taxes increased for the top 1.2% of Americans, not 2%, as Mr. Rendell stated. The economy did grow substantially after the passage of the bill, but just because B happens after A, doesn’t mean A caused B, and in this case it’s impossible to prove causation. Senior fellows at the Brookings Institution, Cato Institute and Heritage Foundation all point to differing factors to what led to the huge economic growth between 1993 and 2001. However, since it is surely possible that those actions taken by the Clinton administration contributed to the economic growth, we cannot rate Mr. Rendell’s statement false, and so considering that and his close but not correct numbers, we will instead rate it HALF TRUE.
This fact-check took a combined 3 hours.