The stock market didn’t take off until 1997, after the Republicans won a House majority and passed a capital-gains tax-rate cut that Clinton, to his credit, signed. But like welfare reform, another popular initiative that Clinton had no choice but to go along with, it was an essentially Republican idea that Congressional Democrats blocked as long as they could. And now that we are again enjoying a strong economy and stock market, in part because of Bush’s 2003 capital-gains tax-rate reduction, Democrats who want to raise taxes by canceling that tax reduction want us to believe that Clinton was solely responsible for the late-’90s boom. Is the Democrats’ current behavior an example of irony or merely chutzpah?
UPDATE: A commenter points out that the market took off around 1995 rather than in 1997. That’s true but it doesn’t affect the validity of my point. As another commenter notes, the market rally began immediately after the Republicans took control of the House
, because everyone expected a cap-gains tax cut. I assume this was because everyone expected a cap-gains tax cut.
Here are some charts:
UPDATE 2: The NASDAQ 100 chart above shows the performance of shares in high-growth tech companies. These companies benefited disproportionately from cuts in capital costs and thus from cuts in capital-gains tax rates. Note the increase in this index’s growth rate beginning around 1997. The same effect is visible to a lesser degree in the chart of S&P 500 index values.
UPDATE 3: Actually, the effect is visible in all three charts.