American history

The Tech Bubble

During the 1990s, the national debt doubled.

Over his term, Clinton would pass welfare reform in an effort to reduce the number of people dependent on government. With Republicans in control of Congress starting in 1994, most major spending programs were opposed by one side or the other, and spending increases stayed relatively low.

However, the overall effect of government policy is disputed, as the 1990s would see a significant boost in the software and "dotcom" industries.

One should take note that during this period, government statistical formulae were changed to produce happier results, and government statistics should be considered carefully before being accepted.

A 2% reduction in the national debt was apparently achieved in the year 2000 due to the "borrowing" of approximately a trillion dollars from the Social Security Trust Fund, and there was much buzz about how quickly the national debt would be paid off given the sudden "surplus" and expected surpluses over the next years.

There was even some concern raised about possible adverse affects of paying off the debt too quickly. Thirty year treasury bonds were removed from the market. Both Democrats and Republicans were eager to spend the surplus (either on tax cuts or spending increases) despite the fact that public opinion polls showed the majority of Americans preferred using the surplus to pay down the national debt.

After several decades of U.S. taxpayer financing of research and development of the Internet, the Internet project was opened up for commercial traffic on its backbone in 1994.

The years 1994 - 2000 witnessed solid increases in real output, low inflation rates, and a drop in unemployment to below 5%. The stock market soared. Some people who had seen projected profits to earnings ratios of 200 to 300 had at first thought it to be absolute nonsense — and they were right.

The year 2000 witnessed the end of the boom psychology and performance, with a growth rate of only 1.4% in the last three months. One of the most striking illustrations of this is the sharp drop in the personal fortune of computer entrepreneur Bill Gates.

The situation worsened in 2001 with output increasing only 0.3% and unemployment and business failures rising substantially. The response to the terrorist attacks of September 11 showed the remarkable resilience of the economy.

Since those attacks, the economy continued to grow, albeit at an uneven pace. More recently, economic growth has sped up, with growth in the third quarter of 2004 reaching 4% according to the Bureau of Economic Analysis.