After the recession of 1991 – 92, the economy of the SU has started towards a phase of growth of income among the longest and most sustained in the second half of the 20th century. In the period 1992 – 99, the increase in US GDP exceeded 3.5 % on an annual average, overtaking the main industrialized economies and in particular the Japanese and German economies, whose average growth in the same period was respectively around About 1.1 % and on 1, 4%. The strengthening of the US economy also translated into a significant improvement in the employment situation which, also in this case, recorded a trend in contrast to the stagnant conditions that characterized the labor market in the euro member countries. Between 1992 and 1999, employment in the US grew by more than 12 million jobs, thanks to which unemployment fell in 1999 at a rate of 4 million.approximately%, a level, the latter, which had not been reached since the 1960s. The positive picture of the US economy was finally reflected in the substantial stability of inflation which remained, with some fluctuations, around 2 % until 1997, falling below 1 % in 1998 and reaching 1.6. % in 1999.
The most surprising aspect of this expansionary phase was the ability highlighted by the economic system to combine the progressive decline in the unemployment rate with the decrease in the consumer price index. It is in fact a phenomenon that is difficult to classify in traditional economic theory according to which the expansionary phases of the economy meet a limit in the ‘natural rate’ of unemployment (which varies according to periods and production contexts), below which the further economic growth translates into an increase in inflation, in accordance with the hypothesis of the NAIRU (Non Accelerating Inflation Rate of Unemployment) . Precisely this characteristic of the US economic cycle has induced various economic observers and exponents of the academic world to consider the old economic theory to be outdated and to postulate a ‘new economic paradigm’ (Blinder 1997) which focuses attention on the effects that the very rapid diffusion of technology information and the extension of economic globalization processes have had on the productive capacity of the economy as a whole. According to the theorists of the ‘new paradigm’, massive investments in information technologies (which have grown in the US by over 14 times during the 1990s) and the increasingly accentuated exposure of companies to foreign competition have generated profound changes in the organization and management criteria of production processes such as to determine a continuous increase in the growth potential of the economy. Precisely the increase in productivity levels, deriving from the cascading effects of technological innovations, represents the secret of the new economy capable of sustaining unlimited expansion without inflation. However, this optimistic view has been the subject of several criticisms (Krugman 1998). In fact, the increase in productivity rates recorded in the 1990s was limited to only some sectors of the economy and in particular in the information technology sector. Furthermore, the combination of high growth and low inflation seems to be linked more to the presence of cyclical elements than to changes in the structure of the economy. The decrease in prices can be interpreted more easily considering other factors such as the appreciation of the dollar, which has reduced the price of imports in the US, the strong flexibility of the domestic labor market, accentuated by the growth of temporary jobs and the weakening of trade unions, which made workers more vulnerable and reluctant to demand wage increases, as well as the reduction of worker assistance programs and cuts to the health system (see below). The combination of these factors, some of which are temporary and therefore reversible, has allowed the economy to operate up to the limit of its production potential in a context of price stability, without thereby configuring the start of new long-term trends. period of the economy.
During the economic recovery, the policy adopted underwent significant changes with respect to the approach that had characterized the two previous post-war expansion phases, that of the period 1961 – 69 and that of the years 1982 – 90. While the latter hinged on expansive fiscal stimuli (the first explicitly referring to the Keynesian approach, the second, instead, inspired by supply-side economics), the economic policy guidelines initiated by B. Clinton were based on a combination of restrictive fiscal policies and cautiously permissive monetary policies. The fiscal deficit adjustment program, which has been one of the priority objectives for the Clinton administration since the beginning, has been crowned with complete success: the federal deficit has in fact been covered in advance of the schedule and already in 1998 it was possible to reach a primary surplus (net of interest on the public debt) of 300 million dollars.
Despite its full success, the deficit reduction program was hampered by a protracted political-institutional conflict between the president and Congress. In 1993 Clinton presented a public finance plan aimed at the dual objective of stimulating the economy (at that time not yet fully recovering) by increasing public spending in the fields of education, infrastructure, scientific research and professional retraining and reduce the heavy federal deficit (which was passed in 1992 the 4 % of GDP) by increasing the tax burden. This project had been accepted in its essential lines by the Congress which, with the approval of the Omnibus Budget Reconciliation, implemented a fiscal tightening among the most rigid in the economic history of the country. The new financial policy, in fact, in addition to increasing the marginal rate on the highest income brackets from 31 % to 36 %, introduced an additional 10 % surcharge on incomes over 250. $ 000, and raised the maximum corporate income tax rate from 34 to 35 percent, with retroactive effect in early 1993. In 1994, with the election of the new Congress with a Republican majority, profound differences began to emerge with the president regarding the adoption of fiscal policy measures. The new Congress, in fact, approved in June 1995 a law for achieving a balanced budget by 2002 (Balanced Budget Act), in which strong cuts were foreseen in spending on health care for the elderly (Medicare) and for individuals less affluent (Medicaid) and tax relief in favor of the more affluent classes (abolition of the tax on capital gains, less progressive income tax for individuals). In July of the same year, the president presented an alternative project which, while acknowledging the objective of a balanced budget (which, however, was deferred to 2005), was distinguished from the one approved by Congress both because the reduction in expenses was reshaped so as to preserve public intervention in the education and research sectors, and because the tax breaks were reserved for families with low and medium incomes. The incompatibility between the two recovery plans emerged fully when the political confrontation between the president and Congress moved on to the procedures for implementing fiscal policy. In November 1995, in fact, the president used his right of veto to reject the Balanced Budget Act, already approved by Congress, triggering a stalemate in the budget approval procedure which lasted several months and which required recourse to provisional exercise to avoid the closure of public offices. Only in April 1996 was a compromise reached (with which the date of 2002 was accepted and cuts in health care programs, tax cuts in favor of the middle classes and a moderate increase in social spending were decided), which gave the green light to law in 1997. Thanks also to a combination of positive factors (sustained economic growth, increase in revenue on capital gains due to the lively trend of the stock market, reduction in unemployment and related social expenses) tax revenues underwent a very strong increase after 1997, allowing a rapid elimination of the public deficit. On the destination of future budget surpluses expected in the coming years (which according to the Congressional Budget Office should reach 3 % of GDP by 2009) a confrontation has opened between the president, who would like to use them to finance the social security system, and the majority of Congress, which instead aims to use them to reduce the tax burden on the middle-upper classes.
The downward trend in consumer prices, also facilitated by the decrease in inflationary expectations and the correction of the federal deficit, has facilitated the adoption of the monetary policy strategies of the president of the Federal Reserve, A. Greenspan, consisting in pursuing the objectives of the maximum employment and long-term interest rate moderation consistent with price stability. Along this line, as early as 1993, on the eve of the economic recovery, Greenspan had brought the official discount rate to 3 %, which, with an inflation rate in that period equal to 3%%, was equivalent to setting a real interest rate of zero. But even afterwards, the conduct of monetary policy was characterized by relative flexibility, subordinated however to the careful monitoring of signals coming from the market and the pressure on prices produced by wage growth above inflationary expectations. Precisely in response to the signs of recovery in inflation, starting from 1994, short-term interest rates were repeatedly adjusted upwards by the Federal Reserve, which set them at around 5 % in early 1996, to then leave them unchanged. until 1998. The monetary authorities also paid particular attention to the trend in stock market share prices which, since the beginning of the 1990s, had begun to grow at a very rapid pace. The threat of a speculative bubble leading to a new stock market crash similar to that of the autumn of 1987 had set the stage for a restrictive change in monetary policy, to curb what Greenspan himself had defined in 1996 as an ‘irrational exuberance. ‘of the markets. The change indicated by the monetary authorities, however, was avoided by the explosion of the currency and financial crisis which in October 1997 it had invested in the Asian markets. In fact, the risk of global deflation, triggered by chain devaluations and the contraction of market outlets in those countries, made an increase in short-term rates substantially useless. The Federal Reserve no longer had the need to curb domestic economic growth to lower inflation, as it benefited from the fall in production in Asian countries, and above all from the crumbling of their financial markets than with their high yields., but very risky, imposed a rise in interest rates on Western markets. However, the recurrence of new turbulence, starting this time from Russia in October 1998 and from Brazil in the first months of 1999, brought out the extreme fragility of financial markets in full light and pushed the Federal Reserve to resolve the dilemma between maintaining low interest rates, to avoid the spread of the deflationary effects of financial crises, and raising interest rates to slow down the growth of domestic prices in favor of the first solution. In October 1998, for the first time in almost three years, the Federal Reserve cut its discount rate gradually bringing it to 4, 5 %.
One of the main consequences of the three financial crises of 1997 – 99 was the pouring into the US financial markets of a large amount of international liquidity attracted by high bond yields, driven by the reduction in interest rates. These flows, which were added to the substantial investments in US securities (both private and public) by Europeans and Japanese, were of such a magnitude as to significantly influence the trend in the dollar exchange rate. The latter, in fact, after a sharp fall in the summer of 1997, began to register a continuous appreciation on the main currency markets, opening an upward cycle that lasted throughout 1999.and still in place in early 2000. The strong increase in net capital inflows also fueled the rise in equities further, bringing the New York Stock Exchange Index (Dow Jones) to around 11. 000 points at the end of 1999, compared with approximately 3800 points five years earlier. The inflow of foreign capital made it possible to finance a very sustained increase in internal investments (the formation of fixed capital grew after 1992 at rates constantly above 5 %, reaching a peak of almost 13 % in 1998) and private consumption (increased at rates above 3 %), thus compensating for the lack of internal savings. The increased dependence of the economy on foreign loans, however, had as a result a rapid deterioration in the current account balance which, in addition to recording a persistent trade deficit (which grew to exceed 350 billion dollars in 1999, compared to about 95 of 1992), has revealed, for the first time, a negative balance also in the section of the invisible, due to the greater volume of capital gains in output than input.
Although with some slowdown compared to previous years, US GDP growth continued in 1999 as well. Fears of a recovery in inflation (with a trend growth of 2, 2% at mid-year) prompted the Federal Reserve to adjust the discount rate twice in the summer, while maintaining a very prudent attitude to avoid the consequences of an excessive credit squeeze on the stock market. The risk of a sharp fall in stock market prices, the growth of which no longer seems to fully justify a correspondence between the value of the listed securities and the value of the companies they represent, appears to be linked to some weaknesses in the US economy that have emerged with greater evidence in the late 1990s. The first of these concerns the level of indebtedness of the household sector. The US household saving rate (calculated on disposable income) fell in 1999 to 2.5 %, compared to + 7.1 % in 1993. The fall in the savings rate is largely attributable to the high capital gains made on the stock exchange (affecting 40 % of US households), and a downsizing of these as a result of a sudden fall in share prices would end up having an impact. significantly on the conditions of domestic demand, triggering the risks of a deep recession. The second factor of weakness relates to the growth of the US trade deficit. This, in the first half of 1999, reached the levels recorded throughout the previous year. This worsening, deriving from both the decrease in US exports and the sharp increase in imports from Asian countries, could create an element of distrust on the strength of the dollar and cause a flight of capital towards securities denominated in more stable currencies. Precisely to stem this risk, the Federal Reserve intervened in July 1999 to defend the exchange rate of the dollar against the Japanese yen, partly modifying the attitude of ‘benevolent negligence’ that has long characterized the behavior of the US monetary authorities on currency markets. Between February and March 2000, after more than 107 months of growth, there were signs of a slight acceleration in the inflation rate (+ 0.7 % between February and March). The Federal Reserve, in an attempt to dampen these tensions, made two successive quarter-point hikes in the discount rate, bringing it to 5.25 % in early February and to 5.50 % towards the end of March. (v. tab.)