omy was Alan Greenspan, who served as chair of the
Board of Governors of the Federal Reserve system
during the entire decade. Federal Reserve staff de-
veloped skill in using the federal fund interest rate as
a target for open-market operations (buying and
selling U.S. government securities in transactions
with investors). Interest rates were reduced during
the recession of 1990-1991, then increased repeat-
edly in 1994 as boom conditions threatened to ag-
gravate inflation. Convinced that technological im-
provement was raising potential output rapidly,
Greenspan refused to exercise much restraint
against the boom of the late 1990’s.
Federal fiscal policy took a surprising turn.
Booming economic conditions and tax rate in-
creases brought a great upsurge in federal tax reve-
nues. By the end of the 1990’s, federal revenues were
taking more than 20 percent of the GDP, a ratio
far above the historical average. In combination with
restraint in the growth of expenditures, this revenue
surge produced government surpluses totaling
nearly $200 billion in 1998-1999. This permitted
some reduction in the national debt. Fantasies
about continuing this trend were soon shattered
by economic recession and war in the new millen-
nium.
A major change in policy toward poverty oc-
curred with the passage of the Personal Responsibil-
ity and Work Opportunity Reconciliation Act of
1996, which brought so-called welfare reform. The
previous program of Aid to Families with Dependent
Children (AFDC) was heavily criticized for subsidiz-
ing dysfunctional behavior, such as idleness and out-
of-wedlock childbearing. In its place came Tempo-
rary Assistance for Needy Families (TANF), adminis-
tered by states with federal guidelines and financial
support. The new program put more emphasis on
the obligation of beneficiaries to find jobs or un-
dergo training. The new program led to substantial
decline in the number of welfare recipients. A less
well-known poverty-relief program was the Earned
Income Tax Credit (EITC), created in 1975. Only
$4 billion was spent in 1990, but then payments
surged, reaching $26 billion in 2000.
In 1997, Congress created the State Children’s
Health Insurance Program (SCHIP) to cover chil-
dren from low-income families who did not qualify
for Medicaid. These programs were state-adminis-
tered but with federal guidelines and financial sup-
port. By 2000, 3.4 million children were covered; this
number continued to grow rapidly in the new mil-
lennium.
Impact The 1990’s produced an enviable record
of full employment and price stability. Economic
growth was substantial. However, income inequality
was widening, with income gains concentrated
above the median. Well-educated managers, scien-
tists, engineers, and professionals did very well. Fac-
tory workers did less well. The 1990’s bequeathed to
the new millennium a public school system that was
failing many of the nation’s children, particularly
ethnic minorities. The dot-com boom was about to
burst, yielding a stock market that had trouble ad-
vancing in the decade to come.
Further Reading
Cairncross, Frances.The Death of Distance: How the
Communications Revolution Is Changing Our Lives.
London: Orion Books, 1997. Good overview of
the impact of cell phones, e-mail, and the In-
ternet.
Friedman, Thomas L.The World Is Flat. New York:
Farrar, Straus and Giroux, 2005. A best-selling
journalistic overview of globalization. Includes
many references to 1990’s events such as the rise
of the Internet and the economic emergence of
China and India.
Heckman, James J., and Alan B. Krueger.Inequality
in America. Cambridge, Mass.: MIT Press, 2003.
This symposium provides abundant data on in-
come distribution, education, and related topics
for the 1990’s.
“The Importance of Health and Health Care.” In
The Economic Report of the President. Washington,
D.C.: U.S. Government Printing Office, 2008. In-
cludes 1990’s data on health conditions, the med-
ical marketplace, and government programs.
Kahneman, Daniel, and Alan B. Krueger. “Develop-
ments in the Measurement of Subjective Well-
Being.”Journal of Economic Perspectives20, no. 1
(Winter, 2006): 3-24. A Nobel Prize winner intro-
duces readers to the fascinating effort to identify
the economic dimensions of happiness.
Levy, Frank, and Richard J. Murnane.The New Divi-
sion of Labor: How Computers Are Creating the Next Job
Market. Princeton, N.J.: Princeton University
Press, 2004. Both business and household uses of
computers are highlighted.
Markham, Jerry W.A Financial Histor y of the United
States: From the Age of Derivatives into the New Millen-The Nineties in America Business and the economy in the United States 137