Taxes and the Investment Recovery

Barry P. Bosworth

Barry P. Bosworth Nonresident Senior Fellow - Economic Studies

Discussants: John B. Shoven and

John B. Shoven Charles R. Schwab Professor of Economics - Stanford University, and NBER

Lawrence H. Summers

Lawrence H. Summers Charles W. Eliot University Professor and President Emeritus - Harvard University @LHSummers

THROUGHOUT 1983 and 1984, the United States experienced an exceptionally
strong recovery of capital formation from the depths of the 1980-
82 recession. Between the fourth quarter of 1982, the recession trough,
and the fourth quarter of 1984, total business fixed investment, even
after adjustment for inflation, increased by 33 percent-more than double
the average 15 percent gain at a comparable stage in previous post-
World War II economic recoveries. Investment in producers’ durable
equipment was up a remarkable 42 percent.