Kevin Hassett, director of the National Economic Council, is arguing that the United States is living through a rare burst of productive capacity that looks more like the late 1990s than the stop‑start recoveries that followed past crises. He describes it as a “massive positive supply shock,” a phase when businesses can produce more with less inflationary pressure even as wages rise. If he is right, the policy choices Washington makes now will determine whether that windfall translates into a durable boom or fizzles into another missed opportunity.
At the heart of Hassett’s case is the idea that technology, investment and policy are finally pulling in the same direction, lifting output and productivity at the same time that inflation pressures are easing. I see his argument as an attempt to reframe a debate that has been dominated by demand management and interest rates, and to shift attention toward the supply side of the economy, from artificial intelligence to construction and infrastructure.
What Hassett means by a “positive supply shock”
Hassett’s claim that the United States is experiencing a “massive positive supply shock, the likes of which we haven’t seen since the late 90s,” is a bold way of saying that the economy’s capacity to produce goods and services is expanding faster than expected. In his telling, the combination of new technologies, improved logistics and a rebound in labor supply is allowing firms to meet demand without reigniting the kind of price spiral that dominated headlines in the first years after the pandemic. He has framed this as a break from the usual trade‑off between growth and inflation, arguing that the current environment looks more like the productivity surge that accompanied the spread of the internet and personal computing in the late 1990s than the sluggish expansions that followed earlier shocks, a view he laid out in detail in a recent interview.
That argument rests in part on how he interprets the latest inflation data. When a hotter‑than‑expected producer price index, or PPI, report rattled markets, Hassett pushed back on the idea that it signaled a return to entrenched inflation, pointing instead to a consumer price index that he said had been steadily moderating. In his view, the divergence between PPI and CPI is consistent with an economy where competitive pressures and rising efficiency prevent higher input costs from fully passing through to consumers, a pattern he has linked to the broader supply‑side gains he sees emerging in the data and that he has discussed in detail when analyzing the inflation reports.
AI, productivity and the late‑90s comparison
To understand why Hassett keeps reaching for the late‑90s analogy, it helps to look at how he talks about artificial intelligence and corporate performance. In a conversation posted in Nov, he argued that the reason “the AI firms are being successful is that their customers are being successful,” a line that captures his belief that new tools are not just boosting a handful of tech giants but are diffusing across the economy. When companies from manufacturing to retail deploy AI to optimize supply chains, forecast demand or automate routine tasks, the result is higher output per worker, which is the textbook definition of a positive supply shock, a point he underscored in the Nov discussion of survey data and corporate earnings.
That framing echoes the way economists later described the spread of enterprise software and the internet in the late 1990s, when investments in information technology finally showed up in productivity statistics. Hassett is effectively arguing that the current wave of AI adoption is at a similar tipping point, with early gains in sectors like logistics, finance and health care starting to compound. By tying the fortunes of AI firms to the success of their customers, he is signaling that he sees this as a broad‑based transformation rather than a narrow tech bubble, and that the payoff will be measured not just in stock prices but in sustained improvements in efficiency and capacity across the economy.
The NEC’s supply‑side strategy
Hassett’s rhetoric about a supply shock is not just descriptive, it is also a defense of the administration’s policy mix. As NEC director, he has argued that the White House strategy is explicitly geared toward increasing supply rather than simply tamping down demand. In a Feb appearance on CNBC, he summarized that approach by saying, “I’m telling you, when we talk economics in this White House, we are talking about increasing supply,” a line that reflects a focus on policies that expand the economy’s productive base, from incentives for business investment to efforts to ease bottlenecks in key industries, as he explained in the Feb exchange that circulated among economists.
That supply‑side emphasis is also visible in how Hassett talks about wages and living standards. In a separate comment amplified on social media, he said, “There’s a great deal of hope for the future that wage increases we’re seeing will continue even if inflation stays positive,” suggesting that he expects real incomes to keep rising as productivity improves. The logic is straightforward: if workers can produce more per hour, firms can afford to pay higher wages without fully passing those costs on to consumers, especially in an environment where competition and innovation are holding down markups. By linking wage gains to structural improvements in supply, rather than to temporary stimulus or tight labor markets alone, Hassett is making the case that the current expansion can deliver lasting benefits, a point he highlighted when discussing those wage increases.
Risks from policy shocks and government dysfunction
For all his optimism about the supply side, Hassett has also warned that policy mistakes could undermine the very gains he is celebrating. During the protracted government funding standoff in Nov, he reportedly told colleagues and markets that the shutdown was “far worse than expected,” stressing that it was already slowing construction projects and creating broader ripple effects across industries. Those comments reflected concern that delayed permits, frozen federal contracts and uncertainty around future funding would hit sectors that are central to the administration’s investment agenda, from infrastructure to energy, a risk he outlined when describing how the shutdown was slowing construction and disrupting jobs.
Those warnings sit uneasily beside his upbeat narrative about a supply‑driven expansion, but they also highlight a key tension in his worldview. On one hand, Hassett argues that technology and investment are pushing the economy into a more productive era, one that could sustain higher growth and wages without runaway inflation. On the other, he is acutely aware that self‑inflicted wounds, from shutdowns to abrupt policy reversals, can choke off the very projects and confidence that underpin that transformation. In that sense, his message is as much a plea for political stability and predictable rules as it is a celebration of economic tailwinds, a reminder that even a rare positive supply shock can be squandered if the policy environment turns hostile.
Why the 1990s analogy matters now
Hassett’s repeated comparison to the late 1990s is not just nostalgia, it is a way of framing the stakes of the current moment. The last time the United States experienced a similar surge in productivity, the payoff included rapid growth, rising real wages and a brief period when it seemed possible to reconcile strong labor markets with low and stable inflation. Yet that era also ended with imbalances, from overvalued tech stocks to underinvestment in parts of the real economy, and policymakers spent the next decade grappling with the fallout. By invoking that period, Hassett is implicitly arguing that the country has another chance to harness a wave of innovation for broad‑based prosperity, provided it avoids the excesses and blind spots that followed the dot‑com boom.
More From TheDailyOverview
*This article was researched with the help of AI, with human editors creating the final content.
Grant Mercer covers market dynamics, business trends, and the economic forces driving growth across industries. His analysis connects macro movements with real-world implications for investors, entrepreneurs, and professionals. Through his work at The Daily Overview, Grant helps readers understand how markets function and where opportunities may emerge.
