Economics 107

The current US economic expansion is the longest ever - 107 months - forcing three questions into the open:

How long can it last?

One economist with an extremely good forecasting record, James Smith of the University of North Carolina, Chapel Hill, says the expansion will last until May 2002. By 2003, it will rebound from a modest slump and grow again for another decade. The best is "yet to come," he says.

But economics is hardly an exact science, so we wouldn't promise he's right. That brings the next question:

How might the economy take a big dive?

The Federal Reserve's attempt to slow the economy by raising interest rates steadily has not shown much effect so far. Fed chairman Alan Greenspan hinted last week that the central bank will raise interest rates until consumer spending and the stock markets cool down.

Few economists doubt that a determined Fed can put the brakes on the economy. Most number-crunchers also would say that the Fed can't be precise in gauging its impact on the economy. In other words, the slowdown could deteriorate into a recession.

Once the Fed sees a looming recession, it would ease monetary policy fast. However, it could be too late, especially if the stock market stumbles badly.

The Fed usually gets blamed when its anti-inflation policy brings about recession, as it often does.

With all this concern about keeping the economy healthy, many people - especially during a presidential race - are asking this question:

Who gets credit for the expansion?

Republican candidate George W. Bush is most reluctant to give President Clinton any credit. He praises former President Reagan's economic policies. Democratic candidate Al Gore says he'll continue the Clinton policies (such as budget balancing) that he claims push the expansion.

It is extremely hard to sort out from the statistics the causes of an expansion. It could be the lower marginal income tax-rates instituted by Reagan helped. So, maybe, did the deficit-trimming tax hikes of President Bush and Clinton. Or maybe new technology (including the Internet), less regulation, or whatever has prompted today's husky economy.

We have the suspicion that if the Fed gives the economy enough money, business will take advantage of whatever opportunities it sees to expand, creating new jobs, new wealth. So the Fed should get a lot of credit. Maybe Clinton should get some praise for not interfering in Fed policymaking.

There's still room left for the politicians to claim economic glory for their heroes. But don't take their disputes over credit too seriously.

(c) Copyright 2000. The Christian Science Publishing Society

About these ads
Sponsored Content by LockerDome

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK