TODAY'S economic conditions present a bonanza for doom-and-gloom peddlers. It is so easy to identify serious shortcomings, notably slow growth and high unemployment.
But the ephemeral debates of the day overlook the fundamentals of the situation. The United States is going through several painful but necessary adjustments all at the same time: adjusting to the end of the cold war, dealing with an economic slump, working off a tremendous array of surplus real estate, and reducing the unusual indebtedness of consumers and businesses.
It is a tribute to the underlying strength of our private-enterprise economy that, under these difficult conditions, it is continuing to grow at all - even though at times we need a microscope to spot the increase.
Meanwhile, we must be wary of the nostrums offered by the critics who are rattled by recent events. Those who urge hasty and drastic action should take a leaf out of the physicians' standard guidance: "First, do no harm." In the late 1970s we saw how quickly rising inflation can be generated. Likewise, in the early 1980s we experienced the pain involved in bringing down escalating inflation.
Those who have forgotten recent history are urging major new spending programs that will increase the budget deficit and lead to another inflation-deflation cycle. This is not a plea for a do-nothing policy. Now is precisely the time to put into place a long-term growth policy that will meet the needs of the very different kind of economy that is emerging from the end of the cold war.
In place of the military rivalry between the US and the Soviet Union, Americans must meet the growing competition of the global marketplace. This requires a different way of thinking about national policy. Because defense and foreign affairs are uniquely the responsibility of the federal government, the private sector plays an important but supporting role. Private firms produce the needed weapons and equipment, but under detailed government supervision.
In the civilian economy, these responsibilities are reversed. The private sector makes the key decisions that determine who is employed and what products they produce. Government has an essential role, but it is a supporting player. Many critics, however, still view government as pressing all the dials of the economy and the rest of us just jumping to respond.
By and large, it is business firms that create jobs in the US and it is American workers who produce the goods and services that they sell. Despite the inevitable frictions that arise, that is the fundamental economic partnership in the private-enterprise economy. Management and labor in each company basically determine how competitive their joint efforts will be.
Government can help - or hinder. For example, government can reduce - or it can increase - the heavy tax and regulatory burdens it now places on the production process. Many economists favor reducing the tax on the gains from productive investments. Others want to restore the investment tax credit.
We can change our tax system so that it encourages saving and investment, the keys to economic growth.
There is also an urgent need to reform the rapidly expanding array of government regulation. This is not a question of being for or against clean air or safe workplaces. We need to strive for the most efficient ways of achieving these objectives. The problem is that the people who write those regulations are often oblivious to the costs they impose on productivity and competitiveness.
Whatever action is taken in Washington in coming months, the outlook for the American economy for the next year and beyond is positive, although far from sparkling. Most professional forecasters are predicting slow growth for the rest of this year and a modest speedup next year. Low inflation, low interest rates, and reduced debt loads help to make for an extended recovery. We likely will look back at 1992 as a time when we successfully adapted to a new economic environment - provided that policymakers d on't get rattled.