An Economic Policy for an Election Year

Article excerpt

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. …