Newspaper article St Louis Post-Dispatch (MO)

`Forces of Light' Are Winning at Last, Economic Observer Says

Newspaper article St Louis Post-Dispatch (MO)

`Forces of Light' Are Winning at Last, Economic Observer Says

Article excerpt

"The forces of darkness have given way to the forces of light." As year-end economic forecasts go, that's hard to beat.

It's the view of Allen Sinai, chief economist for Lehman Brothers, who believes the sick economy finally is ambulatory. "The pluses were cooking even in the Bush years," he says, "but the minuses still dominated. Now, the pluses are winning the tug of war."

He ticks them off. The lowest inflation in 30 years has raised consumer purchasing power. Higher productivity and lower costs of doing business have greatly improved corporate profits. Banks are in excellent shape, their bad-debt problems behind them and profits high. Both consumers and businesses are restructuring their debts, thanks to the drop in interest rates. Consumer sentiment is up. The prices of American products and services are now more competitive internationally.

Sinai is looking for several years of moderate but healthy economic growth, in the 2.5 percent to 3.5 percent range annually, without high inflation and without the burden of growing federal budget deficits.

The growth rate won't be steady. For example, he expects a temporary slowing early in 1994, with the reported rate of unemployment revised upward. The rich will blame the lull on the tax increases they have to pay, but in Sinai's opinion, "that only makes a dent." The culprits next year will be a slowing in exports (because of foreign recessions) and a natural pause in today's strong rate of growth in business and consumer spending. The pause should settle fears of higher inflation and interest rates.

Politically, the country is facing up to the deficit binge of the 1980s - accepting two doses of deficit reduction in the past three years (tax hikes and spending cuts from Presidents Bush and Clinton). The federal budget laws are now so tight that Clinton has little room to try anything stimulative.

The remaining forces of darkness, however, still haunt us at the human level. Layoffs will continue as defense cuts and corporate downsizing persist. Full-time positions will keep giving way to part-time or temporary work. The quiet struggle of underemployed young people and middle-aged managers isn't over yet. …

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