THE American economy is in serious trouble. The recession has
brought into stark relief many of the problems built up over more
than a decade of economic mismanagement. After ignoring the
recession for a year, the Bush administration has come forth with
proposals that solve neither the short-run problem of recession nor
the long-term deterioration in our economic fundamentals. Without a
significant change in course, the American economy appears headed
for a future of slow growth and diminished opportunity.
The most recent cyclical indicators demonstrate the tenacity of
the current recession. The unemployment rate in February rose to
7.3 percent, representing 9.2 million unemployed workers, the
highest level during the recession. Another 1.1 million people have
grown so discouraged about the labor market they have given up
looking for work. In addition, 6.5 million people who want
full-time work can find only part-time jobs. The Labor Department
calculates that if the discouraged workers and involuntary
part-time workers (counted one-half) are included in the
unemployment rate, that rate for February would be 10.9 percent.
The number of long-term unemployed - those out of work for 27
weeks or longer - rose to 1.7 million in February, more than
two-and-a-half times the long-term unemployed at the beginning of
the recession. We know more job losses are coming, since many large
firms such as GM, IBM, and Bethlehem Steel have announced large
permanent staff cuts.
Even those with steady jobs find it harder to make ends meet.
Real per capita after-tax income is lower today than it was at the
end of 1988. This is the first three-year period since the Great
Depression in which real income has fallen. It is hardly surprising
that consumer confidence is near an all-time low.
Unfortunately, the president's proposals are not adequate to the
challenge. They indicate that he is still underestimating the
severity of both our short- and long-term economic problems.
The president's Economic Report predicts that the economy will
grow by 2.2 percent in 1991 if the president's plan is adopted.
Without the president's proposals, the administration predicts the
economy will still grow at 1.6 percent. Thus, the program the
administration has submitted would, by its own calculations, add
only six-tenths of a percentage point to economic growth this year.
It is predicted to have about the same impact annually, half a
point, through 1997. …