Newspaper article THE JOURNAL RECORD

The Year That's Hard to Believe

Newspaper article THE JOURNAL RECORD

The Year That's Hard to Believe

Article excerpt

NEW YORK -- The economy has performed like a master magician this year, thoroughly confusing those who claim expertise and causing massive objects, such as inflation and budget deficits, to disappear right before their eyes.

The magician has been in control throughout. Things that people feared would rise, such as unemployment, interest rates and taxes, fell instead. So did the fear level, as measured by consumer confidence studies. And the belief that stocks couldn't go higher still.

It's hard to explain how so many things came together to create good news; those who tried to explain weren't convincing. It was hard for the Congressional Budget Office to explain; it concluded that the budget deficit for the year would rise to $124 billion. By February, evidence surfaced that indicated the estimate was a monumental error, since the healthy economy was pouring revenues into the collection basket faster than anticipated. And most unexpectedly, health care costs were lower than foreseen. It turned out the deficit actually declined. But the drop -- expected to be between $25 billion and $50 billion when the final figures are in -- is still suspect to millions of Americans, and talk about potential surpluses in years to come is just beyond the realm. Can't blame them; the last surplus was in 1969. Their belief is tested further by the anemia that has afflicted inflation, which some had expected to be a scourge. Why shouldn't folks find it hard to believe: The labor market tightened, and that's supposed to be a signal for imminent inflation. Why, Alan Greenspan has said so, and as the country's central banker and chief monetary official, he should know. Greenspan, chairman of the Federal Reserve, managed to keep the storm flag of inflation flying all year long, but inflation faded to a breeze. …

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