Newspaper article THE JOURNAL RECORD

Expansion of 1990s Weakest since WW2

Newspaper article THE JOURNAL RECORD

Expansion of 1990s Weakest since WW2

Article excerpt

As America awakened from a recession in 1991, the economy had a lot of work to do.

A real estate collapse had left banks in terrible shape. Companies had stopped hiring. The federal budget deficit had once again started to swell. Incomes had stopped rising for most Americans. Wage inequality had become a national sore. Health insurance was protecting fewer people. Layoffs were spreading to white-collar workers. And as the preliminaries got under way for the 1992 presidential election, Republicans and Democrats alike promised rapid economic growth that would lift all boats and, in doing so, sweep away these problems.

America got its expansion, all right -- one that has now lasted eight years and brought good times to many. But with the global financial crisis spawning talk of the next recession, much of what an expansion is supposed to achieve remains undone. For all the dazzling gains in the stock market, for all the money showered on Americans -- rich Americans in particular -- for as good as these times have felt, the report card on this expansion, if a child brought it home from school, would make a parent wince. Late in the expansion, in 1996, the economy surged, and it is just now simmering down. But despite the surge, economic growth measured over the entire cycle makes the expansion of the 1990s the weakest since World War II. Economies can expand rapidly only when workers produce significantly more in a given hour of work than they have in the past. And that did not happen in the `90s, any more than it had in the `80s. The result is painfully obvious in many households. While wealthier families enjoyed big gains, particularly from the booming stock market, most households find that their incomes, adjusted for inflation, are no higher today than they were in 1989, when the last expansion ended. Americans, for the most part, have been running in place for 25 years. And as economies around the world weaken, Americans are unlikely to gain ground soon. "This has been a long and smooth and untroubled business-cycle upswing," said Robert Solow, a Nobel laureate in economics at the Massachusetts Institute of Technology. "But it has not overcome the long-run sluggishness of the economy. That depends on deeper things, like technological progress and gains in efficiency. And finding the secret of those, despite all the advances in computer technology, is a job that certainly was not accomplished in the 1990s." The 1990s expansion, more than others in the recent past, has been market-driven, with government playing a lesser role. And some economists contend that the growth surge in 1996 and 1997 was evidence of the power of markets, when they are left alone. Yet even some conservative, market-oriented economists, like Robert Lucas, the Nobel laureate at the University of Chicago, argue that the performance of the `90s economy demonstrates that government action must complement market forces. …

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