Economic Policy That's More Than a Political Quick Fix
Paul S. Sarbanes. Sen. Paul S. Sarbanes of Maryland chairs the congressional Joint Economic Committee., The Christian Science Monitor
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. …