The U.S. Economy: What’s All the Fuss?

Somehow, it’s become an accepted fact that the American economy is in the doldrums. People give each other knowing, tight-lipped

Somehow, it’s become an accepted fact that the American economy is in the doldrums. People give each other knowing, tight-lipped glances when the topic of “how the economy is doing” comes up. But this widespread grim view is not borne out by the facts. The truth is, we ought to be thankful for the current economy. Sure, it may seem a bit pale compared with the red-hot 1990’s, and yes, the Bush administration’s economic policy lacks common sense (see below), but most indications point to an economy that, if not robust, is certainly in good health and should be no cause for anxiety.

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As The New York Times’ Daniel Akst and others have pointed out, there are signs of prosperity almost anywhere you look. Unemployment is low compared with past levels, and millions of women and immigrants have entered the work force without resulting in others being tossed out on the street. And remember inflation? That threat has receded so far, Mr. Akst notes, that we’re being told to worry about deflation instead. Indeed, Americans seem to have a special talent for turning good news into bad: Housing prices are high, so we worry-rather than seeing this as a sign of the country’s well-being. The Times reports that the home-ownership rate has risen to 68 percent, and sales of second homes remain strong, at their highest levels in history. There is no evidence of the collapse in the housing market which many economists had predicted.

Yes, the stock market has taken a mighty tumble in the past few years-but that represents a sane correction to stock prices which were being driven by absurd dot-com valuations, garbage I.P.O.’s and the unwillingness of Federal Reserve chairman Alan Greenspan to intervene and prick the bubble when he should have done so. At the moment, the market has stabilized, and prices are still higher than they were just five years ago, in 1998. Dire predictions of how a war with Iraq will impact the market are premature; past wars have stimulated the U.S. economy.

Many might be surprised to learn that the American economy actually grew last year. So why all the gloom? Mr. Akst speculates that the advertising recession, which hit the media business in 2001 and resulted in layoffs and cutbacks, has made journalists a sour bunch who are predisposed to report bad economic news and ignore the good.

The solution? Americans need to re-adjust psychologically and accept that the boom is over, and then acknowledge the fact that we are still living in prosperous times, for which we should be profoundly thankful. No matter what a bunch of grumpy newspaper reporters say.

Bush on a Binge

Has anybody informed George W. Bush that it’s not 1997 anymore? Apparently not, for the White House is acting as though there’s nothing wrong with a nice, prolonged economic binge. The administration is handing out tax cuts left and right-never mind that the government no longer is running a surplus, that state governments around the country are on the verge of a fiscal catastrophe, that Social Security and Medicare are in desperate need of reform, and that a long war may be just around the corner.

Washington is on a binge, mirroring the behavior of the corporate scoundrels who turned Enron, Global Crossing and Tyco into front-page scandals. What’s ironic, of course, is that President Bush and his Republican allies in Congress generally are the first to scream about fiscal irresponsibility, a trait they want voters to associate with Democrats. But Mr. Bush’s obsession with tax cuts is undermining attempts to fix Social Security and Medicare, provide for muscular homeland security (like, for example, a rigorous screening of shipments into ports like New York) and eliminate deficits.

Even as Washington preaches and acts on the dogma of tax cuts, state governments are considering tax hikes. Unlike Washington, state governments cannot run deficits. By law, they must balance their books, and it’s becoming apparent that they can’t do so without considering increases in various taxes and fees. New York faces the prospect of a $12 billion deficit. In California, the gap is about $35 billion.

Meanwhile, the Bush crowd binges on tax cuts. Talk about a formula for disaster: annual deficits of perhaps $200 billion to $300 billion; a war that may cost tens of billions; and entitlement programs like Social Security and Medicare starved of funding.

The President and his advisers are living in a time warp. Sheltered against hard times, they are reducing government revenues at the exact time when government needs revenues. It’s 2003, Mr. President. Wake up and take a look at the red ink.

San Francisco Can Teach Us Something

Convicted felons, drug addicts, prostitutes-hardly the types of people one would hire to work in a fancy restaurant, upscale bookstore or even coffee shop. Yet these are precisely the people who are running those very businesses, under the auspices of the Delancey Street Foundation in San Francisco. Started 30 years ago by psychologist Mimi Silbert, the foundation is a residential rehab program which instills accountability and community as core values among its 500 participants. The average resident is functionally illiterate, has been a hard-core drug addict for 10 years and in prison four times. Seventy percent are sent there by courts. And yet these same residents-all of whom are required to take a high-school equivalency program-operate the aforementioned restaurant and bookstore, as well as an auto-service center, a silk-screen company and Northern California’s largest independent moving company. The average stay is four years, and there hasn’t been a single arrest of a resident since the program began.

Perhaps the most remarkable thing about the foundation is that it takes no government money. As reported in the American Psychological Association’s Monitor , all of the funds come from the revenues from Delancey Street’s businesses. In 1990, the foundation took a $10 million loan to construct a new facility; the residents paid off the loan in four years.

Mimi Silbert proves that with boldness and determination, the most desperate lives can be turned around and not cost taxpayers a dime. New York should take a page from San Francisco.

The U.S. Economy: What’s All the Fuss?