A sure sign of a top?: "No End in Sight for Economic Boom In U.S., According to Clinton Report
By JOHN D. MCKINNON
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON -- The current economic expansion, the longest in U.S.
history, can continue "indefinitely," a top adviser to President Clinton said
in releasing the administration's annual economic report.
"The fundamentals look very good," said Martin Baily, chairman of the
president's Council of Economic Advisers. "As long as we stick to sound
policy, there's no reason why it cannot continue indefinitely."
Mr. Baily noted the expansion has been unique not only in its longevity but
also its continued vitality.
In a statement accompanying the report,
President Clinton credited "fiscal discipline to
help reduce interest rates and spur business
investment; investing in education, health care,
and science and technology to meet the
challenges of the 21st century; and opening
foreign markets so that American workers
have a fair chance to compete abroad."
The result, Mr. Clinton said, is a strong economy that is "well positioned to
continue to expand and to widen the circle of opportunity for more
Americans."
What has been particularly surprising has been the increase in productivity
as the expansion -- now in its 107th month -- continues, Mr. Baily said. In
most expansions, productivity shoots up at first as businesses make more
efficient use of their plants and workers. But in the current expansion,
productivity has been growing steadily. "This pattern of strong productivity
growth at a mature stage of the cycle is a key reason why this expansion is
set to become the longest on record," the report says.
One of the more surprising lessons of the current expansion, Mr. Baily
said, has been that it is possible to increase reliance on both foreign trade
and technology without penalizing lower-wage U.S. workers. That might
be because technological change and openness have helped keep inflation
low while boosting wages and pulling more people into the work force.
But Mr. Baily said the administration expects some key indicators of
growth to begin slowing soon. In particular, in its budget projections, the
administration sees productivity growth slowing to 2% from the 2.9%
average recorded from 1995 to 1999. Productivity is a measure of worker
output per hour. High productivity growth inoculates the economy against
the inflation bug in periods of rapid expansion because it allows businesses
to absorb higher labor costs without raising their prices.
The administration also expects consumer spending to slow somewhat.
Consumer spending growth has been outstripping income growth for seven
years, Mr. Baily noted.
Even with somewhat lower productivity and spending growth, officials
believe the economy can continue to expand. The administration expects
inflation-adjusted growth of 2.9% this calendar year, down from 4.2% in
1999. For the remainder of the decade, growth rates are projected at
2.5% to 3.0%.
As for the potential problems in the economy, Mr. Clinton has recently
focused on the U.S. trade deficit. But the administration expects recovery
of overseas markets to boost demand for U.S. products and services.
The report also sees the potential for further efficiencies coming in the
high-tech arena, particularly in e-commerce. Firm projections of the
growth of retail e-commerce will have to wait for results of a current
federal data-gathering initiative, the report said. But in the meantime, the
report foresees the possibility of strong growth in the business-to-business
portion of the e-commerce sector. According to a private estimate cited in
the report, it could rise from $43 billion in 1998 to $1.3 trillion in 2003. |
