Journal: No need to take cover; sky's staying put
Staff
Monday, July 16, 2001
IF SOMEONE WERE to tell you that the sky was falling, you probably would glance up to double check that, of course, it wasn't. But if you kept gazing up, as if Chicken Little was right, you might stumble and trample the flower bed or trip and hurt yourself.
Hardly a day goes by that Democrats don't exclaim one way or another: "The sky is falling; the sky is falling."
T'aint so.
Take a look:
Our air is cleaner; so, too, is our water. We aren't running out of energy supplies; in fact, our free-market system is working on all cylinders to increase supply.
This resulted in June's record declines in residential electricity and natural gas prices and a big drop in gasoline costs.
Yes, our economy has been slowing down since last year, as anyone who has a 401(k) can testify. Even still, both arms of our national defense against recession --- monetary and fiscal policies --- have been activated to lessen the possibility, or duration, of a recession.
The Federal Reserve System has cut interest rates six times this year (ahead of a possible recession instead of waiting for one to arrive). Eventually, these cuts will induce businesses to resume capital spending and investments.
And Congress has passed a tax cut, something most economists suggest is sound fiscal policy in the face of a recession, as it puts money in the pockets of consumers, whose spending accounts for two-thirds of our economy. It will take time for these to work their effect, but we can be satisfied that both actions are in place.
And, there is no federal budget deficit. This year we are enjoying the second largest surplus in history. Too often, when our economy has teetered on the brink of a recession, our federal budget has been in the red, exacerbating the situation.
That the surplus is less than projected was to be expected as the economy continued slowing down. But that surplus allowed us to enact the tax cut, which will put some $74 billion this year into taxpayers' --- consumers' --- hands. What better use of the surplus than to employ such a powerful fiscal tool against recession?
If one had to describe the ultimate defense against a recession or the ideal position to weather one, it would be: lower interest rates; tax cuts that put more money in consumers' pockets; and, a federal budget surplus.
Still, the economy teeters. Perhaps the Fed will need to cut rates again. And surely Congress and the president need to be vigilant about depleting the remaining surplus. But it is a surplus we are dealing with.
The sky might not be clear and blue, but it isn't falling.
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