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Introduction: The U.S. Economy: How Good, How Bad?
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14219 |
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CURRENT ISSUES
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7 / 1988 |
1,032 Words |
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When is "good" bad and "bad" good other than when speaking to Michael Jackson fans? The answer is: When listening to a room full of economists talk about the U.S. economy.
To most of us, the falling U.S. dollar seems bad; to some economists, it's good. To laymen, a low unemployment rate is good; to a majority of economists, it's bad. Is the difference simply in the way we see a glass of water as half-empty or half-full? Or are fundamental economic differences involved?
For example, the falling dollar means that U.S. exports will cost less, and foreigners will very likely buy more, which in turn reduces the big "bad" U.S. trade deficit. Good or bad? Furthermore, according to the Phillips curve, the closer the employment rate moves to full capacity, the higher the rate of inflation. Good or bad?
Or have all the economic theories run amok with the economy? (Last year's October 19 market crash defied supply and demand laws.) To paint the grayest picture, one can portray the United States as having moved from the world's largest global creditor to the world's largest debtor nation, from a superpower committed to supporting international democracy to not being able, or willing, to pay its dues around the world, and from having a strong gold-backed dollar to having a weak nose-diving currency.
Doomsayers point to the "tremendous" federal and trade deficits and the enormous national debt. They see another depression as sure to follow. But are things really that bad? THE WORLD & I went to internationally respected economists to find out just how good and bad the U.S. economy truly is.
Robert Eisner, president of the American Economic Association, asserts that the United States does indeed have some problems, but they are not the ones most publicized. The most talked about problem, the federal debt, must be seen in relation to income, says Eisner. He explains that "if an individual borrows from a bank to buy a house, the key question in deciding on the debt that can be incurred is the individual's income." Obviously, a $100,000 loan (debt) will be more easily granted to one whose annual income is $50,000 than to one whose income is $20,000. Eisner argues that a similar standard should be applied to the government, where income is the gross national product. With this measurement, the U.S. debt is historically great, but proportionately average. "Our budget deficit," writes Eisner,
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