TCS Daily

The 19 Fat Years and How We Can Do It Again

By James K. Glassman - November 19, 2001 12:00 AM

MINNEAPOLIS, Nov. 15 -- It`s late at night and strangely warm in my second `-apolis` of the day. Earlier, I gave a speech in Indian; now, I`m in Minne.

Indianapolis is a surprisingly beautiful city: spacious, calm, spotted with wonderful early 20th century classical buildings (like Washington, only better), with gorgeous proportions. Minneapolis is something else: built for the cold with those Skyways blocking the vistas.

The main reason I am in the Midwest is to talk about the economy. The National Bureau of Economic Research, official scorekeeper of recessions, is now saying that the current recession "probably" began in March. I prefer July, but who cares? We`re in it, and it ends the longest expansion (that is, a period without a decline in output) in American history: 10 years (or 10 years and four months, depending on whether you pick March or July). That`s nothing short of amazing; so is the fact that the U.S. went for 19 years with only a shallow recession -- the greatest economic boom period the world has ever seen.

It is no accident that those 19 years began when Paul Volcker bit the bullet and flattened inflation by relentlessly raising interest and Ronald Reagan had the courage both to stand by Volcker and to push hard for massive cuts in marginal tax rates.

Is the Golden Age over? Not at all. The Fed`s rate cuts since January (4.5 percentage points` worth) will begin to have an effect very soon; so will the tax cuts that the President and Congress approved early this year, against all odds. So will the administration`s reasonable attitude toward antitrust attacks on successful companies like Microsoft and toward exploring for energy and building up supply in the United States.

But challenges are ahead: Clearly, with the terror attacks, we need more tax cuts. And the president has to get Trade Promotion (formerly fast-track) authority. And, to remedy the sad failure of the Telecommunications Act of 1996, we need to split the monopoly Bell companies up to encourage more competition and innovation. The President is busy winning a war, but it`s time for those of us who aren`t directly engaged in Afghanistan to turn to domestic policy and give him the support he needs.

The stock market has made a magnificent rebound. The Dow is approaching 10,000 again after dropping to 8200 the week after the attacks. The Nasdaq is close to 2000 after falling to 1400. Stocks are now considerably above their levels BEFORE the attacks. The markets are anticipating an economic recovery, but it`s not going to happen quickly if we don`t get more tax relief, TPA and changes in telecommunications and energy policy.

People here in the heartland, which has benefited from the boom of the past 20 years, are worried. They should be. But they should also be helping.


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