Bogged Down: Why This Economy May Never Get Going
Compounding the strictly economic problems are profound political-economic difficulties: The Reagan administration was able to deal with renewed economic problems by temporarily raising military spending, devaluing the dollar to stimulate exports and cutting taxes to produce economy-boosting Keynsian deficits. All these major economic cards have now been played.</br></br>AS .THE ECONOMY continues to send contradic-tojry signals, a disturbing question arises: Is it conceivable that the United States has entered a period not simply of recession and temporary cyclical downturn, but of long-term, persistent stagnation?</br></br>It so, the kinds of policies it will take to get us out of the economic doldrumsÛÓand the political reappraisal needed to bring jpolicymakers to consider themÛÓare likely to be far more [wrenching than most Americans are yet willing to contemplate.</br></br>Stagnation has been evident in numerous economic indicators for a considerable period. In 1990, for instance, median household income adjusted for inflation was $1,000 less than; it was 17 years earlier. Between 1977 and 1988 average wages and salaries of the bottom 90 percent of the population fell 3.5 percent. Wages for a young male high school graduate entering the job market in the late 1980s were 18 frercent lower than in the late 1970s. Now, even if we expedience a modest resumption of growth, most forecasters expect it to be so tepid as to produce virtually no improvement in the unemployment rate.</br></br>The idea that we may be confronted with ongoing stagnation is| not something many experts have been willing to talk ope ply about. Most economists continue explicitly or implicitly to suggest that our troubles derive from the recurrent cycle of recession and upswing that is the "normalÛ way a modem economy is held to function.