For the first time in a long time, the nation – and its policymakers – can emerge from crisis mode. This is the ideal time for President Biden and Congress not only to put in a victory lap, but also to begin addressing the long-standing challenges facing the United States.
There are always surprises for the US economy – and almost all of them have been cheering lately. Growth this spring was better than expected. Inflation is cooling faster than expected. Unemployment remains near its half-century low. The optimism increases. Consumer spending remains solid. Wages are now rising faster than inflation. UPS workers won’t go on strike after the company gives them a big raise. The stock market is near all-time highs. Wall Street banks are no longer predicting an imminent recession. Corporate investment is picking up. Even in residential construction, a trend reversal seems to be taking place. The country may be able to do what many pundits thought impossible: bring down inflation without triggering mass layoffs and a downturn.
Mr. Biden is eager to acknowledge the Goldilocks economy. The latest data shows that government investment in infrastructure and manufacturing is helpful but modest so far in a $25 trillion economy. The Federal Reserve’s aggressive fight against inflation has played a bigger role. However, the biggest factor seems to be the economy’s return to normalcy after three years of turmoil. Fed Chair Jerome H. Powell used the words “normal” or “normalization” nine times in his press briefing on Wednesday to characterize everything from supply chains to the labor market.
Americans are beginning to notice the improvement. Sentiment has skyrocketed in recent weeks. People are finally leaving the pandemic behind and allowing themselves fun and optimism again. This is the summer of Taylor Swift, friendship bracelets, European vacations and Barbie movie laughs. It’s a comeback era.
What is particularly clear is how much the United States has recovered compared to the rest of the world. China’s economy is sluggish, Germany has barely emerged from recession and Britain’s inflation is still close to 8 percent. In the United States, the comeback has been so strong that growth has almost returned to pre-pandemic trends. Similarly, middle-class wages are close to pre-pandemic trends, even after accounting for the recent inflation shock.
That doesn’t mean the country is lacking in problems. Lower-income households are still feeling higher costs, a reminder that the inflation battle is not over yet. Home ownership remains out of reach for many and credit card debt is at an all-time high.
Still, the country’s belated fortunes offer its leaders an opportunity to catch their breath and address some long-term national issues. Topping the list is the national debt and $32 trillion in immigration. Tackling these problems would allow the United States to grow faster in the coming decades. It would also prove to the world that American leaders are still capable of solving tough problems.
Social Security will not be able to pay full benefits as early as 2034. Simple changes now—primarily raising taxes on the rich and slowing their output growth—would save the program for everyone, especially lower- and middle-class Americans. Who really needs it? In a recent series, we outlined other options for debt stabilization over the next decade – a mix of cautious spending cuts and tax modifications. Failure to act would mean that the US government would spend an increasing amount on interest costs, reducing the government’s and private sector’s ability to make future investments.
Immigration has been a hot topic for 20 years now. As baby boomers retire, the United States needs more workers. There has been an encouraging increase in the number of people re-entering the workforce, particularly among black women, but more workers are needed. The United States is in a global war for talent. Mr. Biden’s plans to build more factories domestically are already being delayed due to a shortage of skilled construction workers. It is long overdue for Congress to fundamentally improve its immigration policy. Meanwhile, Mr. Biden is right in using all the power at his disposal to let in more migrants through legal channels.
The country has made a remarkable economic comeback. Now it’s time to aim higher.
– The Washington Post, July 29
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