Economic Policy

Abstract

THE AMERICAN ECONOMY IS THE largest and most productive in the world. Not only does it have the highest per capita levels of productivity and output of any industrialized country, but even its modest growth in 1992 surpassed the performance of the other major industrialized countries. The American economy faces serious short-term problems and long-term challenges, however. As past Economic Reports of this Administration have stated, the Nation cannot take sustained, long-term economic growth for granted. It must pursue wise economic policies that improve the foundation and performance of the economy. Such policies are by nature limited but not passive. Activist economic policy reforms can greatly improve the performance of the American economy, laying a better foundation for the economic growth that provides expanded employment opportunities, not just for new entrants into the labor force but for those seeking upward economic mobility, a higher standard of living, a richer legacy of prosperity for our children, the resources to help pay for nontraditional goods and services such as a healthy environment, and assurance that America's economic and geopolitical leadership will extend into the next century. Because the last 4 years have been so challenging to the American (indeed, to the world) economy and more recent economic performance has not been what Americans have come to expect, two currents of opinion have gained currency, based on a lack of accurate information and faulty analysis. The first, which can be labelled "declinism," puts forth the notions that America has been in substantial decline, that America is lagging behind its economic competitors, that economic collapse is just around the corner, that the United States is deindustrializing, or that foreigners will soon own all (or at least too much) of America. These complaints cannot survive a thorough scrutiny based on readily available factual information and sound economic analysis. To be sure, the American economy does, indeed, face serious challenges, but it does so from a position of great strength and with the tools and experience needed to overcome them. On one point, however, the prophets of declin-