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Crises and the Economy

These days the United States economy resembles one of those Saturday morning cartoon characters. It keeps getting smacked with a falling piano, or something like that, and it pops up again unharmed.

A financial crisis hits East Asia and Russia. Exports and some import sensitive firms are staggered. But the economy keeps growing at a handsome after-inflation 3.5 percent annual rate

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Stock market prices drop nearly 20 percent after July 17. Ho hum. They bounce back.

The House impeaches President Clinton. Though badly split on the issue, Americans continue with their Christmas shopping. Mall sales were up 4.5 percent in the first half of December and show no sign of drooping. And the consensus on Wall Street , for now, seems to be that impeachment is, financially, a "nonevent."

The US and Britain bomb Iraq, starting last Wednesday. The stock market has a good day Thursday.

Unlike the summer of 1990, when Iraq invaded Kuwait, American consumers retained their confidence. The Gulf War contributed to a recession in 1990-91. Today's economy, forecasters say, will slow somewhat in 1999. But it won't fall into a recession.

That's not to say that Desert Fox or impeachment proceedings will have no impact on the economy. The ordinance used on Iraq will need to be replaced. That could be costly. Hostilities in the Gulf usually cause jitters about oil supplies. But the recent action, despite some damage to Iraq's oil facilities, had no such effect - largely because of the current glut of oil worldwide.

The impeachment process could have economic consequences. If the Senate gets tangled in a long trial, chances of changing Social Security and/or cutting taxes may well fade.

But that, frankly, may not be so bad. Social Security is in need of attention to deal with a surge of beneficiaries a few years down the road, but it's in far better shape than those keen to privatize it would lead the nation to believe. According to the Social Security trustees, it will be able to pay full benefits to 2032. And next March, when the trustees report again, that date could be pushed further into the future.

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As for a tax cut, we would rather see federal debt reduction. It would put the nation's finances in better shape for eventually tackling Social Security - or, even more urgent, runaway Medicare costs.

Nonetheless, an economic argument can be added to moral and political ones in favor of a quick, strong bipartisan resolution of the impeachment process. This would have the virtue of allowing Congress to get on with its normal legislative functions, many of which affect Americans' economic lives.

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