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The economic long run

When our remarkable ride ends, will it be with a bang or a whimper?

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The amazing US economic expansion reached its 106th month in February, making it the longest-running, uninterrupted period of growth in US history. There's much debate over who deserves credit, but little sober discussion of how the expansion might end.

There is no shortage of candidates for credit, and President Clinton is first on the list. Upon election in 1993, he realized that lower interest rates borne of deficit reduction would prove a longer-lasting stimulant than the deficit-expanding spending programs he originally championed.

This act of fiscal apostasy was anointed with low interest rates by Federal Reserve Chairman Alan Greenspan, who gets a share of credit for the expansion by allowing the economy to grow at rates that would have given his predecessors vertigo. And he has helped provide stability in times of crisis - in Mexico in 1995, Asia in 1997, Russia and Long Term Capital Management in 1998.

But credit for the economy's success is due, too, to Robert Noyce and Jack Kilby, who separately, in 1959, perfected the integrated circuit, from which flowed the microprocessor, the computer, and the Internet - all of which have transformed the economy as much as any policy.

To some, giving Clinton-Greenspan credit for the expansion triggered by the Information Revolution is like giving Moses all the credit for water flowing from the rock at Hebron: Providence also had something to do with it. There's merit to this view, but absent the stage Clinton and Greenspan set, it's unlikely today's revolution would have proven so robust.

But the debate over the expansion's origin obscures the more important question: How will it end?

The economy has grown at a muscular 4 percent for four years. But as knowing Wall Streeters say, "Trees don't grow to the sky" - nothing goes on forever. When economies falter, it's usually because some delicate balance has gone out of whack.


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