- The Washington Times - Tuesday, February 1, 2000

Break out the champagne, cut the cake and strike up the band it's time to celebrate the U.S. economy.

Today, the current expansion that began in March 1991 becomes the longest in American history at 107 months, beating the old mark of 106 months set during the 1960s.

The eight years and 11 months since the last recession is quite a feat considering the average expansion before 1982 did not last long enough to see its third birthday, let alone its ninth.

"If you are not cheering for this accomplishment, then you have awfully high standards," said David Wyss, chief economist at Standard & Poor's Data Resources Inc. "This is an unprecedented economy."

And it is not just length that makes the current period remarkable.

By almost any measure, these are good economic times. Unemployment is at its lowest level in 30 years 4.1 percent consumer confidence is at record highs and Wall Street has just wrapped up an unprecedented five straight years of returns of 20 percent or more in the S&P; 500 stock list.

Long past the time that most expansions are showing their age, this one seems to be getting stronger, with 1999 marking the third straight year with growth at 4 percent or more.

Normally, economic growth at those levels, combined with a dwindling supply of workers, would translate into rapidly rising wages, leading to higher inflation. But not this time. Last year, the so-called core rate of inflation, which takes out volatile energy and food products, was up just 1.9 percent, the best performance in 34 years.

President Clinton takes every opportunity to cite the soundness of the Clinton-Gore deficit-reduction program as a key building block for the good economy, hoping voters will reward Democrats this fall.

Republicans are quick to note that the current recovery actually started nearly two years before Mr. Clinton took office, when Republican George Bush was president.

Mr. Bush's misfortune was that while the last recession lasted only eight months, from July 1990 until March 1991, the recovery in the early days was dubbed the "jobless recovery" because it was exceptionally sluggish, allowing Mr. Clinton to make the weak economy a key campaign issue in 1992.

Asked to apportion credit among government policy-makers for the good times, private economists generally give the lion's share of praise to Federal Reserve Chairman Alan Greenspan and his central bank colleagues.

Mr. Greenspan has already engineered one soft landing raising interest rates seven times in 1994 and early 1995 to slow things down and keep inflation under control. And he is now attempting a second soft landing.

Since June, the Fed has raised rates three times, and it is expected to do so again during its meetings today and tomorrow.

"The economy is growing so fast that even the Federal Reserve hasn't been able to slow it down, and that's why they will be raising rates again," said Richard Yamarone of Argus Research Corp.

Economists, in fact, are looking for as many as three more rate increases before summer, bringing the total number of credit tightening moves to seven in one year.

The absence of inflation pressures so far has allowed the Fed to let unemployment fall far below the 6 percent level that economists used to believe signaled dangers of rising wage pressures.

The remarkable combination of low unemployment and low inflation is often cited by proponents of a "New Economy" theory for why the current expansion has lasted so long.

They believe the billions of dollars invested in computers and other high-tech products has boosted America's productivity, the amount of output per hour of work. That, combined with new competition from the global economy, has kept the lid on prices, many analysts argue.

But even staunch supporters of the New Economy idea caution that the business cycle has not been repealed, and there will be another recession; they just don't have one in the forecast now.

"There is a possibility that the expansion could run into trouble in the next two or three years, but right now the types of forces that start us toward a recession are still not in play," said Allen Sinai, chief economist at Primark Global Economics in New York.

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