- The Washington Times - Friday, February 11, 2000

The current economic expansion, already the longest in the nation's history, should keep going this year and beyond even though a recent surge in productivity may not last, the Clinton administration said Thursday.

The administration used this year's 432-page "Economic Report of the President" to take part of the credit for the good times, with unemployment and inflation both at 30-year lows and consumer confidence at record highs.

While praising the Federal Reserve for pursuing an astute monetary policy, the economic report said the administration deserved credit for making the tough choices to eliminate the soaring government deficits it inherited.

The report said that, by turning huge deficits into record surpluses, the administration helped keep interest rates 30 percent to 50 percent lower than they had been during the 1980s. Also, the low borrowing costs have fueled an investment boom by businesses.

"Today, the American economy is stronger than ever," President Clinton said in the report, which like the $1.84 trillion budget he released on Monday was heavy on themes the Democrats hope to use in the fall elections.

"More than 20 million new jobs have been created since Vice President Gore and I took office in January 1993," Mr. Clinton said in one of his stated references to Mr. Gore, who is running to succeed him.

Republicans maintain that the administration only reluctantly agreed to balance the budget under pressure from the Congress, which they control. Republicans also give credit for the economy's good times to Ronald Reagan, who first appointed Chairman Alan Greenspan to the Federal Reserve. And they point out Mr. Reagan's championing of large tax cuts in the 1980s, which they say laid the groundwork for the current boom.

The economic report, prepared by the president's three-member Council of Economic Advisers, contained details of the administration's updated economic forecast, which formed the basis for budget projections forecasting $746 billion in non-Social Security surpluses over the next decade.

The annual report forecast that after three straight years with economic growth averaging more than 4 percent, the economy will slow in 2000 to 2.9 percent, when measured from the fourth quarter of each year, and slow to 2.5 percent in the following three years. Such a slowdown would see the unemployment rate rise slightly to 5.2 percent from the current 4 percent.

Part of recent economic strength has come from a remarkable jump in productivity growth, the amount of output per hour of work. The government reported Tuesday that productivity in 1999 increased by 2.9 percent, the strongest increase in seven years.

Over the past four years, productivity has risen at an annual average of 2.6 percent, far higher than the 1.4 percent annual average increase from 1973 to 1995.

After booming gains in the 1950s and 1960s, productivity went into a two-decade slump after the first Arab oil embargo in 1973. The recent upturn has left some analysts believing that huge business investments in computers are finally beginning to pay off and the country is in a new economic era that will be marked by stronger productivity gains.

Productivity is the key factor determining whether Americans' standards of living can increase. Higher productivity allows employers to pay higher wages that are not inflationary because they are financed by increased output rather than increased charges for goods and services.

The president's economic report, however, sounded a note of caution about how long this near doubling in the rate of productivity growth will last.

Rather than predicting gains of 2.6 percent, the average from 1996 through last year, the administration's economic forecast projects more modest annual increases of 2 percent.

But Martin Baily, chairman of the president's economic council, said the administration is erring on the side of caution on productivity as well as on overall economic growth.

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