WHAT IS HAPPENING TO THE AMERICAN ECONOMY?
As of the fourth quarter of calendar year 1990, the American economy entered recession (Council of Economic Advisers, 1992, p. 3). Thus, for five consecutive quarters, the GNP has declined; the longest GNP decline since the four quarter decline in the first Reagan Administration fourth quarter of calendar year 1981 through the third quarter of calendar year 1982 (Council of Economic Advisers, 1984, p. 222; Council of Economic Advisers, 1992, p. 3).
The preliminary report of the second quarter of calendar year 1991 economic performance had indicated that the GNP had grown 0.4 percent during the quarter. That preliminary report caused President Bush and his economic advisers to declare that the recession was over. Declaring the end of the recession also provided the president with an excuse not to trigger the long term unemployment compensation extension then recently enacted. The revised data, cast new doubts on the underlying strength of the economy, and the extent to which it will be able to bounce back from recession. In the second quarter of 1992, the Bush Administration is once again touting the end of the recession. A significant decline in retail sales in March 1992 (reported on 14 April), however, is once again casting doubts on claims of economic recovery (The New York Times, 1992, B1).
The economic and political advisers to the Reagan and Bush Administrations began to sound somewhat like those to the Kennedy and Johnson Administrations. In the 1960s, the Kennedy and Johnson Administrations cut taxes, financed a war, and expanded domestic spending. In the process, they created what their advisers believed was an economic nirvana. Some of these advisers even held that business cycles were a thing of the past. In the longer run, however, the American economy paid the price in the late 1970s and the early 1980s. In the mid and late 1980s, the Reagan Administra...