Something Has to Give

Uncertainty seems to be everywhere these days. Nearly everyone we talk to senses the same thing.

Americans, normally an optimistic lot, are uneasy about the future. Less than half now think we’re heading in the right direction. But it’s hard to tell if the dark mood is the cause of the slow economy or if the slow economy brought about the dark mood.

There are other things that enter into the general anxiety of the times, such as warnings of possible terrorist attacks and the near-certainty of war with Iraq. All are connected.

Yet, generally, the economy has been puttering along at a decent pace. The Fed’s economic forecast says the overall economy will grow at a rate of 3.25-3.5 percent this year, as measured from the fourth quarter of 2002. Last year, the economy’s growth rate was 2.8 percent. Unemployment is expected to remain below 6 percent, which is higher than we’ve become accustomed to but nothing like the bad old days.

We suspect the continuing doldrums of the equities markets has made everyone think the economy is bad. The uncertainties have made companies reluctant to invest in capital spending until some international issues are resolved. Consumers have done just about all they can to keep the economy going, and we can’t help wondering how many more homes and cars can be bought.

A true recovery will depend on an increase in capital spending, building inventories and hiring by businesses.

Federal Reserve Chairman Alan Greenspan said fiscal stimulus legislation would be premature until it becomes clearer what impact war would have on the economy. Instead, Greenspan urged Congress to restrain spending and limit budget deficits.

While we have a great deal of respect for the Fed boss and think he’s right with his warnings about the dangers of long-term budget deficits, we’re not so sure that some sort of short-term federal stimulus may not be needed.

We’re less sure, however, if it ought to be President Bush’s plan in light of projected record deficits of $304 billion this year and $307 billion next year. Couple the rising fuel and energy costs and a baby-boomer generation hitting retirement age and the demands that will put on the Social Security system — not to mention the war — and it’s hard for us to justify the president’s $1.3 trillion tax cut package.

Most needed is an end to the anxiety over Iraq. The longer the situation drags on in limbo, the longer it will affect both the markets and the economy.