Far from weak, U.S. economy described as still in the lead

Economic journalist Knight Kiplinger provides optimistic outlook during Princeton University talk

By: Alex Gennis
   Although recent events may have given people the impression that America’s economy is in danger, quite the opposite is true, with the United States economy facing an optimistic future, Knight Kiplinger, a leading economic journalist and business forecaster, told Princeton University students and community residents in a March 29 address.
   Nonetheless, the United States must reduce its dependence on foreign oil, and tackle the huge cost of domestic entitlements such as Social Security and Medicaid among other issues, if its economy is to continue to set the pace for the rest of the world, said Mr. Kiplinger, the editor in chief of Kiplinger’s Personal Finance magazine, in a talk given at Princeton University’s Whig Hall.
   "(In the past 15 years) the U.S. rate of growth has been far and away the strongest among all the major industrial nations of the western world," he said.
   Mr. Kiplinger said the 2001 recession and several recent events have given people an impression that America’s economy is in danger. "We gather today at the time of rising public anxiety about America’s economic future, and the factors in this anxiety are numerous," he explained.
   Mr. Kiplinger identified fierce global competition, increasing American dependence on foreign energy, a negligible savings rate, and a growing reliance on foreign capital to fund the U.S. budget deficit as the main economic setbacks that Americans are anxious about.
   However, Mr. Kiplinger noted that despite these setbacks the strength of the U.S. economy enabled it to endure and to help the world deal with its own economic difficulties.
   "The United States looks like the Energizer bunny of the global economy," Mr. Kiplinger explained. "Over the last four years, the United States has been the only economy in the world poised on the brink, holding the global economy back from plunging over the brink into global recession."
   America’s prudent monetary and fiscal policies allowed it to become such a prominent player in the world economy, said Mr. Kiplinger. He praised the Federal Reserve Bank’s slashing of short-term interest rates, President George W. Bush’s tax cuts, and increased government spending for getting America out of a recession.
   "U.S. consumers and businesses began spending again with gusto. Low mortgage rates sent home prices soaring," Mr. Kiplinger explained. "In short, the United States became the world’s customer of last resort or, in many cases, first resort."
   Mr. Kiplinger acknowledged that America still faces several economic challenges, but remarked that other countries have been too quick to point out its shortcomings.
   "The rest of the world likes to wag its finger at us and scold us for over-consumption — for being profligate — as if they haven’t benefited enormously from America’s love of consumption," Mr. Kiplinger explained.
   Yet Mr. Kiplinger warned that the current state of the global economy is only sustainable in the short run.
   "The United States consumer isn’t exhausted — winded on the side of the track — but the U.S. consumer is getting a little tired pulling the wagon of global economic growth all by himself," Mr. Kiplinger said. "We’re moving into a period of a global economy of more balanced economic leadership — different parts of the world taking turns pulling the engine of global growth."
   He pointed out that, contrary to common belief, the rise to prominence of other economies does not threaten America’s economic position.
   "(It) will create better markets for U.S. exports," Mr. Kiplinger said. "With growth picking up in the rest of the world, there will be more markets for what we make."
   Although he praised America’s heavy consumption for being helpful to the world economy, Mr. Kiplinger warned about excessive U.S. dependence on foreign energy.
   "I would like to see America become more serious about alternative energy fuels more quickly," Mr. Kiplinger added.
   He also drew attention to America’s rapidly aging population and the uncertain future of its entitlement programs.
   "Heavy military spending will be replaced by soaring spending on Social Security and Medicaid. These are big issues that Congress doesn’t yet have the guts to deal with," Mr. Kiplinger explained.
   He suggested partial voluntary privatization as one plausible solution to the financial problem facing Social Security.
   Looking at the U.S. economy as a whole, Mr. Kiplinger saw no cause for worry and called for increased optimism about America’s economic future.
   "My optimism is not based on blind faith — it is based on the study of history," he said. "I don’t see evidence of a nation in decline, I see evidence of a nation in transition."
   Mr. Kiplinger stressed that to ensure continuing economic prosperity amidst the rapid rise of other economies, the U.S. must remain an attractive destination for foreign investment.
   "We’re not the only show in town," Mr. Kiplinger explained. "We have to keep our economy flexible, welcoming. That’s a tall order because we are the big boy on the block."