The good news for the new year is that the American economy is not only on the mend but is gaining strength in a big way.

If that much were not clear before, it should be indisputable from the very latest reports on how the economy is performing and how confident Americans feel about the future.Right after one report showed existing homes are selling at a record pace, the government's chief forecasting gauge predicted that shipments from the nation's factories will grow in 1994 at their fastest rate in six years.

Meanwhile, another survey shows that rising personal incomes are fueling increased consumer confidence. Increased consumer confidence, in turn, means that Americans can be expected to spend more for goods and services.

Since consumer spending accounts for two-thirds of the nation's economic activity, anticipations of stepped-up spending can be expected to prompt manufacturers to build inventories and invest in capital equipment. Recent low interest rates tend to spur the trend.

Indeed, sales are already up. So are orders and profits.

Since the president of the United States always takes much of the blame when the economy goes sour, President Clinton can't be criticized for taking a few bows. But the fact is that politicians seldom affect something as big and complex as the American economy except belatedly and marginally. Even by a reasonably generous standard, Clinton's record on the economy is mixed.

View Comments

The middle-class tax cut he promised during the election campaign never materialized. His misguided effort to pump $16 billion into the economy was wisely scuttled. But his accomplishments in further international trade are solid.

Otherwise, if credit is due in Washington, it should go to the Federal Reserve Board for gradually easing interest rates over a three-year period to give the economy a much-needed boost. Though FRB Chairman Alan Greenspan has been criticized for moving too slowly, the end result is an inflation-free recovery. It's hard to quarrel with the results.

With the economy rebounding and consumers increasingly confident, Washington can expect less demand for radical reform of health care as Americans seek to hold on to what they already have. At the same time, fewer fears about the economy can be expected to prompt a shift to crime as the No. 1 worry of most Americans.

The main question is whether Washington will shift, too, during the coming year or remain stuck in the same ideological ruts. As a key case in point, will the White House and Congress have the political courage to make painful but necessary cuts in federal spending? Or will they simply keep on creating new entitlements and more drains on the Treasury and taxpayers? Past performance provides little reason for optimism on this score.

Join the Conversation
Looking for comments?
Find comments in their new home! Click the buttons at the top or within the article to view them — or use the button below for quick access.