With the battles having begun in Iraq, the U.S. economy once again looks as if it might be on the cusp of emerging from its torpor. The Standard & Poor's 500-stock index rose more last week than it did during any week since September 2001, and Wall Street forecasters have predicted that a quick military victory would reduce economic uncertainty, causing a surge of corporate and consumer spending.
But this has become a familiar refrain. A year and a half ago, many economists said that the country would prosper as soon as it recovered from the Sept. 11 attacks. Early last year, the scandals at Enron, Worldcom and elsewhere were supposed to be all that was preventing a new boom.
With each new month of layoffs and other corporate cost-cutting, however, the exceptions begin to look more like a rule. Increasingly, corporate executives and some economists worry that the slow-growth economy of the last three years might in fact be the new reality, one that will bedevil workers and investors for a few more years.
"When it all comes out, we're going to have a significantly less sanguine outlook than we did in the late '90s," said Dale W. Jorgenson, an economist at Harvard University and an expert in productivity, widely seen as the most important factor for future growth. "That's something we're just going to have to get used to."
Economic turning points rarely announce themselves clearly, and rapid growth might truly be just around the corner this time, thanks to the Federal Reserve's reduction of short-term interest rates, say, or a technology breakthrough yet to be understood. At the least, a victory in Iraq would seem likely to cause a spurt of optimism and economic activity.
But there are tangible reasons to doubt that the United States will soon return to the heady times of the late 1990s. The federal budget deficit is rising, and the aging of the population will slow the growth of the labor force.
Consumers will probably not increase spending as rapidly as they did in recent years, and businesses — having invested so much in the boom years — still have a lot of idle factories and machinery.