The years since the mid-1970s have been an unusual and disquieting period. Even before the events of last October 19 there was a growing sense that something was not quite right in America’s economic life. The system appears no longer to be working as it should.
On economic matters, we seem to be governing ourselves less adequately than at any time since World War II; sometimes we seem to be confronted by factors and forces that we cannot quite understand, let alone predict or correct. We find ourselves more and more in an environment of unaccustomed economic uncertainty and instability, both at home and abroad, and with no real consensus on what is happening, what is causing it, or what should be done next.
In the postwar period we often confronted severe economic challenges at home and abroad, and we met them—not always perfectly, but certainly quite adequately and, in fact, rather well. Our domestic economic policies enjoyed a broad degree of support and met our needs. We created new international institutions and, on balance, they did the job. The depth of our problems was not an impediment to effective economic management and positive progress.
Can there be any doubt that we are not presently tackling the problems of the 1980s with equal understanding, imagination and success? Look first at our domestic scene:
—We are burdened with a federal budget deficit of unprecedented proportions, year in and year out, even in times of relatively satisfactory employment and growth. There is broad agreement that the risks are great, but not on much else. The nation with the world’s largest and most sophisticated economy has so far been incapable of finding a way out.
—We are running huge deficits in trade and current accounts which stubbornly fail to dissolve, even two years after our currency has been devalued relative to the world’s other principal currencies by more than 40 percent. Most predictions as to the timing of any real improvement
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