Are we better off than we were?

OPINION
Published: August 29, 2008

Are Americans better off financially than they were five years ago? Yes and no. Energy prices are much higher today. But the values of homes are higher, too, despite the recent downturn. So is the stock
market. In the summer of 2003, the U.S. economy was into the second year of a recovery following the dot-com recession, the corporate accounting scandals, and the fallout from the 9/11 terrorist
attacks. The economy was improving, but had just started to kick into high gear.

Remember all the grumbling about the “jobless recovery”? That came to an end five years ago when the second round of President Bush’s tax cuts was enacted. These cuts were aimed at capital,
investment, and innovation and were far more powerful than the first round. They worked and the economy grew rapidly for four years, creating millions of jobs.

Today, we’re mired in the middle of the first economic slowdown since 2001. Whether it is technically a recession or not isn’t terribly important. The country has hit a rough spot, spurred primarily by high
energy prices and the dire consequences of the unraveling of many excesses in the housing market. Unemployment is gradually climbing, though it remains well below levels historically associated with
recessions.

More alarming is the increase in inflation, which has taken a bite out of household income for most Americans. The recent sharp fall in the price of oil and other commodities may signal the end — at
least for now — of 5-percent-plus headline inflation. But hoping world commodity markets will settle down is not a sound economic policy for a great country. Richmond Federal Reserve President Jeff
Lacker was right — once again — when he implied recently that the central bank needs to reassert its role as a force for price stability.

Fighting inflation, supporting the dollar, producing more domestic energy, avoiding tax increases, and bringing more discipline to government spending are the critical economic challenges facing the
United States in the next few years. The country also must fix its Rube Goldberg approach to paying for health care. Eliminating the tax code’s bizarre effects on medical spending is the place to start.
And we must begin to tackle the Social Security and Medicare funding deficits, which are enormous.

Much work to do, but no reason to panic. Yet.

Are you personally better off now than you were five years ago? Do you think the U.S. economy will be better off in five years than it is now? Visit the online Public Square on TimesDispatch.com and
inRich.com. Type in the keyword “consumer” to join the conversation.

— Richmond Times-Dispatch