With The Economy Booming, It's Time To Solve Problems

From the editorial board of The Washington Post:

For the first time in a while, the nation — and its policymakers — can step out of crisis mode. This is an ideal moment for President Biden and Congress not just to take a victory lap but also to start tackling the United States’ long-running challenges.

The surprises keep coming for the U.S. economy — and nearly all have been worth cheering lately. Growth was better than expected this spring. Inflation is cooling off faster than anticipated. Unemployment remains near half-century lows. Optimism is picking up. Consumer spending remains solid. Wages are now rising faster than inflation. UPS workers are not going to strike after the company gave them a large raise. The stock market is near all-time highs. Wall Street banks no longer predictan imminent recession. Business investment is picking up. Even housingappears to be turning around. The nation might be able to achieve what many experts deemed impossible: bringing down inflation without triggering mass layoffs and a downturn.

Mr. Biden is eager to take credit for this Goldilocks economy. The latest data show government investments in infrastructure and manufacturingare helping, but they are modest so far in a $25 trillion economy. The Federal Reserve’s aggressive battle against inflation has played a bigger role. But the largest factor of all appears to be an economy returning to normal after three years of turmoil. Fed Chair Jerome H. Powell used the words “normal” or “normalization” nine times in his news conference Wednesday to characterize everything from supply chains to the job market.

Americans are starting to notice the improvement. Sentiment has jumped in recent weeks. People are finally putting the pandemic behind them and allowing themselves to embrace fun and optimism again. This is the summer of Taylor Swift, friendship bracelets, European vacations and “Barbie” movie laughs. It’s a comeback era.

It’s especially pronounced how much the United States bounced back vs. the rest of the world. China’s economy is sluggish, Germany’s is barely out of a recession, and Britain still has inflation near 8 percent. In the United States, the comeback has been so strong that growth is nearly back to its pre-pandemic trend. It’s a similar story for middle-class wages, which are close to the pre-pandemic trend even after adjusting for the recent inflation shock.

That doesn’t mean the country lacks problems. Lower-income households still feel higher costs, a reminder that the inflation battle isn’t over. Owning a home remains out of reach for many, and credit card debt is at a record high. Beyond economics, the ongoing GOP assaults on abortion, LGBTQ+ rights and basic facts about slavery are another reminder of how far from normal some aspects of life remain.

Even so, the country’s late good fortune offers its leaders an opportunity to take a breath and address some long-term national problems. At the top of the list are the $32 trillion national debt and immigration. Addressing these would set up the United States for stronger growth in coming decades. It would also prove to the world that American leaders are still capable of fixing tough problems.

Social Security won’t be able to pay full benefits as early as 2034. Simple changes now — mainly increasing taxes on the wealthy and slowing their benefit growth — would save the program for all, especially the lower- and middle-class Americans who really need it. We spelled out other ways to stabilize debt over the next decade — a mix of careful spending trims and tax modifications — in a recent series. Failure to act would mean the U.S. government would spend a growing amount on interest costs, reducing the government’s and the private sector’s ability to make investments in the future.

Meanwhile, immigration has been a top issue for 20 years. As baby boomers retire, the United States needs more workers. There has been an encouraging uptick in people entering the labor force again, especially women of color, but more workers are needed. The United States is in a global war for talent. Mr. Biden’s plans to build more factories at home are already being delayed citing a shortage of skilled construction workers. Congress is overdue for a major upgrade to immigration policies. In the meantime, Mr. Biden is right to utilize every power he has to let in more legal immigrants through asylum and parole.

The country has seen a remarkable economic comeback. Now it’s time to aim higher.