http://news.excite.com/news/r/000201/20/economy-record

FOCUS-Still feisty U.S. economy hits milestone Updated 8:18 PM ET February 1, 2000

By Glenn Somerville

WASHINGTON (Reuters) - Still feisty after nearly nine years of uninterrupted growth, the U.S. economic expansion which is spinning up new jobs moved into record territory on Tuesday with no end to the boom in sight.

Every piece of evidence showed the world's largest economy still vigorous as it entered its 107th month of growth, which eclipsed the previous record expansion set over 106 months from February 1961 to December 1969.

"As February begins, the economy is going into the longest expansion in American history," Treasury Secretary Lawrence Summers told reporters. "That is a substantial accomplishment for American workers and American business."

But Summers also said both consumers and businesses needed to be aware of the risks. The United States needed to maintain its budget surpluses and refrain from "inappropriate" tax cuts or spending hikes, he said.

The Commerce Department's most recent report said construction spending grew two percent in December to a seasonally adjusted record $730.3 billion, reflecting brisk momentum as the millennium began.

Separately, purchasing managers for the country's big corporations said manufacturing remained buoyant in January, with the National Association of Purchasing Management's factory index slightly easing to 56.3 from 56.8.

The last recession, a brief one from July 1990 to March 1991 when the current expansion began, seemed barely a memory to confident consumers and to U.S. leaders as they fearlessly surveyed sunny prospects.

"It's an expansion that was earned by the American people through hard work, high technology, open markets and fiscal discipline," President Clinton said at the White House, quickly adding: "We ought to be determined to continue, to deepen, to improve."

The expansion has created millions of new jobs, pushing down unemployment which hit a three-decade low of 4.1 percent at the close of last year and is forecast to go even lower.

Inflation, as measured by consumer prices, increased by a modest 2.7 percent last year, and excluding volatile food and energy prices was at mid-1960s levels of 1.9 percent.

"This combination of strong real growth, low inflation and a falling unemployment rate is unique in U.S. post-World War Two economic experience," said John Auten, director of the Treasury Department's Office of Macroeconomic Analysis.

Auten can speak with some authority -- he came into government with the Kennedy administration of 1961-63. He was briefing Bond Market Association members at the Treasury on Tuesday, a day before Treasury announces its latest quarterly borrowing plans tailored for an era of surpluses.

A striking feature of the expansion is the emergence of the first budget surpluses in 40 years, beginning in 1998 and forecast to continue through about 2010 as tax revenues pour into Treasury's coffers from corporations and individuals.

That has enabled Clinton to credibly talk about paying off the nation's debt -- at least the $3.6 trillion of the $5.6 trillion that is publicly held -- by 2013 in order to free up capital for investment.

The short term appeared rosy. The nation's gross domestic product expanded four percent last year after growing 4.3 percent in 1998 and 4.5 percent in 1997.

"All things considered, the economy seems likely to grow at a somewhat more moderate, but still healthy pace going forward, with inflation remaining under control," Auten said.

There were a few clouds on the horizon, however, with Federal Reserve policymakers meeting Tuesday for a two-day session expected to produce an announcement of higher interest rates.

Fed Chairman Alan Greenspan, lauded as a prime architect of the expansion, has expressed his worry that a scarcity of employees to hire could start a wage and price spiral if growth remained at the current pace.

The U.S. central bank's traditional role is to prevent too much of a good thing from tipping the economy back into recession, so economists note there may be more interest-rate hikes to come if growth runs at rates likely to fan prices.

"The only real risk we see to the expansion is the Fed possibly going too far" with rate rises, said economist Gary Thayer of A.G. Edwards and Sons Inc. in St. Louis, Mo. "The Fed can always end an expansion."

-- Hokie (Hokie_@hotmail.com), February 01, 2000

Answers

Excellent article to post - American politicians need to demonstrate fiscal responsibility and pay off the ever growing debt -

-- Bob (bmoss3@prodigy.net), February 01, 2000.

---it's a totally false "expansion"-or labeled as such-based on theoretical future amounts of productivity and real tangible wealth, with incredible,staggering amounts of credit as the only collateral, fueled by increasingly lower and more expensive supplies of a finite amount of available resources that power what real productivity is actualy going on. It's a dream based on a premise that you can get something for nothing forever. It's quite pleasant while you are still dreaming. Sometime the awakening will occur.

-- zog (zzoggy@yahoo.com), February 01, 2000.

I'm with you Zog. I thought it was a great example of the kinda spin that's manipulating the sheoples.

-- Hokie (Hokie_@hotmail.com), February 02, 2000.

Well, ABC NEWS has a few concerns about this current "expansion": The Dark Side Of The Boom

Amid Spending Spree, Economists Are Troubled by Mounting Consumer Debt N E W Y O R K, Feb. 2  When she was an undergraduate student 10 years ago, Frances Buck never considered taking out a student loan. Buck, who asked that her real name not be used, had always prided herself on leading a debt-free life. Her fear of credit and uncertainty about her future after graduation discouraged her from borrowing money. Even a dollar owed is too much for me, Buck says of her philosophy.

Live Now, Pay Later

But her attitude changed when she entered graduate school in 1996. Encouraged by the rosier picture of the U.S. economy, Buck decided it was a safer bet to take out a student loan. I felt like I would be able to get a job, whereas when I was getting out of college in 92, I didnt have such assurances, she says.

Bucks change of heart is typical of many U.S. consumers in this record period of economic expansion. Emboldened by the robust economic growth and low inflation, Americans are consuming more than ever  and paying the price later.

A Borrowing Binge?

Many economists say the enormous amount of debt Americans are taking on is a troubling aspect of the current economic expansion because like all good things, it will come to an end sooner or later.

Americans are on a borrowing binge, and Im not sure how long this can continue, says Michael Szenberg, professor of economics and the director for the Center of Applied Research at Pace Universitys Rubin School of Business.

According to the Federal Reserve, total outstanding consumer debt in November 1999 was a massive $1.38 trillion  79 percent higher than a decade earlier. The fact that much of the robust consumer spending is fueled by credit is particularly problematic for many economists since it creates a bubble economy and a false sense of prosperity...

-- DeeEmBee (macbeth1@pacbell.net), February 03, 2000.