Take back the tax cut

As the new year begins, the economic future seems more uncertain than usual. We don't know when the recession will end. Nor do we know when the war on terrorism will end—or even how we will know when it is over.

But there are a couple of assumptions that we can safely make.

First, whenever the recession ends, the U.S. economy is unlikely to return to the boom conditions of the last half of the 1990s. In the wake of the collapse of major companies like Enron and the loss of some five trillion in stock market value, it will take years to arouse the animal spirits of speculation that pumped up the economic bubble.

Second, intense competition from a deregulated global economy and the domination of short-term financial horizons will continue to fray the bonds of loyalty and commitment between employers and workers.

As a result, all the problems we were wrestling with before the boom will reappear. Slower growth will mean greater unemployment—particularly for those at the bottom of the wage ladder. With a safety net that is increasingly torn, hardship will spread. The long-term trend toward rising inequality, which was interrupted by the tight labor markets of 1996-2000, will resume. The health care crisis will get worse—not only will the number of uninsured and underinsured grow, but the cost of health care and the shifting of that cost to individuals will continue.

And with the bursting of the stock market bubble, the heady expectations that ordinary workers could speculate themselves to retirement security have deflated. The assets of many 401k plans are back to where they were in the early 1990s. With the disappearance of defined benefit plans, a growing crisis in retirement income is in the offing.