Will America's Good Times Keep Rolling On?

CAMBRIDGE: The U.S. economy is now in its eighth year of robust economic growth. The American unemployment rate is below 5% and is, thusly, at its lowest level in 25 years. Inflation, that scourge of not many years ago, seems to have virtually disappeared from the economic horizon.

Faced with these remarkable numbers, most Europeans, in particular the French, have responded almost viscerally by looking for flaws in America's performance: surely these numbers must conceal some dark blemish; surely they must contain some artificial economic growth. There must be some other way to prosperity besides the rough-and-tumble American way, many in Europe seem to say. The facts, however, suggest that, up close, American economic indicators are even more impressive than they appear from afar.

On the demand side, it is not public sector demand but private sector demand that has been the engine driving growth relentlessly ahead in the United States. Within the private sector, the biggest fuel for growth has not been consumer demand, but comes instead from investment demand and, despite the dollar's appreciation of recent times and the Asian crisis, a boom in US exports. Both US investment and US exports increased by about 10% last year alone. The American economy faces neither a problem of capital shortage, nor a lack of competitiveness.

The U.S. budget deficit has been eliminated, at least for now. This has occurred, moreover, almost completely without fog and mirrors. There has been no resort to the type of budgetary gimmicks that many European countries used to meet the deficit targets mandated for participation in monetary union by the Maastricht agreement.