Two cheers for a lackluster economy

Raise a glass to the longest economic expansion in modern American history.

A full decade has passed since the end of the last recession, in June 2009, and the economy continues to grow. As of Monday, the current expansion surpassed the previous record for uninterrupted growth, set between 1991 and 2001.

But this time around, no one is accusing Americans of irrational exuberance: These good times don’t feel particularly good. Economic growth over the past decade has been slow and fragile, and most of the benefits have been claimed by a small minority of the population.

The sense of disappointment is more than a feeling. Through the first quarter of 2019, the nation’s gross domestic product had increased by 25% during the current expansion. Between 1991 and 2001, economic output expanded by 42%. Between 1982 and 1990, output increased 38%. And between 1961 and 1969, output grew by 52%.

The distribution of the gains is even less satisfying.

Truck drivers still earned, on average, slightly less in 2018 than in 2009, after adjusting for inflation. Executive compensation, by contrast, went up, up and away. Chief executives of

companies in the S&P 500 stock index — a list that includes most of the nation’s largest corporations — made an average of $14.5 million in 2018, increasing by $5.2 million in the past decade, according to data compiled by the AFL-CIO.

The wealthy have also reaped most of the gains from rising stock prices. The least affluent 70% of American households had less wealth at the end of 2018 than at the beginning of 2007, according to the Federal Reserve. The top 30% of households saw at least some increase, but the big gains were heavily concentrated at the very top, in the hands of a small proportion of extraordinarily wealthy families.

This inequality of prosperity has become a defining issue in the nation’s politics. There is also reason to worry that America has squandered the opportunity for a more prosperous future. During periods of economic growth, governments can take advantage of swelling tax revenues to improve infrastructure, invest in education and fund research. Companies can plow profits into new products and markets.

But over the past decade, both public and private sectors have largely refrained from investing. The government has handed out tax cuts while companies have handed out dividends and repurchased shares. In effect, they’ve chosen to distribute profits among already wealthy Americans rather than develop the intellectual capital and equipment that could increase growth in the decades ahead.

Another result of the Trump administration’s tax cut is that federal deficits, which usually shrink during periods of economic growth, are on the rise. That leaves less room for the government to respond to a downturn by cutting taxes or by increasing spending. And the Fed cannot easily ride to the rescue: It has kept rates low to extend this fragile expansion, leaving little room to cut rates.

The end of an expansion is visible only after it happens. It is possible the economy will continue to grow for years, giving policymakers a chance to do better. It’s also possible that the analysts predicting a recession next year — there are always analysts predicting a recession next year — will turn out to be right.

So enjoy this lackluster expansion while it lasts. What comes next may well be worse.