THE U.S. RESPONSE reflects mutually reinforcing political and economic strengths. In this essay, we focus on the economic institutions and conditions that allowed us to successfully adjust to the shock and regain equilibrium. While further setbacks are certainly possible, the response of our economy to date and its inherent strengths provide us with great confidence that the final outcome will be favorable. Four main features of the U.S. economy justify this confidence. These are:

• Vigorously competitive markets
  
• A robust financial system
  
• A strong government fiscal position
  
• Low inflation and monetary stability
  

To reflect on these features is a valuable exercise, for they did not arise by accident. Given the routine pressures every family, firm and government faces, it would be all too easy to neglect the investments necessary to build resilient economic institutions. The components of the U.S. economy we discuss in this essay were built over time and with attention to a long horizon. They serve the nation well in ordinary times, but especially so in extraordinary times. In contrast, a country that accepts economic compromises, through an unwillingness to invest in the future, places itself at risk. The defects of a compromised structure usually become painfully apparent in a time of stress, too late to make the long-run investments that would permit a constructive response to the shock.

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