THE PICTURE WE HAVE PAINTED of the U.S. economy in the wake of September 11 is encouraging. Yes, the attacks were damaging. But they were not crippling. In a society in which entrepreneurial initiative and risk-taking are rewarded, recovery from disaster is bound to be expedited. When citizens have faith in the soundness of their financial institutions, they have less reason to panic. Where a federal government spends taxpayers' monies wisely, a nation shows resilience during adversity. And where a central bank sets a goal of maintaining price stability, consumers feel confident that their money will retain its purchasing power, even in dire circumstances.

The United States embodies all of these qualities. The result? Its economy is, in many ways, shock-resistant.

Despite the devastating ramifications of the terrorist attacks, many key economic indicators began to regain equilibrium within weeks. Economic statistics for the period since September 11 have suggested that the economy is stabilizing quickly after initial declines caused by the attacks:

• Real GDP increased at an annual rate of 1.7 percent in the fourth quarter of 2001.
  
• Productivity in the nonfarm business sector increased 5.2 percent at an annual rate in the fourth quarter.
  
• Monthly CPI inflation came in at 0.2 percent in February and 1.1 percent for the 12 months ending with February.
  
• Payroll employment rose by 66,000 jobs in February.
  
• In February, real consumption rose 0.5 percent over January.
  

In the end, our economy passed one of the most challenging tests in the nation's history.

The question is, can it pass even tougher tests? Yes. There is no reason to believe that what served us well during this crisis would abandon us in the future.

Our competitive markets and strong financial system are deeply ingrained within our culture. And while government fiscal policy and Federal Reserve actions evolve over time and depend to some degree upon the individuals in office, the benefits of prudent budgets and low inflation have become so obvious that they have become institutionalized within our society as well.

We have known for many years that an economy based on free markets and personal liberty performs better than one based on central planning and government compulsion. We now know also that a market economy and free people are remarkably resilient in the face of a severe shock. We hope that all of the new security precautions will thwart future terrorist attacks in the United States. But whatever the future may bring, we can be confident of our nation's capacity to weather the storm.

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