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Fareed Zakaria (CNN):

But, first, here’s my take. The great American housing market is back. The Case-Shiller housing index showed its largest annual increase in prices in seven years.

So, despite dysfunction in Washington, despite the sequester, the American economy, once again, shows its core character: flexibility and resilience.

A housing revival was inevitable at some point. The United States is the only rich country in the world whose population is growing. We add 3 million people to our numbers every year, thanks largely to legal immigration.

That means, over time, we will need new housing unless kids want to live with their parents forever.

Consumer confidence has hit a five-year high and not without reason. Americans have been paying off their debts at a steady clip since the financial crisis.

The U.S. economy is susceptible to bubbles and manias, but it also has the flexibility to adjust. American people and companies change past practices, take pain and prepare for the future.

When you compare American companies since 2007 with, say, Japan’s great corporations after that country’s crisis and recession, it’s clear that U.S. corporations are pretty ruthless in restoring productivity even at the cost of firing people.

And they are nimbler, which means that they often come through a crisis stronger and faster. From automobiles to airlines to energy, companies are posting strong sales and profits.

American banks have been under fire from many quarters. Critics feel they should have been punished or broken up or more tightly regulated.

But if you compare them with their principal competitors in Europe, they are far better capitalized, more secure with stronger balance sheets. As home prices recover, that should create a virtuous cycle between credit and housing that will enhance both stability and growth.

The American private sector, individuals and firms, can take credit for the good news this week. But so can Washington. Looking back, it’s now clear that Washington handled the 2008 financial crisis extremely well.

It acted quickly and with massive firepower rescuing overextended banks, enacting a large stimulus, saving, but restructuring two automobile giants.

Perhaps above all, we should thank the Federal Reserve for a bold strategy of flooding the markets with liquidity, lower rates and keep it up while the economy was depressed. Compare that with Europe’s response or Japan’s, after its crash, and you see the differences.

Many problems remain, chiefly, high and persistent unemployment and stagnant wages. For the next generation of growth, we must focus on training and retraining workers, break the immigration deadlock, build out our infrastructure, invest in science and technology.

And to pay for these, we’ll need reforms that will make our entitlement programs affordable as we age. Now, if Washington could just do a few of these things, imagine what the American economy might look like then.

http://transcripts.cnn.com/TRANSCRIPTS/1306/02/fzgps.01.html

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