Go get the MSM a Kleenex. We hear all about the economy from the media that’s been trying to talk it down for several months. What do I mean by “talk it down”? Well it’s simple. We all play a small part in the economy. Together we are the economy. Our economic activity helps the economy grow. If you have a good job with good income, you buy things. Even if those things are imported you are providing jobs for the people that import the goods, the people that offload the goods at the dock, the truckers that bring the goods to the stores and the clerks that sell you the goods. If the mainstream media convinces you and a few million of your best friends that the forecast is bad then you stop buying stuff. If enough people stop buying stuff the clerk loses his job or perhaps the trucker and then he can’t buy stuff and then it’s a self fulfilling prophecy. Soon you have a recession.
For those who may not be familiar with what a recession really is, it’s when the overall economy (as measured in gross domestic product or GDP) declines for 2 straight quarters. What that means is that you don’t know whether you are in a recession until you’ve been in it for 6 months. And by that time you might actually be out of it. You’d only know after an additional 3 months. So there has been a lot of speculation about whether we are in a recession or headed for one mostly fueled by the sub-prime mortgage mess and the general chaos in credit markets. It certainly has had a dampening effect on Wall Street but the stock market is not the economy. The question was how to what degree the crisis in the lending markets would be contained or spread to other sectors of the economy.
Well there’s good news as reported by Larry Kudlow at NRO’s Corner. He’s the Economics Editor at National Review. Here’s what he says:
While modest gains in retail sales and industrial production suggest temporarily slower growth for the U.S. economy, these indicators are not signaling recession. In particular, Friday’s 0.1 percent production increase — which comes to 2.4 percent at an annual rate over the past 3 months and 2.3 percent over the past 12 months — removes the recession scenario. It’s slow growth, but it’s growth nonetheless.
To get a true recession reading, the production index would have to fall for 4 to 6 months in a row. That’s not happening. Despite some monthly declines over the past half year, the production reading for January was 114.2 — exactly where it was in July and September of last year. Looking inside the January index, there was a 0.3 percent increase for consumer-goods production and a 0.4 percent rise for business equipment. Both are solid numbers.
Meanwhile, the just-released January retail sales report defied the recessionistas with a better-than-expected 0.3 percent gain. Retail sales are climbing at a 2.7 percent annual rate over the past 3 months and a 3.9 percent rate over the past year.
Trade exports also continue strong, with the new December number showing a huge $144 billion gain. Out on the campaign trail, Hill-Bama mutters protectionism at every stop. But export trade has grown by nearly 50 percent — or 9 percent yearly after inflation — for the past four years. The real export sector now accounts for nearly one-third of U.S. gross domestic product, yet more proof that the global economic boom is alive and well.
On the political front, Kudlow offers some advice that John McCain would be wise to take:
Hill-Bama is campaigning on a populist platform of taxing businesses and rich people. This fiscal nymphomania will create new government bureaucracies on infrastructure and energy totaling a couple hundred billion dollars. It’s beyond the pale.
For the fiscally tightfisted Sen. John McCain, and his crusade against unnecessary spending and earmarks, there is a great opportunity here. McCain can build on his pro-growth corporate-tax-cut proposal with a broad-based tax-reform plan. This approach would lower tax rates across-the-board and broaden the base by removing unnecessary exceptions and loopholes. In effect, while Hill-Bama copies Western Europe’s failed economic playbook, McCain can replicate the tax-reform success over in Eastern Europe.
Whether it’s national defense, homeland security, or economic growth, the key to a McCain victory over Hill-Bama in November is to compare and contrast two visions of America’s future. The contrast couldn’t be greater. Hill-Bama trashes corporations. But Sen. McCain understands that by lowering tax rates on corporations, vital capital will be unlocked, leading to business expansion and job creation.
Speaking in Warren, Ohio, this week, Sen. Clinton singled out oil, credit-card, insurance, pharmaceutical, investment, and student-loan firms in a massive attack on business. She’s attacking corporations that employ 23 million people and, by the way, pay higher than average wages. In other words, Clinton is attacking 23 million jobs. This is the forgotten middle-class. And they know that if politicians curb or confiscate the profits of their companies, it is they, the workers, who will be harmed.
This is what Hill-Bama fails to understand. This is why Hill-Bama policy would be so damaging to the economy. Corporations are profitable, sure. But wage earners get 70 percent of the profits; investors share the remaining 30 percent.
And these companies pay a colossal fortune in taxes. Exxon Mobil is a perfect example. Over the last three years, Exxon Mobil has paid an average of $27 billion annually in taxes. $27 billion! As my friend, economist Mark Perry, points out, while corporate profits receive a lot of media attention, the corporate taxes paid on these corporate profits are largely overlooked. Dr. Perry also points out that Exxon Mobil pays as much in taxes annually as the entire bottom 50 percent of individual taxpayers — a full 65,000,000 people.
The choice is clear: Jimmy Carter-style big-government spending, taxing, and regulating all over again. Or supply-side free-market capitalism that can endure the inevitable negative shocks, shorten the cyclical downturns, and fuel the engines of economic growth.
It’s unbelievable to me that anyone would fall for that liberal mumbo jumbo about corporations being bad. But there’s a lot of dumb people out there thanks to our government public education monopoly (and they want to turn healthcare over to the same types of bureaucrats that run our schools). I just hope John McCain can put away his “soak the rich, profit is evil” rhetoric and realize that he is a Republican for at least the time being.
My advice to you fine folks. Continue to live your economic lives in a sound manner and when your tax rebate check comes as part of the stimulus plan in May or June, spend it on something nice.