- The Washington Times - Wednesday, November 2, 2005

A great “whodunit” caper remains unsolved in Washington this week. But this case neither involves leaks, nor how many different ways the media can say the ship of state needs new ballast to keep it afloat. No, those transgressions are pretty well covered by the press corps.

This mystery affecting all of the nearly 300 million Americans as opposed to one White House staffer — has apparently escaped the attention of the doom-and-gloom media. The question the press is failing to ask: “Who’s behind America’s robust and consistently positive economic numbers?” Third-quarter Gross Domestic Product (GDP) grew at a strong 3.8 percent rate, we learned last week, while inflation remained tame. Those numbers mark the eighth consecutive quarterly increase at a rate above the 3 percent mark — the longest streak of consistent growth since World War II.

Even a junior sleuth might tie part of America’s economic success to Washington following through on promises to reduce spending and avoid tax increases. Predictable, growth-oriented proposals encourage businesses to make investment and spending decisions that spur the vibrancy evident in these numbers. Follow-through and consistency are critical to business decision makers — and that’s exactly what the House and Senate are doing in the next few weeks.

You’re forgiven if you missed the news. The GDP numbers were briefly mentioned on CNN and MSNBC programs I watched, but treated as a joke. A Republican congressman was shouted down by Larry King and California Democrat Sen. Barbara Boxer when he tried to bring up the economic news on Indictment Day last week. How dare anyone mention good news that affects all Americans when we can dissect the political implications of the legal problems of one White House staffer? Those facts don’t fit into the media/Democratic disaster narrative — so they’ve been largely ignored. But does any fair-minded person deny that negative third-quarter GDP news would have been trumpeted as a sign of failed Republican economic policies and added to the list of mounting White House and GOP woes? Over the next few weeks, Republicans will pass laws implementing the budget blueprint adopted in April — another signal of predictability to capital markets and to business investment decision-makers. The so-called “reconciliation” process, adopting spending reductions and extending tax policies, is on track to meet or exceed the objectives laid out in the budget earlier this year.

This week, the full Senate considers the work of eight committees, rolled into the Deficit Reduction Act, shaving $39 billion off the growth of mandatory programs like Medicaid and farm subsidies over the next five years. The House follows suit next week with a deficit-reduction package of its own that promises savings of about $50 billion. Next, both chambers consider tax legislation set to expire. By continuing current law, Congress avoids tax increases on individuals and business, and continues policies on a consistent, dependable path.

Some may scoff at these exercises, arguing the spending reductions are small and extending tax policies doesn’t reduce the deficit. But these critics miss the point. From the standpoint of business investment and capital markets, the key is predictability and intent. In what direction do Republicans in Congress and the White House want to move? Despite the hubbub about highway bills and hurricane spending, at the end of the day, are lawmakers putting in place policies that keep the deficit as a percentage of GDP roughly constant over the next several years? Evidence from the budget reconciliation process suggests, yes. How about taxes? Will Congress let them increase and change direction? Again, lawmakers will send a strong signal to capital markets and businesses.

The fiscal-policy signals create a positive environment in which to plan, invest and grow. Republicans understand mounting concerns about spending and are adopting new fiscal restraint policies. They also understand that allowing tax cuts to expire — in effect raising taxes — would hobble the economy.

The hero in this economic whodunit isn’t tough to surmise. It may be hard for Democrats and a hostile media to accept, but Republicans doing what they said they would do is spurring business confidence and triggering solid economic growth. It’s too bad that the media and Democrats want to lock up Republicans in a grim news penitentiary because a much more compelling story is going on outside the walls.

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