- The Washington Times - Monday, July 1, 2002

The events of the past 10 months have certainly provided us with a lot of evidence about the U.S. economy's enduring resilience and strength. So maybe it's time to begin recognizing this as a fundamental and unarguable fact.
Despite the worst terrorist attack on U.S. soil, fears that it could happen again soon, and a string of sordid corporate scandals that have undermined investor confidence and sent stocks into a nosedive, the economy is still growing at a healthy rate. Globally, free market, center-right governments are being elected all over Europe and emerging markets are expanding faster than ever.
As the latest accounting scandal struck the once-mighty WorldCom telecommunications empire casting another dark cloud over Wall Street's gloominess there were also signs of economic vitality across much of the country.
The Commerce Department recently announced that new-home sales had shot up by an astonishing 8.1 percent last month, surprising all the analysts who had expected a much lower rate. This was the strongest advance in six months and a record one-month level, heralding a rippling effect across a number of sectors in the economy, like furniture, appliances and other home-product industries.
"The housing sector is poised to set new records for production, sales and aggregate home equity in the years ahead," said a representative from Harvard's Joint Center for Housing Studies last week.
There was also good news among the nation's factories, which were hit hard in last year's recession. Orders for manufactured goods inched up 0.6 percent last month, following a 0.4 percent rise in April.
Manufacturing still has a long way to go to climb back from last year's steep decline, but there is growing evidence that factories will be getting increasing orders in the months to come. The declining dollar is helping U.S. manufacturers become more competitive abroad. The economic stimulus package that Congress passed earlier this year gave businesses tax breaks to buy new equipment, and we're seeing the effects of that now. Decisions to replenish depleted inventories are also feeding manufacturing growth.
Let's not forget, too, that the economy was growing at the furious pace of 6.1 percent in the first three months of this year. It is expected to slow down to a more sustainable 3 percent to 3.5 percent rate in the second quarter that ended Sunday, but I would not be surprised if the gross domestic product (GDP) came in higher than that when the numbers are crunched later this month.
Still, a 3.5 percent rate is not chopped liver (a year ago the GDP was an anemic 1.3 percent). And all the signs are there to keep positive growth at that level for the rest of the year.
Meantime, U.S. productivity remains robust, inflation is tame, consumer confidence is higher now than a year ago, and the national unemployment rate fell last month to 5.8 percent, suggesting that the "Great American" jobs machine may be gearing up again.
So why haven't these economic recovery signs sent stocks soaring? Historically, in the early stages of a recovery, investors buy low on bullish expectations that increased earnings and higher stock values will result in the months and years to come, but not in this bearish environment.
The financial scandals that hit WorldCom, Enron, Global Crossings, Tyco International and Qwest Communications have shattered investor confidence. The daily feature on the CNBC financial news channel, "Who Can You Trust," perfectly explains the dismal and deeply skeptical mood on Wall Street nowadays.
Add the fear of additional terrorist attacks, the threat of war in the Middle East, and recent nuclear brinkmanship between India and Pakistan, and you have a volatile brew of poisonous pessimism that has kept sidelined investment capital out of the equity markets.
This administration is not helping matters. Higher steel and timber tariffs to further restrict trade, increased farm subsidies, the threat of new regulations on business, and the Justice Department's unwillingness to end the antitrust action against Microsoft have all combined to create a creeping anti-growth agenda in a presidency that ran on free trade and free markets.
Where is the administration's voice in all of this turmoil? It is difficult to remember when President Bush spoke about further deregulating the economy. Little is heard from White House economic adviser Larry Lindsey, and even less from Treasury Secretary Paul O'Neill, who has been virtually invisible since his tour of Africa with rock star Bono.
This is the time when the Bush administration should be, like Ronald Reagan, defending capitalism and expressing confidence in American businesses and the economy. Instead, it seems to be heading for the tall grass, afraid yet another financial scandal will break.
I believe most corporate leaders are honest and care about their stockholders, that their company books are sound, and that the economy is heading higher. What we need now are some strong expressions of confidence from the highest levels of government about the soundness of our capitalist system and the economy. Are there any defenders out there besides Louis Rukeyser?

Donald Lambro, chief political correspondent for The Washington Times, is a nationally syndicated columnist.


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