- The Washington Times - Saturday, January 1, 2005

The headline of the late-year lead story in Investor’s Business Daily went like this: “Consumer optimism roars back in December as sales end strong.”

Yes, indeed. The U.S. economy is hitting on all cylinders as 2004 passes into 2005. Since the election, stock markets have been on an upward tear, pointing to continued prosperity in the new year.

IBD, however, is one of only a few newspapers that have covered this story accurately. Most in the mainstream media steadfastly refuse to give the economy a break.

It has gone on all year. The strong recovery got no respect in the presidential election, as John Kerry and minions pounded President Bush for presiding over a “Hoover” economy. Mr. Kerry said Mr. Bush failed to create new jobs, though traditional economic health measures have advanced nicely for two years. The media largely reported it the Kerry way.

Mr. Bush may not have been the most adept debater on the economy, but the facts spoke loudly in his favor. The most comprehensive measure of economic health — inflation-adjusted gross domestic product (GDP) — has been trending steadily around 4 percent for the last two years. This is half a percent above America’s 3 percent long-run trend.

Meanwhile, the unemployment rate — formerly the key election-year labor-market indicator — moved down from 6.3 percent to 5.4 percent, indicating strong U.S. work conditions. Then there’s the 2 percent inflation trend, a stat never mentioned during the campaign but a long stone’s throw from Jimmy Carter’s 15 percent rate of price increases.

Big media let Mr. Kerry get away with murder as he obsessed over nonfarm payroll jobs, which were slow to recover but have in fact expanded by more than 2 million in the last 18 months. Nonetheless, the other major jobs report — the household survey — went virtually unreported.

The household measure shows 2 million jobs gained in Bush’s first term and a whopping 4.2 million increase since the end of the 2001 recession.

It’s a real measure, too: It gives us the unemployment rate. It also does not triple-count job gains or losses, as does the payroll survey. But it does include self-employed workers and independent contractors, key parts of our new Internet-based information economy.

Then there’s the positive effect of reduced marginal tax rates. The Bush supply-side tax cuts were made early in 2003, in the wake of the September 11, 2001, attacks, a burst technology bubble and the corporate scandals. They immediately jolted the economy, as both employment and investment responded to a badly needed dose of economic incentives. By taxing work and investment less, the economy got much more of both.

Here are a few simple facts: In the six quarters after Mr. Bush’s tax cuts, real GDP expanded at 4.6 percent annually, much faster than the 2 percent pace of the six earlier recovery quarters. Consumer spending jumped from 2.8 percent to 3.9 percent. Business investment in new plant and equipment surged to 13.4 percent from only 1 percent before the tax cuts. Personal income jumped to a 5 percent growth rate, nearly double the earlier 2.6 percent. The average employment gain (combining both surveys) was 2.4 million, compared with virtually no gain before the tax cuts.

Corporate profits, without which businesses cannot create jobs, now stand at a record $1.118 trillion — 56 percent above their recession trough, 25 percent above the prior recovery peak of the late ‘90s, and at a near-record 9 percent of GDP. Broad stock market averages have jumped 60 percent from their lows. Homeownership is at an all-time high, as are existing home sales. U.S. household wealth is a record $51 trillion.

Nowadays, amidst all this economic good news, the declinist rant has shifted to the twin budget and trade deficits. The former is declining even while import increases widen the latter. Both, however, are sins of economic strength, not weakness.

Believe it or not, liberal editorialists now argue for slowing the economy. Prosperity is bad, you see. Americans borrow, consume and thrive too much in this “Alice-in-Wonderland” media conflagration that turns positives into negatives.

Gibberish. Nothing more than another big-media campaign to raise taxes.

Under Mr. Bush, it won’t happen. Instead, the president will nurture economic growth with more tax incentives for work, saving, investment and risk-taking. Europeans derisively call this “cowboy capitalism.” The president thinks of it as free-market ownership. Whatever the label, in the Bush view workers, entrepreneurs and the self-employed — not government planners or entitlements — provide the backbone for America’s prosperity. Left to our own devices, we will keep barreling ahead at a speed our envious rivals can only dream about.

Lawrence Kudlow is co-host of CNBC’s nightly “Kudlow & Cramer” and is a nationally syndicated columnist.



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