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January 21, 2008

Recession? Spare Us the National Economic Pity Party


If “The Economy” were a movie, the movie critics would conclude that “we have seen this movie before”. With exaggerated fears of an immediate recession being proclaimed by the media, the players are the same, the movie plots are the same, the lines are the same, the chase scene near the end will be the same, and unfortunately, the end of the movie will be the same.


Here are just some of the promotional headlines appearing on media marquees last week to entice you to pay the $7.50 to go to the movie or order it on pay-per-view.  


“DOW takes a 300-point dive”

“New housing starts down 25 percent for 2007”

“Inflation rate is worst in 17 years”

“Only 18,000 new jobs created in December 2007”

“Job picture gloomy, recession feared.”

And . . . “Media nearly unanimous: Recession inevitable.”


Federal Reserve Chairman Ben Bernanke said last week that we should expect an economic slowdown in 2008. That means economic growth will still be positive if the media does not scare the crap out the public and business owners. He did not say to expect the great depression of 2008.


The Democratic leaders in Congress and their presidential contenders are desperate to maintain the perception that the last four years of economic growth did not happen. They continue to be in denial that we have had over 50 straight months of positive GDP and job growth as a result of the Bush tax cuts of 2001 and 2003.


Thus, the recurring lines in the movie by the Democrats of “the tax cuts were for the rich”, or “this economy has not helped everybody.” And at the first sight of an economic slowdown the Democrats and their media allies proclaim “economic disaster!”


Admittedly, there are some components of the economy that are experiencing negative growth versus a year ago, such as construction, real estate and related businesses. And yes, there are some people who are facing mortgage foreclosures due to poor lending practices by lenders on the one hand, and poor spending practices by some consumers on the other. But this is no time to panic, overreact or throw out the baby with the bath water.


We are in an economic correction, not an economic recession.


That means the free market dynamics of supply and demand will unfortunately “downsize” the segments of the economy that are overbuilt or have produced too much for the demand. And, that includes some businesses that have expanded too much too quickly, and some consumers who have spent too much.


At this point in the movie, the media and some people are screaming for the president and Congress to do something. (Music builds) So to appear responsive to the “crisis”, they ride in on their famous white stallions called “stimulus package”. That’s right, they all have different stallions (ideas) named stimulus package. Here is where the sub-plots and lines are truly old reruns.


The president was the first to put his ideas out in public, by proposing to make the existing tax cuts permanent along with a short-term tax cut in some form directly back to the working people. Even though the details have not been released, presidential candidate Hillary Clinton said the same day in a speech that “the president’s package does not go far enough.”


But this is typical typecast Hillary. When the preliminary August 2007 jobs report was issued in early September indicating the economy lost jobs, Hillary Clinton immediately proclaimed that President Bush’s economic policies were a disaster. Two weeks later the Labor Department revised the jobs report, as they do every month, and the final numbers reflected another positive jobs report for August. I missed the scene where she admitted that she had made a mistake.


As the movie unfolds, look for Speaker of the House Nancy Pelosi to say a variation of “Now is the time for the president to work with Congress in a bipartisan way to help the American people.” Translation: Do it my way. And look for Senate Majority Leader Harry Reid to say a variation of “This president and his administration are a disaster.” Translation: I haven’t a clue as to how to fix the problem.


Economic concerns have taken center stage in the arenas of media coverage and the presidential campaign, but we do not have to be stupid about what to do. We need to tighten our collective and individual spending belts, and allow the free market dynamics to work the way they are suppose to work.


We also need certainty about the current tax rates, and that they will not expire in 2010. This lingering uncertainty is at the heart of the economic jitters. In the end, the less the president and Congress do to “save the day”, the sooner the economy will level off. But as usual, they will do something.


And as usual, the voters will not get their money’s worth – just a free bag of popcorn, not realizing that it is already included in the price of the ticket (taxes).


We do not need to talk ourselves into a recession, and we do not need a national economic pity party.


© 2008 North Star Writers Group. May not be republished without permission.


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