Columnist.
Political advantage can be fleeting. A couple of months ago, during the winter quarter, job gains looked to be picking up, unemployment was easing lower, and President Obama's re-election hopes looked more secure. But things sure have changed. In recent weeks, a whole bunch of new economic stats have been pointing to a sputtering economy -- maybe even an inflation-prone, less-than-2-percent-growth recession. Stocks have dropped five straight weeks, as they look toward slower growth, jobs and profits out to year end. And Friday's jobs report didn't buck these trends.
With a flamboyant downgrade of the outlook for economic growth, jobs and profits, Wednesday's 280-point Dow plunge to launch the so-called June stock swoon is a warning shot across the bow. The Dow tanked alongside a batch of dismal economic data. The ISM manufacturing index, ADP employment, Case-Shiller home prices and consumer confidence are all pointing to 2 percent growth or less, rather than the kind of 5 percent growth we ought to be getting coming out of a deep recession.
House Majority Leader Eric Cantor turned the policy temperature down on austerity this week by rolling out a strong economic-growth agenda. Headlined by a 25 percent top tax rate for individuals and business, the Cantor package includes regulatory relief, free trade and patent protection for entrepreneurs. It's job creation and the economy, stupid. Sounds Reaganesque? Well, Eric Cantor has a lot of Reagan blood in him. Back in 1980, while Cantor was still in high school, his father was the Virginia state treasurer of the Ronald Reagan presidential campaign. So the apple never falls far from the tree.
As the International Monetary Fund gets ready to choose a successor to Dominique Strauss-Kahn, who resigned following his arrest on charges that he sexually assaulted and raped a hotel housekeeper, it would be a good thing to step back for a moment and ask: What should the IMF do? More specifically, can the IMF possibly morph itself into a worldwide force for economic growth instead of Bailout Nation? Yes, it's a powerful global economic agency. It's also one with a very checkered past. Usually opting for austerity policies, such as currency devaluation and tax increases, the IMF has bungled a lot of rescue missions down through the years.
In the aftermath of the killing of Osama bin Laden, I found myself agreeing with Charles Krauthammer that this was a global game-changer for American greatness. It was a gutsy and courageous decision by President Obama, brilliantly executed by the Navy SEALs and all the intelligence and support behind them. As Krauthammer put it, after the tough slogs in Iraq and Afghanistan, this amounts to the restoration of unquestioned U.S. military dominance. America has not slipped, nor has our military reach and power.
Fed head Ben Bernanke, at his first-ever news conference on Wednesday, slammed the door shut on any new QE3 pump-priming. The $600 billion QE2 program to purchase bonds will end on target at the end of June, and that will be that. Bernanke also suggested that the Fed's "extended period" for the near-zero federal funds target rate could end in a couple of meetings. Perhaps these announcements suggest a bit-less-easy monetary policy. Perhaps. But Bernanke had no defense of the sinking dollar, or the inflation it brings, or the drop in middle-class living standards it causes. So it's little surprise that gold prices surged $24 to $1,526 during the Fed chairman's press conference. Silver jumped sharply, as well. The markets clearly don't see any King Dollar shift by the Fed.
We thought tax reform meant lowering rates and broadening the base by eliminating or cutting back on various deductions, credits and loopholes. That's what the Bowles-Simpson commission proposed. That's what Paul Ryan and David Camp are working on. And that's the pro-growth model. But President Obama unveiled a much different tax-reform vision in his much-anticipated debt speech on Wednesday. He would raise tax rates on upper-income earners and small businesses. He also would eliminate deductions and credits, or so called "tax expenditures." The president referred to these tax-expenditure reductions as "spending cuts." In his context, they most certainly are not. They are more tax hikes.
Washington shutdown fears are sinking the U.S. dollar, according to some news reports. Surely there's something to this, as investor confusion rises and confidence falls, and as Washington seems to be gridlocked over a few billion dollars. Frankly, the GOP could easily declare victory and accept a $35 billion to $40 billion spending cut for the final strokes of the 2011 continuing resolution. This kind of deal would move the domestic discretionary baseline back toward 2008. No mean feat.
Of all the discussion about Paul Ryan's big-bang budget plan, the element I like best was caught in this Wall Street Journal op-ed title: "The GOP Path to Prosperity." In other words, it's a growth budget. It has plenty of spending cuts, but it also has significant pro-growth tax reform. Obsessing over the debt is not by itself a policy. Advancing the economy and setting the stage for more job creation is a policy. Ryan kept an important dose of Ronald Reagan in both the spirit and reality of his plan. Limited government, lower tax rates and deregulation (of energy) will all promote the path to prosperity.
Did the big March jobs report put President Obama back on the road to re-election? If so, he can thank the GOP, whose tax cuts saved him from himself. You could hear cheering all the way from the West Wing when the Labor Department showed a 216,000 gain in non-farm payrolls, the biggest number in quite some time. Plus, the unemployment rate continued its decline to 8.8 percent. Not so long ago it was nearly 10 percent.
If you buy into the energy speech President Obama delivered on Wednesday, it sure sounds like we're headed for drill, drill, drill. It would be a total reversal of policy. I guess $100-plus oil and near $4 gas at the pump -- along with a consumer economic-political revolt -- will do that to you. After bashing oil and gas companies for a couple of years and instituting a virtual drilling moratorium, President Obama now says yes to offshore oil and makes a big pitch for natural gas. There may even be incentives for faster leasing and smaller royalty payments to the government. Is it credible? Well, when you get to the fine print, it may not be.
Caveat emptor: The first-quarter economy is slowing, and inflation is rising. A month ago, economists were optimistic about the potential for 4 percent growth. Now they are marking down their estimates toward 2.5 percent. Behind this, consumer expectations are falling, while inflation fears are going up. A recent CNBC All American Economic Survey revealed that 37 percent of respondents expect the economy to get worse in the next year. That's up about 15 percentage points from the December poll. The key reasons? Worries over rising food and fuel costs. Respondents anticipate prices to climb 6.6 percent over the next year. That's double the 3 percent inflation registered in the December survey.
According to news reports, Team Obama and House Republicans are at least $50 billion apart in the budget negotiations for FY2011. I'm willing to bet that Team Obama and Senate Democrats won't agree to even $20 billion in spending cuts. And that's a far cry from the GOP's annualized $100 billion pledge-to-America mark, and an even farther cry from the hundreds of billions of dollars in cuts that are necessary over the next five to 10 years. As I recall, the Simpson-Bowles deficit commission suggested more than $1 trillion in cuts to the domestic discretionary baseline over 10 years. I think the plan by Rep. Paul Ryan would do the same.
Big economic-growth stats are trumping oil prices and the Mideast tinderbox. In optimistic trading on Thursday, stocks soared nearly 200 Dow points. Oil barely fell to just under $102 a barrel. Know what? The market may be shouting out that the recent oil spike is not going to derail economic recovery. Of course, nobody can predict events in wartorn Libya and other hotspots -- or, for that matter, in Saudi Arabia. Sure, if Saudi Arabia erupts into violence on its so-called "day of rage" on March 11, oil prices will spike like we've never seen before, causing incalculable damage to the U.S. and world economies.
The Democratic/government-union days of rage in Madison, Wis., are a disgrace. Wisconsin Rep. Paul Ryan calls it Cairo coming to Madison. But the protesters in Egypt were pro-democracy. The government-union protesters in Madison are anti-democracy -- they are trying to prevent a vote in the legislature. In fact, Democratic legislators themselves are fleeing the state so as not to vote on Gov. Scott Walker's budget cuts. That's not democracy. The teachers' union is going on strike in Milwaukee and elsewhere. They ought to be fired. Think Ronald Reagan PATCO in 1981. Think Calvin Coolidge police strike in 1919.
A week after Ronald Reagan's 100th birthday celebration, comparisons between Presidents Obama and Reagan continue. The conversation began when Obama praised Reagan in a USA Today op-ed. He commended Reagan's leadership, his confidence in and optimism for America, and his great ability to communicate his vision for the country. Reaganites like myself appreciate these sentiments.
The January employment report was a complete snow job. Abominable winter blizzards across the country caused 886,000 workers to report "not at work due to bad weather," according to the Bureau of Labor Statistics. This is 600,000 more than the normal 300,000 not at work for the average January of the past decade. So the bad weather has distorted the numbers. The actual 36,000 increase in non-farm payrolls and the 50,000 gain in private payrolls really don't have a snowball's chance at being accurate. The 1 million people in January who wanted a job but didn't look for one because of "other" reasons hints again at the bad-weather distortion. So does the 4.9 million jump in the part-time workforce.
Decades of autocratic government and a lack of free elections are, of course, the main drivers of the political upheaval in Egypt. But did the sinking dollar and skyrocketing food prices trigger the massive unrest now occurring in Egypt -- or the greater Arab world for that matter?
Can GE CEO Jeffrey Immelt talk President Obama into a major corporate tax cut? Immelt has been appointed to the new Council on Jobs and Competitiveness, which replaces the disbanded Paul Volcker Economic Recovery Advisory Board. Immelt was a member of that original board. Now he has a more elevated position in the Obama 2.0, allegedly pro-business, move-to-the-center Clintonesque White House.
Is there a new Cold War developing between China and the United States? That's a question hovering over President Hu Jintao and his entourage as they come to Washington to discuss military, trade and financial flash points with the Obama administration. Hu told The Wall Street Journal that "we should abandon the zero-sum Cold War mentality." But is he to be believed? Everyone agrees that this is a new, muscular and more aggressive China. The more the Chinese strengthen economically, the more rambunctious they become with their foreign policy. Americans are increasingly irritated by this arrogance.
