Remember the pre-election accusations that President Bush wasn’t doing the job when it comes to the economy? Well, it appears that the voters made the right decision last November, and the proof is in the numbers.
While anti-American pessimism sweeps over an old Europe that brandishes a 10 percent unemployment rate, the numbers suggest that the U.S. economy is experiencing strong economic growth and falling unemployment. Larry Kudlow in fact estimates that the U.S. is on its way to adding 2 million jobs in 2005, with incomes rising fast. According to his latest client report,
Using the aggregate work-hours and average hourly earnings indices, we can construct an income growth measure. This measure shows a robust 5.2 percent growth over the past twelve months. Actually, the annual growth rate has been in that range for the past five months. It is no wonder that June chain store sales beat expectations with a 5.3 percent gain, the biggest gain since May 2004.
This good news is reinforced by the mid-year 5 percent unemployment rate, down from a peak of 6.3 percent.
President Bush’s economic success is no turn of luck. In the wake of a burst technology bubble and the 9/11 attacks, Bush fathered major tax cuts that contributed to lifting the economy out of recession and into expansion. While the Federal Reserve’s lower interest rates are often credited with putting the economy back on track, it was fiscal stimulus that made the difference as immediate demand was pumped into an otherwise lackluster business sector.
The president’s detractors (Sen. John Kerry, et. al.) said his policies wouldn’t work. They instead wanted a big tax increase to offset a rising budget deficit. Remember that misdirected policy option when you head to the ballot box for the midterm elections in 2006.
Low interest rates have also worked miracles by helping create a higher standard of living for both homebuyers and homeowners. Virtually all residential housing has risen dramatically in value over the past two years. This rise gives consumers a new source of credit — the best kind as interest on real estate is tax deductible in most cases.
The seeds of further economic expansion are being sown. Found wealth in real estate is making its way into consumer spending, which in turn is pushing consumer sentiment higher. Record corporate wealth is finding its way into rising factory orders and intentions for increased spending on plant and equipment. Free-trade policy is keeping prices low while the opposition wants to trigger major trade wars. Remember who encouraged lower interest rates and defended free trade when it comes time to vote in 2006.
Voters made the right choice on the economy, and also on security. While some in Congress suggest that we are in a quagmire in Iraq, it’s important to point out that not one major terrorist attack has occurred on U.S. soil since 9/11 while Spain and more recently Britain have experienced terrorism first hand. While more terrorist attacks at home are always a possibility, we are nevertheless approaching the fourth anniversary of 9/11 with no additional terrorist attacks in the U.S.
The attacks of 9/11 unleashed an unparalleled U.S. response in Afghanistan and Iraq. And by the numbers, it was the correct response. While the press is quick to report civilian casualties in Iraq, little is heard about the killing and capture of terrorists in that country. My bet is that the press has the numbers and just prefers not to reveal them. (We certainly have come a long way since Vietnam, when success or failure was measured by the enemy body count.)
If you are part of the growing America that is benefiting from President Bush’s economic and foreign-policy programs, you won’t have to think too hard about which party to support during the 2006 races.
– Thomas E. Nugent is executive vice president and chief investment officer of PlanMember Advisors, Inc. and principal of Victoria Capital Management, Inc.