by James K. Glassman
(reprinted with permission of Tech Central Station, "Where Free Markets Meet Technology)
To hear John Kerry tell it, America is mired today in the worst economy since the Great Depression. How dumb does he think voters are?
We just set a record for yearly production: a GDP of nearly $12 trillion, or $120,000 per family. As for what really counts, personal well-being: A record 69 percent of Americans own their own homes, and the account balance in the average 401(k) plan is $77,000, up 22 percent in three years.
On the eve of his nomination at the Republican Convention in New York, Bush can be proud of the U.S. economy and what he's done to keep it growing.
He was dealt an extremely miserable hand by his predecessor. As Bill and Hillary Clinton were leaving the White House, the tech-stock bubble was deflating, and GDP and employment growth were slowing sharply. A recession began two months later.
The fraud at Enron, WorldCom and other companies, which would bloom into historic scandal in the fall of 2001, also occurred under Clinton's watch. And, then, of course, there was 9/11.
It is, frankly, a miracle that the U.S. economy is as good as it is today. How good? The Economist magazine says the U.S. will grow more than twice as fast as Europe this year, and our unemployment rate is roughly half that of France and Germany.
More interesting, compare Bush's economy to Clinton's at the same stage. "On many of the key variables that voters care about, the economy looks uncannily like it did in the summer of 1996," writes Michael Mandel in the current Business Week.
The unemployment and inflation rates today are precisely the same as at this time in 1996. Total job gains from January to July were somewhat higher in 1996 than in 2004, but in 1996 manufacturing jobs actually fell -- while they rose by 81,000 in 2004. Also this year, GDP growth and productivity were considerably higher than in 1996.
The ABC News/Money Magazine personal-finance index is 59 percent -- which is higher than the 18-year average. "I think economic growth will be faster in the second half of 2004 than in the first," writes David Malpass, the highly regarded Bear Stearns strategist.
So why all the gloom and doom? Three reasons….
1. In many cases, Kerry and his supporters are flat-out lying. Look up the non-partisan website of the Annenberg Center, www.FactCheck.org. It measures the claims of candidates against the truth. Here are headlines from recent studies: "Kerry Makes Bogus Comparison to Great Depression. He claims U.S. suffers greatest job loss since the 30s, which is not true." "Kerry's Dubious Economics. He says new jobs are paying $9,000 less than old ones. That's not a fact." The site also blasts the Media Fund, a pro-Kerry group that claimed in ads that Bush would help companies outsource jobs. "But Bush never said that," says FactCheck. Instead, Bush wants to create better conditions to keep jobs here.
2. The media are wildly pro-Kerry. Last week, the Census Bureau released data showing an insignificant uptick in poverty rates in the past year, plus a minuscule rise in the number of uninsured. From the hysterical TV and newspaper coverage, you would have thought another depression had begun. An actual reading of the report reveals that poverty rates "remained unchanged for Hispanics…and Blacks" and are below levels in the first Clinton term. Also, while the number of people without health insurance rose, so did the number of people with health insurance.
3. This is a time of change, and Americans are legitimately worried.
To assuage those fears, Bush wants to shift ownership and control -- of retirement funds, health insurance and other key assets -- away from businesses and government and toward individuals. That means building an "ownership society" through reform of Social Security, the tax code and the healthcare system.
I strongly agree, which is one reason I am helping to launch a new group called Investors Action, which will educate America's 93 million investors and promote their interests.
It's hard to see those interests being served by Kerrynomics. For example, Kerry wants to raise taxes, which will reduce returns for investors and increase the cost of capital for businesses, almost certainly whacking stocks. Already, as my colleague, economist Eric Engen of the American Enterprise Institute, has shown, when Kerry's prospects in the polls rise, the market falls -- and vice versa.
Maybe investors -- and investors-to-be -- aren't nearly so dumb as some candidates think they are.
First printed at Tech Central Station