THERE'S NO COMFORT ZONE IN SCARY TIMES:

The silence of the Bush Boom (Larry Kudlow, August 17, 2005, Townhall)

Breaking down the major components of the economy, business spending on equipment and software is now contributing close to 30 percent of the increase in gross domestic product. (Prior to the Bush tax cuts on capital gains, dividends, and personal incomes, cap-ex was a net drag on economic growth.) The business surge has caused industrial production to rise by nearly 9 percent in the past couple of years, or 4.1 percent annually.

In this supply-side model, it is investment and production that create jobs. Not surprisingly, the total U.S. employment of 142 million workers stands at an all-time high. Since May 2003, non-farm payrolls have grown by 4 million, while the Labor Department’s household survey (which includes the self-employed) has surged by 4.5 million. The unemployment rate is 5 percent with real worker compensation growing by nearly 4 percent. Interest rates and core inflation are running at four-decade lows.

Liberal economists like Paul Krugman ridicule the Bush boom as nothing more than a housing bubble destined to burst. But if the numbers-challenged Krugman would do some homework he would find that the GDP contribution of residential investment has dropped from 15 to 8 percent in the last two years. For that matter, the consumer contribution to GDP has slowed from 90 to 75 percent. By taxing investment less, the economy is generating more of it.

With comparable economic numbers in 1983 and 1984, President Reagan enjoyed a tremendous “morning in America” popularity that won him a 49 state landslide. Similarly, the economic boom of the late 1990s helped President Clinton withstand the political slings and arrows of impeachment. But for some reason this economy is not working for Bush.

Most pundits blame rising gas prices and Iraqi war difficulties for Bush’s slump. While these are involved, they’re not the whole story. The unwillingness of the Bushies to communicate and market an economic-recovery message is also to blame.

It seems entirely possible that in a world where you can theoretically be blown up at any moment folks just feel to jumpy to appreciate the actual ease of their lives.

Posted by Orrin Judd at August 17, 2005 7:07 AM