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Posted March 20, 2013 | Leave a comment
Lawrence Kudlow: Optimism in the air: Political economy getting better
By Lawrence Kudlow
You might not know it from the acrimonious political debate on cable and broadcast TV, or on talk radio, or on websites and blogs. But here's a counterintuitive observation: Amidst all the negativism out there, I believe optimism is in the air.
That's right. Optimism.
Sometimes you have to search for it, or read it in the fine print. But I believe the political economy is getting better, not worse.
Let me make a few points to defend what most folks believe is an indefensible position.
The stock market is hitting record highs daily, returning a tremendous amount of wealth to the half of American households that own shares. This investor-class wealth-creation alone is sparking a new sense of confidence and optimism.
Then on a smaller scale, housing -- the other great source of American wealth -- is beginning an impressive recovery. Over 60 percent of Americans own their own home, a key form of wealth. Like stocks, the housing recovery is creating a new sense of optimism after a very long and depressing dry spell.
Then there's the anemic economic recovery. It's the worst in modern times going back to 1947. But wait a minute -- things are looking up here, too.
Let me quote from the highly respected economists Conrad DeQuadros and John Ryding: "In the last two weeks, we have seen manufacturing ISM, non-manufacturing ISM, ABP employment, payrolls, jobless claims, retail sales, and industrial production beat expectations and show an upswing in economic activity."
Record profits for business may be driving this economic pickup. And it's all unfolding after the supposedly catastrophic budget-cutting sequester, and after a tax-hike bill that supply-siders like myself opposed (although income and investment taxes went up much less than feared).
As I have argued time and again, spending cuts and limited government lower the overall tax burden and promote economic growth.
And might there be just a bit more optimism on the political front?
"So the question from our perspective is, 'Was this so-called charm offensive a one-off event?' Or was it a new posture -- a new conversion that's about to continue?"
Ryan's new budget roadmap is more vision than green-eyeshade exercise: Repeal Obamacare. Replace it with a patient-centered health care system. Go for true pro-growth tax reform by lowering marginal rates and broadening the base for individuals and businesses. (By the way, Obama is talking about corporate tax reform. Maybe common ground can be found.)
And yes, after his first significant meeting with President Obama, and despite the major differences, Paul Ryan says it's possible to achieve common ground.
"I'm cautiously optimistic about this," he said.
Of course the differences are huge. And Sen. Patty Murray just put out a Democratic budget (first time in over four years) that raises taxes by $1.5 trillion, with virtually no spending cuts. No common ground there.
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