US Economy Ahead - A Layman's Guide

Let’s expand a tad on the Sep/20 sketch.

In explaining the delayed recovery there’s no need to get tangled up in page-long equations and econ mumbo jumbo. (Others, more qualified, have already done the heavy lifting.)

Observers have highlighted the parallel - this experience and the Depression. Great sums of $ were spent by FDR and Obama. In both cases, the employment situation worsened significantly soon after.

Readers will recall from an earlier sketch that unemployment peaked at 9% two months after the Oct/29 crash, then headed downwards, to 6.3%, June/30. Then came the first federal spending spree. Unemployment hit double digits, Dec/30.

Phil Gramm recounted this experience in today’s WSJ. Gramm also quoted FDR’s treas secty, Henry Morgenthau, just as we did several months ago. Morgenthau summarized as follows when before Way and Means, Apr/39: "Now, gentleman, we have tried spending money. We are spending more than we have ever spent before and it does not work . . . I say after eight years of this administration we have just as much unemployment as when we started . . . and an enormous debt, to boot.”

We called gov’t spending a “tragedy” and noted the exercise would be at best a wash, likely a retardant. It proved to be a retardant.

It never works folks. If you didn’t take our word for it two years ago, do it now. The stimulus deal was a scam. Obama is not entirely stupid. He knows this the same as we do. He just figured he’d take in the masses (who in fact excused FDR but won’t BO, not for this nor the health heist).

The other similarity between the two experiences is that in both cases the presidents refused to cut taxes. We know from Kennedy / Reagan that this works. Since Obama is more concerned with not offending far-left zealots than seeing to the welfare of America, he won’t do that.

And this brings us to Oct/2010. Where now? First, tune out the TV prophets, the ex -spurts.

Next, put your ear to the ground. We did. We listened to major employers. Sure, they are risk takers yet there is just too darn much legislative-driven uncertainty ahead for even them to do anything but sit on their cash. Why? A statist at the helm is a death threat.

What then will provide the spark to potential employers and consumers alike? We all know the answer, not tough at all. First comes Nov/2010 when major harm being inflicted is stopped (with our 40% risk that Dem lame ducks will twist the knife). Next will be the period of resuscitation, that of 2011, when the health heist is reversed, tax cuts ironed in, cap & trade put to bed. By that time the economy - short of a major international wild card event - will be moving along very well.

Our plastic surgeon pal will be doing more lifts. Our nursery pals will be selling more plants. And, the Maui vacation-home market will come alive!


Robert Craven