Skip to comments.Optimism in the Air
Posted on 03/16/2013 5:14:35 AM PDT by Kaslin
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).
In fact, even the eruption in government spending is showing signs of calming down. Taking into account a modest recovery, spending-cut bills of roughly $2 trillion and an end to the failed spending stimulus of 2009, the federal spending share of the economy has dropped from 25 percent in 2009-10, to 24 percent in 2011, to just below 23 percent last year.
As I have argued time and again, spending cuts and limited government lower the overall tax burden and promote economic growth.
Finally, Fed policy remains highly accommodative, while there are no real signs of an inflation problem. The Fed has stabilized nominal gross domestic product (total spending in the economy) at around 4 percent, which will probably move higher toward 5 percent in the next year. And King Dollar is strengthening. All this is good.
And might there be just a bit more optimism on the political front?
President Obama has embarked on a charm offensive, initiating more dialogue with Republicans than in the past four years. Of course, the Ronald Reagan adage "trust but verify" applies to Obama's newfound charms.
But in a recent interview with former vice presidential candidate and current House Budget Committee Chair Paul Ryan, I found more optimism. While on the subject of Obama's new diplomacy, I asked Ryan if he believes a grand design, including spending, entitlements and tax reform, is a good thing. Is it achievable? He replied: "I do think it's a good thing. I do think it's achievable. And I do think it should be done.
"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.)
Ryan also spoke of welfare reform, including food stamps and ways to reduce child poverty and get single mothers back on their feet. He wants to do everything possible to encourage the energy revolution sweeping America. He believes a lower spending burden on the economy is pro-growth. He targets a 10-year balanced budget at 19.1 percent of GDP: Budget growth overall would drop from 5 percent to 3.4 percent, while spending would be curbed by roughly $5 trillion.
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.
But I'm still optimistic. Small pro-growth advances are possible as long as people are talking. I see a thaw in politics. So does the stock market.
Optimism is in the air.
There are no economic problems. Nothing to see here, move along.
It might be improving somewhere else but not in my neck of the woods. Unemployment has actually gone back up to about 9%. It should be less than 5% if things where actually good. A couple of hours from where I live, CAT is having rolling layoffs until May. Not sure if that is just the Peoria area or company wide..
Are you in Michigan?
Does that include the millions of home owners who owe more on their mortgage than their home is worth?
I'm sure they're happy to hear the great news.
Yes, the stock market is at a high. But that is simply paper profits. You have to sell the stock to get the money. Looks good on paper, does not help the bank account or buy groceries. So everybody sell their stock and watch the stock market then.
Well the wagon has come full circle, I am in the survival mode once again. Socialism will do that. This time it is worse, I know one day our money is going to be worthless and that is scary indeed.
So these economic geniuses can talk up this fake economy all they want, I am not optimistic at all.
We have been living off of the Reagan optimism for a long time, that gave us hope. Now 0'bastard is trying to crush our will and with the help of the MSM is succeeding.
Yesterday the formal announcement of construction ground breaking of a mega retail complex was made. It has been on hold for several years.
The project is enormous in scope and atypical of our end of the state. It will rival such complexes in cities twice or three times our size.
This means the money was released and the initial retailers have agreed to go forward.
It is the outward and visible manifestation of optimism
It may be empty or abandoned or never finished, those big complexes are not profitable and no one ever buys all the garbage on display in those stores, I think they are deliberately run at a loss
Larry is quite knowledgable in the financial field and by no means a lib.
I would consider this piece good news no mater where I lived as it didnt sound to me as regional
Let me see.
Every one I know thinks the stock market is rigged now.
If you have a house where I live you are holding on to it because you can’t get another. Seems that most people have had their hours reduced or took a pay cut, and some have had both. To top that off the new banking restrictions are making it very hard to qualify.
It is not hard to beat expectations any more since we have sunk so low. This is just more of the governments lies and the more informed don’t believe any of it. The “Boy who Cried Wolf” story comes to mind here as well.
Still not seeing any spending cuts, just a paltry reduction. What I see is the government buying like crazy. Just spending on crap it does not need. Things like drones bullets and armor vehicles. That tends to make me feel all the more optimistic there by itself.
No real signs of inflation huh. Have you bought gas or food lately? I don’t care what the fed does to manipulate these numbers the dollar just does not go as far as it use to last year.
Obamas charm you say. I have seen more charm from a cobra. And forget about the repubs standing up for the people, aint happening till they are replaced. One or two repubs that do stand up will make no difference.
Blow smoke some where else pal. Till I see some significant change I will continue to stock pile food for my family and prepare for a economic collapse be it slow or fast. That is what I see coming. Oh that and a bunch of war because the government thinks it is smarter to teach pottery in Africa than to defend our ambassadors.
Larry is always finding reasons to be optimistic but at least where I live the RV manufacturing industry is quite important and actually doing quite well despite high gas prices, soft employment, etc. It could be a lot worse, that is for sure.
Well put realist. Amen.
I wont say Larry’s needs to brush the powder off his nose but his Optimism declaration is due to solely the stock market.
Next he will claim it is a “Goldilock economy.” make me puke.
His radio show starts at 10am edt on WABC.
If he starts singing Optimism is in the air then I will know he is back on the blow.
Ok maybe I was a little harsh on Larry Krudlow. Obviously he has been hanging out with Steve LIESman too much. Of course we could add CRAMer to the mix and we have a cheerleading squad.
maybe I need a snort of Larry’s Optimism after listening to KingsWorld this am.
Former US Treasury Official - US Financial System To Collapse
March 16, 2013
Today a former Assistant Secretary of the US Treasury warned King World News, This type of situation is extremely dangerous. The world has never seen it before. Former Assistant of the US Treasury, Dr. Paul Craig Roberts, also told King World News that JP Morgan now threatens the stability of the...
It is not like our local economy is dead in the water. There is actually quite a bit of construction activity in our local community. I am not sure what is driving it. I guess they figure if they build it, people will come. However, the county has a 9% unemployment and a 25% poverty rate. It hard to be optimistic with numbers like those. On a national level, are things really getting better? Food stamp usage is at all time highs. The housing market is still pathetic. If it weren't for FHA backed loans at 3.5% down, there wouldn't be any activity.
My optimism is with McCain’s “wackos.”