Liberal "economic populism" has become the Democrats' mantra, a vaguely defined retro term that calls for higher taxes on businesses and the people who save and invest, reregulation of the economy, mandated wage levels and protectionist tariffs that would raise consumer prices here and lead to retaliatory trade barriers abroad.
But this is no time to be imposing new taxes, regulatory straitjackets and counterproductive trade restrictions on an economy that, despite its slowdown, is fundamentally strong.Unemployment remained in the mid-4-percent range, and the nation's gross domestic product (the chief measure of U.S. economic growth) has been averaging 3 percent over the past 20 quarters.
While manufacturing dipped in the past several months, and is due for an upturn in the new year as the global economy continues to expand, the larger services sector has been thriving. (And producing most of the new jobs.)
"Services output is growing strongly, as indicated by the latest 58.9 reading for non-manufacturing ISM index (which includes construction). While the market's emphasis has been on the weakness in manufacturing, services, with a much larger share of GDP, continue to suggest solid growth," said David Malpass, chief global economist at Bear Stearns.
With wages growing nicely in a "full employment" economy, consumption has been "growing steadily since the 2005 Katrina fluctuation," Malpass adds. He expects consumption growth to "remain solid into 2007, drawing on the low unemployment rate, good lifetime earnings prospects and the high level of household financial savings (more than the rest of the world combined)." Consumer spending accounts for two-thirds of the entire U.S. economy, and the trend lines are all pointing upward in this key sector. If the current pace holds, consumption could rise by a strong 3.5 percent annual basis in the fourth quarter.
That's not the worldview one hears coming from the bears on Wall Street and in academia who have been sounding the dreaded "r-word," forecasting a recession for 2007 and almost hoping for the dramatic economic crash they've been predicting in the past year.
But I think the pessimistic practitioners of gloom and doom will be proven wrong once again, as they have been throughout 2006.