Donald Lambro
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WASHINGTON -- Throughout her campaign in the Pennsylvania primary Hillary Clinton kept repeating that America didn't manufacture anything and that if she becomes president, we'd start making things again.

There's only one thing wrong with this bleak, despondent assessment of the American economy (which many voters share): It isn't true. Sadly, no campaign reporter called her on it. This was a bigger whopper than her tale about dodging bullets in Bosnia.

In Hillary's world there is no Boeing Corporation, which is beating the pants off Airbus in aircraft manufacturing. (It announced a 38 percent jump in first-quarter profits last week.) There is no Apple Computer, selling so many IPods and IPhones that it can barely meet demand. Americans make no cars, no washing machines, no fiber optics, no countertops or kitchen cabinets, no plumbing supplies. There is no pharmaceutical industry, no electronics businesses, and no farm and construction machinery companies, just to mention a few of the industries that make things. Drug giant Eli Lilly reported stronger quarterly sales last week that doubled its earnings. Well, you get the idea. These and millions of other American companies sold more than $1.6 trillion in exports last year, according to the U.S. Department of Commerce, and that does not count sales here at home. We make and sell a lot of stuff, Hillary.

But the Democrats have a huge stake in portraying the U.S. economy as bleakly as possible, even if that means making things up -- though you'd think that a near-negative growth rate, higher unemployment, and a steeply declining housing industry would be enough evidence of the problems we face. We're talking, however, about the possibility of recapturing the presidency, so we are going to be hearing a lot of talk in the coming months that the U.S. economy is not just in a recession, it's in a depression. Political rhetoric is going to be ramped up to exaggerate and exploit preconceptions and misconceptions.

But what if the economy begins turning around in mid-campaign? That's what happened in 1984 when President Reagan was running his optimistic "Morning in America" campaign ads as the long two-year recession was ending. Reagan's Democratic opponent Walter Mondale disagreed, and his America-in-depression rhetoric never changed. Mondale carried one state, his own.

A mid-year turn-around is still quite likely. Federal Reserve Chairman Ben Bernanke has predicted it, as have many others. In a new report on the United States and global economies, titled "Liquidity-Driven Rebound," Wall Street economist David Malpass does not believe "the credit crisis will cause a long or deep recession."

Neither do I. As I said in past columns, I think this downturn is going to end up being short and shallow because of the same reasons set forth in Malpass' latest study. "Global fundamentals are reasonably solid in terms of interest rates, innovation, and profit opportunities, arguing for a recovery in coming months. The powerful Washington stimulus, combined with huge reservoirs of liquidity built earlier in the decade, should spur a rebound in credit markets, equity markets and gradually in economic activity," Malpass writes. "Looking forward, we expect to see indicators of recovery in coming months -- narrowing credit spreads, a moderate decline in conforming mortgage rates, moderate jobless claims, higher equity prices, revived consumption growth in May and June, and then an increase in home sales and mortgage applications," he forecasts.

We are already seeing some signs why Malpass' outlook makes sense. With some exceptions, this month's quarterly corporate earnings reports have been unexpectedly strong -- not the signs of an economy plunging into a long recession. The global economy remains strong, too, as reflected in mushrooming U.S. export sales. It is hard to remember a deep recession when the world economies were growing -- as they are in Europe, Asia and much of Latin America. Wall Street, with its zigs and zags, has by and large kept its head in all of this, sending additional signals that the economy may be approaching a bottom. We see those signs when investors push the Dow higher, picking up cheaper stocks in good companies that have been pulled down by the undertow of a bear market. The plunge in the financial markets has had a lot more to do more with falling confidence in the economy's fundamentals than with the availability of cash, or as it is referred to on Wall Street: liquidity. There's still a lot of it sitting idle. "The percentage of cash on the sidelines as a percentage of market value is the highest it's ever been," says Richard E. Cripps, chief market strategist for Stifel, Nicolaus.

It's in this context that voters are going to choose between two sharply contrasting economic agendas in this election: the fear-based campaign that America is flat on its back, plunging in the abyss, with the only solution being to raise taxes on businesses, investors and consumers in order to grow the government; or the glass-is-half-full belief that we face economic problems we can overcome with pro-expansion tax cut incentives that will unlock the capital needed to create jobs and grow our economy.

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Donald Lambro

Donald Lambro is chief political correspondent for The Washington Times.