Jack Kemp

In more than three decades of political involvement, I've never witnessed such pessimism, gloom and doom over the nation's economy emanating from people who should know better. If it's not Warren Buffett shorting the dollar because of trade and budget deficits, it's Fed Chairman Alan Greenspan bad-mouthing our economy at the G7 meeting in London and Congress failing to bring much-needed assistance to the Gulf Coast region because of wrangling over budget cuts and deficits. It's actually the antithesis of the real story of our economic resilience.

As investment strategist Brian Wesbury of Claymore Advisors wrote recently in The Wall Street Journal, "When bond yields rise, it is considered bad for the housing market and the consumer. But if bond yields fall and the yield curve narrows toward inversion, that is bad, too, because an inverted yield curve could signal a recession. If housing data weaken, as they did on Monday when existing home sales fell, well, that is a sign of a bursting housing bubble. If housing data strengthen, as they did on Tuesday when new home sales rose, that is negative because the Fed may raise rates further. If foreigners buy our bonds, we are not saving for ourselves. If foreigners do not buy our bonds, interest rates could rise. If wages go up, inflation is coming. If wages go down, the economy is in trouble."

I'm an optimist who doesn't worship at the shrine of balanced budgets, but I'm also realistic enough to know that the Titanic didn't stop just to take on ice.

The deficit is less than 3 percent of our economy's GDP, which is approaching $12.6 trillion. Unemployment is dropping, and while 5.1 percent is too high, it's going down, not up as in Europe. Core inflation, while too high, is less than 2 percent. The trade deficit that allegedly causes the dollar to fall has allowed the dollar to rise 10 percent in value versus the Euro this year alone.
The 10-year yield on T bills is well below the year 2000 yield of 6 percent, on average.

Problems abound post 9-11, post-Katrina and post-Detroit manufacturing slump, but with energy and health-care price increases among our challenges, let's not push a panic button and start raising tax rates or cutting social spending for low-income families and the poor.

Jack Kemp

Jack Kemp is Founder and Chairman of Kemp Partners and a contributing columnist to Townhall.com.
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