WASHINGTON -- Just nine weeks before the 2008 election year begins, the nation's political climate seems to be cooling down a bit from the fiery debates and battles that blackened headlines earlier this year. We can't exactly say everything is fine, but the sky isn't falling, either, as the doom-and-gloomers were predicting it would. A lot of things are getting better.
Media pundits, notably those at The New York Times, were asking last week, what has happened to the Iraq war? It seems to have vanished from the front pages of the nation's newspapers and the top of the nightly news shows, they noted, somewhat unhappily.
To be sure, things seem to have quieted down somewhat in Iraq lately as a result of President Bush's surge plan to crush the terrorist insurgency there. The country still faces a long battle against Al Qaeda in Iraq, but the statistics coming out of Baghdad lately show that there's been a significant decline in violence in the capital and in some of the worst terrorist-infested provinces.
Indeed, the focus has shifted to other trouble spots, such as Iran's march toward nuclear hegemony in the region and its efforts to support terrorism across the Middle East through its deadly Revolutionary Guard Corps and elite Quds Force.
Bush last week turned up the heat against Tehran with his toughest sanctions to date to show them the United States means business. Life is about to get a lot harder for the Iranian regime that has been supplying high-tech bombs and other explosives that have killed our troops in Iraq.
Here at home, the sharp downturn in housing sales and the subprime mortgage market's upheaval have continued to rattle our economy, amid predictions that it is only going to get worse before it gets better. But the economy also continues to show substantial strength, evident last week from a rash of strong, third-quarter corporate-earnings reports.
If the economy is falling headlong into a recession, as the naysayers keep parroting, then corporate earnings and profits should be declining. But, quite the opposite, they were remarkably strong, and, more importantly, reflect sustained consumer buying power that is at the core of a healthy and growing economy. A few examples:
-- Apple's fourth-quarter profit leaped 67 percent on sales of its computers, iPods and iPhones, capping a record-breaking year for the high-tech company.
-- Merck, the pharmaceutical giant that developed a vaccine for cervical cancer and a new pill for diabetes, reported a 62 percent gain in profits in the third quarter.
-- Amazon.com, the country's largest Internet retailer, said its profits had more than quadrupled in the last quarter.
-- Google, the fabulously successful global Internet information system, saw its stock climb to a stunning $676 a share based on record earnings.
America's largest corporations, most of them major players in the global economy, reported similarly strong earnings and profits: from McDonald's and Coca-Cola to top defense-industry leaders, such as Boeing, General Dynamics and Lockheed Martin.
These earnings statements helped to stabilize a jittery stock market last week, at least for a time. But the financial markets remained volatile as a result of troubling evidence that the housing sector was still in decline.
The National Association of Realtors said existing-home sales dropped last month, for the seventh consecutive time, by 8 percent, which sent the closely watched Dow into another steep drop -- though the blue-chip index was still up by nearly 10 percent for the year.
No one knows how much deeper the housing slump has to go or how much longer it will last. Millions of adjustable-rate mortgage holders still face interest resets that many may not be able to handle amid predictions this will trigger a wave of foreclosures that will worsen the credit crunch.
But the good news is that the Fed has been pumping billions of dollars into banking institutions, and lenders have begun to preemptively offer refinancing packages for endangered homeowners that could ease the credit downturn.
The other side of this problem is a positive development for people who want to buy a home but have been effectively priced out of the market by exuberantly irrational real-estate prices of recent years. Housing prices are slowly but surely coming down in a self-correcting adjustment by market forces that at some point, when they get low enough, will lure new buyers into the housing market. I think this is going to happen sooner rather than later.
In the meantime, let's keep the excesses of the housing crunch in perspective. It's one sector of a $14 trillion economy, but by no means the biggest one. We will get through this, because 150 million people are still working and we have full employment, consumer spending remains healthy, 70 percent of Americans still own their own home, half of them outright.