I
want you to understand one harsh reality. In the four years of the
Obama presidency, economic growth has been almost neutral. This is
after thirty straight years of effective 4% growth under all previous
administrations. It is about to be followed by strong above average
growth over the next four years. It is a nasty picture that every
Democrat will have to defend for decades. From now on, the only
electable democratic presidential contender will be those with proven
economic track records.
Both
Democrats and Republicans suffer from what I like to call Big
Government Disease or BGD. Often there is little to differentiate
between the two as common sense usually rules. Unfortunately. Obama
has stepped out a couple of times and must now defend his record
against common sense. The real campaign is now underway, and the
Republicans will rightly hold his feet to the economic fire. He
cannot win.
There
is in fact little excuse for Obama's abject economic failures and
shortcomings except his own profound economic ignorance. He was the
wrong man at the wrong time. Regrettably, John McCain was almost as
weak so we lack a plausible might have been also. Instead we got to
hold our fire for four long painful years while everybody learned a
nasty lesson in why you do not allow brokers to gamble with
depositor’s money. Many other things need to be fixed, but that
always was important.
We
are now 14 years past the structural change that was made under
Clinton at the behest of the top handful of banks, all of which have
either disappeared or been massively bailed out. Perhaps it is time
to ensure we do not have a repeat.
Lawrence
Solomon: The Romney boom
Corporations
will start spending once Obama is gone
The
Republican National Convention is over. Mitt Romney will now get a
bump in the polls, putting him ahead in the presidential race. If he
can maintain his advantage and seem a good bet to win — as I
believe he will — businesses in the U.S. and abroad will for the
first time focus on what the U.S. would look like with Obama gone.
The
burden of regulations, rather than relentlessly rising, would
immediately stop – on Day One of his administration, Romney would
allow no added regulatory costs. The certainty of tax increases under
Obama would flip to become a certainty of tax cuts – also on Day
One under Romney, the corporate tax rate would drop to 25%.
Moreover, the borrowing binge that has given the U.S. a $16-trillion
debt and yanked its AAA credit rating would end with Romney, a
notorious tightwad. The bloat that is now the U.S. government, at
25% of GDP and rising, would instead deflate to an historic 20% of
GDP. To aid this slim-down of government, the federal government
would contract out major construction programs to unionized and
non-unionized companies alike, whichever was more competitive.
As
all this dawns on businesses – and it will dawn on some faster than
others — businesses will spring into action and the U.S. economy
will awaken, starting with a stock market boom.
That
boom may have already begun. Starting in June, as it became clear
that Romney would be able to match and perhaps out-compete Obama in
raising campaign funds, the Dow has increased by 1000 points – this
in the face of data showing that the growth in the U.S. economy slid
from a weak 2% in the first quarter to a weaker 1.5% in the second
quarter. But whatever the reason for the recent stock market surge,
here’s why a Romney recovery could be huge.
As
found by the U.S. Federal Reserve in a study of recessions over the
last 40 years, recoveries tend to mirror the recessions they
follow – the deeper the recession, the steeper the recovery.
The Reagan economy’s recovery after the doldrums of the Carter
years and the deep 1981 recession saw rapid growth averaging 6% a
year. The Reagan recovery also saw one of the great bull markets in
stock market history, with the Dow Jones industrial average tripling.
After
the deep recession of 2008, in contrast, a strong Obama recovery of
the U.S. economy never happened – it was aborted by Obama’s
business-unfriendly policies, which led business to stay on the
sidelines. The result: The Obama economy grew at one half to
one-third the rate seen in the Reagan recovery, despite the massive
stimulus spending and quantitative easings and near-zero interest
rates of the Obama years. The investment dollars needed to rev up the
economy didn’t disappear, however, they have just been parked, out
of harm’s way.
The
S&P 500 companies alone are sitting on US$5-trillion in cash and
many others holding trillions more are champing at the bit, waiting
for the all-clear sign before to invest. The sole reason much if not
most of that money is on the sidelines comes down to one factor –
Obama worries business. Facing a blizzard of known and unknown new
taxes and known and unknown new regulations, most businesses can’t
plan and even if they could, they can’t be confident of a growing
economy into which they can sell their goods and services.
Where
will those pent-up trillions go, once Romney lifts the blanket of
insecurity that now stifles the economy? Those 500 businesses of the
S&P and countless others doubtless have plans in abeyance that
they would eagerly pursue. But a Romney recovery would open up
numerous new vistas for investment, too, by virtue of his plan to
limit federal government meddling in the economy. No area has been
more meddled with than fossil fuels.
Coal,
oil and natural gas developments have all been stymied by Obama, who
has starved them of permissions and bound them in red tape. To make
good his pledge of energy self-sufficiency in North America, Romney
would unleash the Keystone Pipeline, permit offshore developments on
all U.S. coasts, open up and lease federal lands in the interior,
encourage coal and fracking of gas, and depoliticize carbon by
removing this non-polluting gas from the Clean Air Act’s purview.
Energy developments alone would account for trillions in new
investments, creating an estimated 3.6 million new jobs while
lowering the cost of energy for businesses and households. The vast
energy expansion would also yield as much as US$2-trillion in
receipts for federal, state and local governments, enabling them to
deal with their debts and stay viable.
Under
Obama, the U.S. economy has experienced the worst recovery since the
Great Depression, one so bad that many believe the economy is headed
back into recession. Under Romney, the U.S. economy would soar.
Investors are now in limbo, unsure of who will win the November
election, unsure whether to dive back into the economy. Some time
between now and Nov. 6, they will become sure.
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