The State of Our Economy

An excellent article written by Herman Cain describing the true state of our economy. We're in an economic correction, not an economic recession.


It's the Economy but don't be Stupid
January 21, 2008By Herman Cain
Hear 'The New Herman Cain Show' Monday-Friday 7pm-10pm on News/Talk 750 WSB.

If "The Economy" were a movie, the movie critics would conclude that "we have seen this movie before". With exaggerated fears of an immediate recession being proclaimed by the media, the players are the same, the movie plots are the same, the lines are the same, the chase scene near the end will be the same, and unfortunately, the end of the movie will be the same.

Here are just some of the promotional headlines appearing on media marques last week to entice you to pay the $7.50 to go to the movie or order it on pay-per-view.

"DOW takes a 300 point dive". "New housing starts down 25% for 2007". "Inflation rate is worst in 17 years". "Only 18,000 new jobs created in December 2007". "Job picture gloomy, recession feared." And "Media nearly unanimous: recession inevitable."

Federal Reserve Chairman Ben Bernanke said last week that we should expect an economic slowdown in 2008. That means economic growth will still be positive if the media does not scare the crap out the public and business owners. He did not say to expect the great depression of 2008.

The Democrat leaders in Congress and their presidential contenders are desperate to maintain the perception that the last four years of economic growth did not happen. They continue to be in denial that we have had over fifty straight months of positive GDP and job growth as a result of the Bush tax cuts of 2001 and 2003.

Thus, the recurring lines in the movie by the Democrats of "the tax cuts were for the rich", or "this economy has not helped everybody." And at the first sight of an economic slowdown the Democrats and their media allies proclaim "economic disaster!"

Admittedly, there are some components of the economy that are experiencing negative growth versus a year ago, such as construction, real estate and related businesses. And yes, there are some people who are facing mortgage foreclosures due to poor lending practices by lenders on the one hand, and poor spending practices by some consumers on the other. But this is no time to panic, overreact or throw out the baby with the bath water.

We are in an economic correction, not an economic recession.

That means the free market dynamics of supply and demand will unfortunately "downsize" the segments of the economy that are over built or have produced too much for the demand. And, that includes some businesses that have expanded too much too quickly, and some consumers who have spent too much.

At this point in the movie the media and some people are screaming for the President and Congress to do something. (Music builds!) So to appear responsive to the "crisis", they ride in on their famous white stallions called "stimulus package". That's right, they all have different stallions (ideas) named stimulus package. Here is where the sub-plots and lines are truly old reruns.

The President was the first to put his ideas out in public, by proposing to make the existing tax cuts permanent along with a short term tax cut in some form directly back to the working people. Even though the details have not been released, presidential candidate Hillary Clinton said the same day in a speech that "the President's package does not go far enough."

But this is typical "type cast" Hillary. When the preliminary August 2007 jobs report was issued in early September indicating the economy lost jobs, Hillary Clinton immediately proclaimed that the Bush economic policies were a disaster. Two weeks later the Labor Department revised the jobs report, as they do every month, and the final numbers reflected another positive jobs report for August. I missed the scene where she admitted that she had made a mistake.

As the movie unfolds, look for Nancy Pelosi, Speaker of the House, to say a variation of "Now is the time for the President to work with Congress in a bi-partisan way to help the American people." Translation, do it my way. And look for Harry Reid, Majority Leader in the Senate, to say a variation of "This President and his administration are a disaster." Translation, I haven't a clue as to how to fix the problem.

Economic concerns have taken center stage in the arenas of media coverage and the presidential campaign, but we do not have to be stupid about what to do. We need to tighten our collective and individual spending belts, and allow the free market dynamics to work the way they are suppose to work.

We also need certainty about the current tax rates, and that they will not expire in 2010. This lingering uncertainty is at the heart of the economic jitters. In the end, the less the President and Congress do to "save the day", the sooner the economy will level off. But as usual, they will do something.

And as usual, the voters will not get their money's worth, just a free bag of "popcorn", not realizing that it is already included in the price of the ticket (taxes).

We do not need to talk ourselves into a recession, and we do not need a national economic 'pity party'.

Listen to The New Herman Cain Show weeknights 7-10pm on News/Talk 750 WSB.