Up­beat indicators

The Washington Times Weekly - - Commentary - Don­ald Lam­bro

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 two weeks ago, 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.

Mr. Bush two weeks ago turned up the heat against Tehran with his tough­est sanc­tions to date to show them we mean 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, as was ev­i­dent two weeks ago from a rash of strong third quar­ter cor­po­rate earn­ings re­ports.

If the econ­omy is fall­ing head­long into a re­ces­sion, as the naysay­ers keep telling us, then cor­po­rate earn­ings and prof­its should be de­clin­ing. But, quite the op­po­site, they were re­mark­ably strong, and more im­por­tantly re­flect sus­tained con­sumer buy­ing power which is at the core of a healthy and grow­ing econ­omy. A few ex­am­ples:

• Ap­ple’s fourth quar­ter profit leaped up 67 per­cent on sales of its com­put­ers, iPods and iPhones, which have capped a record-break­ing year for the high-tech com­pany.

• Merck, the phar­ma­ceu­ti­cal com­pany that de­vel­oped a vac­cine for cer­vi­cal can­cer and a new pill for di­a­betes, re­ported a 62 per­cent gain in prof­its in its third quar­ter.

• Ama­zon.com, the coun­try’s big­gest 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. Other in­dus­trial gi­ants such as Cater­pil­lar, Honey­well and 3M re­ported strong earn­ings, too.

Th­ese earn­ings state­ments helped to sta­bi­lize a jit­tery stock mar­ket on Wall Street 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 into a some- what softer land­ing.

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 self­cor­rect­ing 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.

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.

No, ev­ery­thing isn’t hunky­dory, but I think we can say the glass is more than half full rather than half empty.

Don­ald Lam­bro, chief correspondent of The Wash­ing­ton Times, is a na­tion­ally syn­di­cated colum­nist.

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