Members of the investor class should keep their eyes on the fundamental story. Low interest rates and rising earnings are still signaling a roaring bull market. Expected profits suggest that the stock market is at least 20 percent undervalued. A Dow Jones index over 11,000 is not out of the question for next year.
But again, no situation is ever perfect. The Bush administration's protectionist stance on trade is wacky. The steel tariffs were stupid, although they'll hopefully be repealed in the next few weeks. New import quotas on Chinese lingerie are more than stupid -- they're an embarrassment. But there will be no global trade war. Mischief-makers in the Commerce Department will be stopped well before the water's edge.
And in Laffer's words, reducing high marginal tax rates on dividends, capital gains, top personal incomes and business depreciation bonuses are much more important than low-grade trade disputes. These supply-side measures jolted the economy into true recovery.
Democratic pessimists on the campaign trail will get nowhere with the American people next year. The nine tax-hiking Mondales would wreck recovery. The antiwar McGovernites would undercut our domestic security and our international credibility. The president will stay the course in Iraq primarily to protect American safety -- and the United States will prevail.
With the economic winds at his back, and a steadfast no-cut-and-run policy in Iraq and other places where terror thrives, Bush will retain the confidence of the American electorate. If the Democrats had learned from Truman and JFK, they might have made it a real horserace. But they opted for the McGovern-Mondale model: an election-year loser. Bush should win next November with 42 states or more. And his coattails will increase legislative majorities in the Senate and the House.
Hopefully, in Bush's second term, we'll see some serious budget restraint and a better trade policy: We should grow our exports, not erect barricades against imports. Personal Social Security accounts, new super-saver plans for retirement, health and education, and thorough-going tax reform should also be on the post-election agenda.
Leave pessimism to the traditional old-media outlets. It doesn't matter what they preach. This country is in good shape.