A great editorial in the Chicago Tribune titled "Goldilocks and the Dow" makes the point that the Dow Jones stock average, which is near an all-time high, is reflecting solid growth with mild inflation. The editors write, "We are enjoying a goldilocks economy, not too hot and not too cold." In other words, there's no economic bubble out there that's about to go "pop."
Recent economic reports confirm this: Factory production is strong. Core inflation has settled down. Excluding energy, consumer prices haven't moved all that much in the last three years. In the third quarter, real consumer spending is running 3.2 percent at an annual rate, ahead of the second quarter average. Non-defense capital-goods shipments (excluding aircraft) are 7.6 percent ahead of the second quarter. After-tax real disposable income is 5.4 percent higher than last year. And tax revenues are rolling in, with both states and the U.S. Treasury reporting record revenue collections.
Rising stocks, falling gas prices, low tax rates and the Goldilocks economy are powerful pluses for election-year Republicans. With so many indicators leaning positive, the Democrats aren't even talking about the economy anymore.
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The media continue to buzz about a do-nothing Republican Congress. But I'd say this Congress held the pro-growth line in its most recent session.
First, the investor tax cuts on dividends and capital gains were extended to 2010. This underpins the Goldilocks economy with the strongest capital-formation incentives since Calvin Coolidge.
Second, Treasury Secretary Hank Paulson apparently talked Sens. "Smoot" Schumer and "Hawley" Graham out of their China-bashing 27.5 percent tariff. This could've been the worst anti-growth legislation since the Smoot-Hawley tariff passed in 1930.
Third, no anti-immigration legislation was passed. Over the past 20 years -- the high tide of Mexican immigration -- the American economy has prospered and flourished. Today, any fence-only (new-Berlin Wall) approach to immigration control would be an economic negative.
Fourth, the Republican Congress passed a detention bill that will allow us to interrogate terrorist prisoners and gain information that will protect our citizens.
I'd give this Congress good marks, even though it failed to pass a strong budget-earmark-reform bill. That said, low taxes, free trade and the free movement of labor and capital will all bolster the Goldilocks economy -- aka, the greatest story never told.