Bush economic prediction more accurate than critics

Larry Kudlow:

President George W. Bush may turn out to be the top economic forecaster in the country.

About a month ago he told reporters, “We’re not in a recession, we’re in a slowdown.” At a White House news conference a few weeks later, despite the fact that reporters pressed him to use the “R” word, Mr. Bush refused. And on Friday, after the most recent jobs report -- which produced a much-smaller-than-expected decline in corporate payrolls, a huge 362,000 increase in the more entrepreneurial household survey (the best gain in five months), and a historically low 5 percent unemployment rate (4.95 percent, to be precise) -- the president told reporters: “This economy is going to come on. I’m confident it will.”

We’re in the midst of the most widely predicted and heralded recession in history. Problem is, so far it’s a non-recession recession. Score one for President Bush. In an election year, it could be a big one.

First-quarter GDP growth came in at 0.6 percent. It wasn’t the widely predicted decline, and economists expect that number to be revised up. GDP growth for the fourth quarter of 2007 was also up slightly, while the prior two quarters averaged over 4 percent growth.

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Interesting -- isn’t it? -- just how durable and resilient our low-tax, free-market, capitalist economy truly is. Hit by soaring food and energy prices, a bad housing downturn, and a Wall Street credit crunch, the economy continues to expand, albeit slowly.

The bad news bears always focus on areas of economic weakness. But parts of the economy are doing splendidly. This includes agriculture, energy, export firms operating in the global boom, and all manner of private-sector business, professional, health, and education services. Incidentally, these are the exact sectors producing the highest-paying jobs. What’s more, at 154 million employed, the civilian labor force just hit a new all-time high.

Another significant data point: Corporate profits are outperforming all expectations. With three quarters of the S&P 500 companies reporting, profits outside the banking system have increased 10 percent over a year ago.

Profits are a dirty word on the campaign trail. Hillary and Obama, who blame American corporations for most every problem under the sun, want to tax profits heavily. With ExxonMobil and other oil companies reporting strong earnings, Democrats are now calling for a windfall profits tax. Last time we tried that -- under Jimmy Carter -- foreign energy imports rose 8 to 16 percent and domestic energy production fell 3 to 6 percent. (This according top a study by the Congressional Research Service.)

A Senate Republican group led by Pete Domenici has a much better idea: Expand drilling and production both offshore and in Alaska. Domenici’s group estimates this would produce up to 24 billion barrels of oil, enough to cover five years of U.S. energy use without a single import.

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There is more.

Republicans need to be hammering this latter point. We are at a critical point where Americans are persuadable about the error of Democrat energy policy because they are starting to feel the early squeeze voters will find themselves in as Democrats strangle production and drive up the costs of all energy.

The Democrats are really vulnerable on this point and it could be an issue that will turn them out of office in November. The energy companies too, need to stress this point. for too long they have taken a supine political position on the supply side of the energy equation.