Looks Like Recovery, No Thanks to Washington
"The Kudlow Report" Anchor
American families are $340 billion wealthier according to the Federal Reserve’s latest batch of household-net-worth data.
This puts folks $4.4 trillion up from the bottom of early last year.
I believe this is contributing not only to a better economy, but also to better consumer spending.
The proof is in the pudding: This morning’s stronger-than-expected retail salesreport showed U.S. consumers were able to shrug off the February snowstorms and do some shopping. U.S. sales rose 0.3 percent, overcoming a 2 percent drop in auto sales. Excluding autos and trucks, retail sales actually were up 0.8 percent in February -- the largest gain since November. Sales have risen in four of the past five months, and are up 3.9 percent compared with a year earlier.
This is clearly a bullish recovery signal.
Stock market capital gains are playing a huge roll here.
The S&P 500 hit a 17-month high yesterday, and is flat as of this writing. It basically has erased the New Year’s correction. Never underestimate the critical role capital gains play in the economy, creating new wealth, investment, and spending power.
This is precisely why it’s so incredibly stupid for Washington lawmakers to raise the capital-gains tax. They want to repeal the Bush tax cuts and impose a payroll tax on investors. Guess what? If you tax something more, you’re going to get less of it. All this does is reduce economic-growth power. It doesn’t make any sense at all. Success equals growth and jobs. Why punish it?
Along with corporate profits, capital gains are perhaps the most basic source of economic stimulus. They are so much more important than phony government spending and borrowing. Why do we want to tax capital gains at all?
It makes no sense.
Elsewhere in the news: Jobless claims fell slightly, but not enough for a return to confidence. At 462,000, we really need to see 400,000 or less. So this is still an issue.
Trade fell slightly Thursday, but let’s not forget that trade has been booming over the past year. Both exports and imports are rising at nearly 15 percent. That’s a very strong pro-recovery number for the U.S. and the rest of the world.
More good news: Citigroup CEO Vikram Pandit has helped lead banks higher with a very optimistic forecast about future profits. He’s looking to get out from under the government’s remaining ownership stake. That’s been a big boost for the banks.
Another piece of good news: A significant legislative obstacle may be developing for Obamacare. The reconciliation package may not be able to make it through after all. The House will have to pass the Senate bill first, and there will be no reconciliation until Obama signs it. By then, the shouting may be all but over. This new setback for Obamacare has given a boost to health-insurance stocks and the overall sector.
Speaking of President Obama, he may have delivered a free-trade speech yesterday, but he’s not really proposing free trade. He’s not pushing for new deals with Colombia, Panama, and South Korea. Why? Because his major union supporters don’t want those deals. Period. So Mr. Obama is now going to push for more spending subsidies for big business.
This is what I call crony capitalism. It’s certainly not free trade. And it won’t help economic growth, small businesses, or job creation.
Washington is so far off track.
It is truly a miracle that the economy is recovering.
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