Businesses created over 200,000 new jobs for the sixth straight month. Second-quarter GDP rebounded by 4 percent from the winter-weather doldrums. And the ISM manufacturing report exceeded all expectations, with big gains in new orders and employment.
So on the surface the economy is looking better. And as a result, the Federal Reserve is on the cusp of a new and less-stimulative policy cycle — which is a big reason why stocks sold off this week. A lot of investors are wondering what happens when the Fed takes its foot off the accelerator. Will burdensome tax and regulatory policies prevent any sort of economic breakout?
But let me throw in another uncertainty: politics. What is the Republican response to all this?
Yes, the GOP is favored to win the Senate. But I wouldn't be so confident. Polling shows many key races are up for grabs. The numbers are close.
And here's what I see as a big part of the problem: Instead of putting forth a clear growth message — like a new Contract with America — congressional Republicans this week voted for a lawsuit challenging President Obama's abuse of executive power.
Now, suing the president is different from impeaching the president. But is it so different in the public's eye? And don't most people think this lawsuit will go nowhere? And isn't this just a big distraction from key issues, like the economy, tax reform, regulatory rollbacks, immigration reform, and rewriting Obamacare?
In other words, is the GOP sending voters a clear message about what it will do if it captures the Senate and House?
Let's circle back to the economy. I'm all for good news. But the current expansion has registered only 2.1 percent annual growth — the lowest in the post-WWII period — and is $1.6 trillion below the economy's long-run potential to grow.
And at least 19 million Americans are underemployed. The so called U-6 labor-impairment rate, followed closely by Fed head Janet Yellen, increased slightly to 12.2 percent in July. And measured against long-term trends, there are still about 6 million missing jobs. To get back to normal, businesses would have to create nearly 400,000 jobs a month by the end of the president's second term.
Take-home pay is also lagging. Wages remain soft at only 2 percent year-on-year. After-tax income, adjusted for inflation, is rising only 2.3 percent yearly.
So while the newest numbers look better, we are still living way below our potential. I say this not to be a pessimist, but to point out that we can do better. But I also want to underscore my concern that the Republicans are not offering a better deal.
What's the GOP plan to increase take-home pay? Or to cut business taxes for large and small companies that would not only increase growth and jobs but throw 70 percent of the benefits to wage earners? And what happened to monetary reform that would boost King Dollar?
House Budget Committee chairman Paul Ryan gets it right with his new state-sponsored anti-poverty program. But he's often a lone GOP voice on issues like these.
And then there's Obamacare. It's a wet blanket over business hiring and the economy. And recent polls show that Obamacare is even more unpopular today. But Republicans seem to have dropped the issue. Why aren't they promising to end the much-disliked mandates?
Former senator Phil Gramm just delivered a great op-ed about the benefits of health-care freedom of choice. "Americans have the right to buy insurance that meets their own needs," he wrote. But where is the GOP on making health insurance freer and substantially cheaper?
The pro-growth measures are out there. But the Republicans are not unifying around them — at a time when the economy needs it.
Consider this: The Federal Reserve delivered a policy directive last week which, though not rules-based, clearly indicated that it is close to meeting its targets on inflation and jobs. That means the Fed is going to end QE3 in October and could start to slowly raise interest-rate targets early next year.
So the stock market is starting to discount this. And it is worried.
I recently moderated a panel including former Obama advisor Larry Summers and former Romney advisor Glenn Hubbard. And all three of us expected the Fed to raise interest rates sooner rather than later.
So here's my question: Where's the GOP in all this? It could play a hugely positive role today if it unveiled and campaigned on a clear economic-growth agenda. Markets want it. And America wants it.
But will they? So far I don't see it.
—By CNBC's Larry Kudlow.