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Are Free Market Forces on the Comeback Trail?

Here’s my latest Money Politics message: the midterm elections are going to be crucial in determining the outlook for pro-growth, free market policies includes lower taxes, lower spending, ending bailouts and diminishing federal control over our economic freedom.

Some commentators fret that high-tax & regulate big government will undermine the stock market boom, and the fledgling economic recovery that I call a mini-boom. Those are good worries. But my counterpoint is this: there is a new revolution going on against big government controls.

It started with the tea party movement. And it now seems to be making its way through the ranks of the Republican Party. The new New Deal may be over. As a result, the longer-term outlook may actually be more optimistic for supply-side capitalism, entrepreneurship, and economic growth.

Some recent news items...with oil prices hovering at a 14-month high around $83, why in the world is Interior Secretary Ken Salazar creating high regulatory hurdles that will make it virtually impossible to drill for oil and natural gas on federal lands? Why is he doing this? We need to deregulate energy. We need drill, drill, drill—plus nuclear. It’s time to unleash energy entrepreneurship here in America. We need free market forces, not government regulations, to dominate our energy markets. It could be a truly phenomenal source of jobs creation.

Elsewhere, the ISM services index rebounded nicely. ADP job losses continue to decline. Layoff announcements are at 9-year lows. This is all part of my mini-boom scenario.

Finally, we can't have free market prosperity without a sound King Dollar. We surely don't need another commodity and asset bubble arising from ultra-low rates, ultra-easy money, and a declining dollar.

It’s unbelievable that December’s Fed minutes are still talking about buying more bonds and creating more money. This is a big reason why oil and gold are soaring. Something is amiss here. Bernanke is not on the right path. Free-market capitalism needs steady money and a sound dollar.

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Questions? Comments, send your emails to: lkudlow@kudlow.com