It's the economy … Here's the most underappreciated story of the year

By Rich Lowry

Our superb economy is hidden in plain view, mostly ignored by a media that prefer to accentuate the negative and a Democratic Party that is loath to admit that anything could possibly be right in George Bush's America.

It wasn't too long ago that the Democrats were comparing President Bush to the alleged mastermind of the Great Depression. Back in 2003, House Minority Leader Nancy Pelosi, D-Calif., said that Bush had "the worst record on jobs since Herbert Hoover," repeating a talking point meant to get the names "Bush" and "Hoover" within close proximity. If Democrats were to evaluate today's economy in similarly ridiculous Depression-era terms, they would have to hail Bush as the new FDR.

The robust American economy is the great underappreciated story of 2005.

Like the purloined letter in Edgar Allan Poe's story, our superb economy is hidden in plain view, mostly ignored by a media that prefer to accentuate the negative and a Democratic Party that, for understandable partisan reasons, is loath to admit that anything could possibly be right in George Bush's America. The end of the year brought a barrage of good news that it will take Herculean determination to determinedly ignore.

MasterCard reported that holiday sales increased 8.7 percent over last year. Sales of electronics were up 11 percent, and home furnishings were up 15 percent. Purchases exceeding $1,000 increased by 13 percent. The Wall Street Journal noted that economic pessimists harp about median incomes declining, but "judging by these holiday sales, somebody must have money."

Overall, consumer confidence rose in December to its highest levels since before Hurricane Katrina battered the Gulf Coast. The price of a gallon of gasoline declined to $2.18, down from $2.26 in November and well below the high of more than $3 in September. Weekly jobless claims are back to their pre-Katrina levels, and workers were earning 3.2 percent more than in November 2004.

Then, there was all the news to ignore from the third quarter of '05: 4.3 percent GDP growth; 215,000 new payroll jobs in November; 4.5 million payroll jobs added since May 2003; fixed investment up 8.6 percent; industrial production up 0.7 percent from October to November.

The unemployment rate is at a level that at one time would have been cause for universal celebration -- just 5 percent -- and according to Jeffrey M. Lacker, president of the Federal Reserve Bank of Richmond (Va.), employment continues to grow at a "healthy pace." All of this comes on top of low inflation and extraordinarily high productivity gains. Heritage Foundation economist Tim Kane calculates, putting all the key factors together, that economically, 2005 is one of the best five years out of the past 25.

Just as blaming Bush for the recession of 2001 was always charging him with being in the wrong place at the wrong time -- the economic downturn and tech crash began before he took office -- he can't get all the credit for a fortuitous turn in the business cycle. (Although President Clinton somehow managed to claim personal responsibility for every tick up in GDP and every tick down in the unemployment rate.) It's the amazing resiliency, and endless capacity for innovation, of the American economy itself that is responsible for the latest spurt in growth.

But one Bush policy in particular did stoke the upturn. As a report of the Joint Economic Committee of Congress explained, consumer spending never stopped growing in the 2001 recession. It was a free-fall in investment that caused the economic stall. Bush's 2003 tax cuts on dividends and capital gains were meant to recharge that particular engine in the economy, and they did. According to Kane, investment has grown at a rate of 9.2 percent since those tax cuts, higher than the average of 6 percent of the past two decades.

No matter. In the Bush economy, the press specializes in making people feel badly about doing well. The coverage in coming weeks will surely obsess about high home-heating bills. Since no economy can achieve a state of Zen perfection, when spring comes, there will be something else to be discouraged about, perhaps the softening housing market. Recent business surveys show companies are planning to increase hiring in 2006. That's a sign the vigorous economy is set to roll into 2006, appreciated or not.

Rich Lowry is the editor of National Review.