Posted By: Tom Hustler

IbdFri Nov 3, 7:00 PM ET

Electionomics: Funny how in 14 years we've gone from "It's the economy, stupid" to "Don't mention the E-word." What's changed? Republicans, of course, are in charge, and the economy is going gangbusters.
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While the global war on terror and the question of whether Democrats are qualified to lead it remain today's most important issues, Americans should also keep the economy in mind when they enter the voting booth Tuesday.

And what they should remember most is how far the president and Congress have brought the economy against some of the most powerful head winds the U.S. has faced.

We tend to forget that before George Bush took office, we were suffering from a recession and market collapse of potentially historic proportions. By January 2001, the Nasdaq composite index had plummeted 46% from its March 2000 top in the final year of the Clinton administration.

In other words, the crash from a wild, anything-goes craze in profitless high-techs, biotech and dot-coms occurred more quickly than the first-year Depression-era drop in the Dow Jones industrial average from 1929 to 1930.

Only months later, on Sept. 11, 2001, America was brutally attacked by fanatical Islamic terrorists, killing 3,000 people. Most burned to death; others suffocated in intense heat. Many jumped out of windows from 100 stories up. Others watched in horror as hijacked airliners were flown into buildings; one nose-dived into the ground.

In the wake of the tragedy, Americans were afraid to travel, shop and invest. This was the economic and psychological situation Bush inherited. The president did a terrific job, cutting taxes for all taxpayers and heading off what could have easily turned into a 1930s-style Depression from which it might have taken a decade or longer to recover.

Since the tax cuts took full effect in mid-2003, GDP growth has averaged 3.6% -- compared with the 1.1% growth before tax cuts. Job growth has soared, along with incomes, profits and the stocks.

To appreciate the progress, you have only to think back over the criticisms Democrats have leveled against the economy in the past six years and how each has disappeared as policies put forth by Bush have been implemented by a Republican Congress.

"The jobless recovery." Remember this one? The economy had hardly begun to recover when Democrats were demanding to know what all the jobs were. And indeed, during the 2000-2003 period, employment growth lagged. But then, it always does in the early stages of a recovery. Employers don't hire if they're not sure the economy's on sound footing.

But by mid-2003, just after Bush's tax cuts went into effect, job growth started to pick up. From April 2003 through the third quarter of this year, payrolls have increased 38 months in a row, adding 6.5 million jobs.

Today, the jobless rate stands at a 5 1/2-year low of 4.4%. This year, household employment -- which, unlike the payroll jobs number, includes entrepreneurial startups -- has posted its biggest gain since 1984, and there are still two months to go.

Strange. We don't hear much about a "jobless recovery" anymore.

A "deficit as far as the eye can see." In contrast to the surplus bequeathed by that tightfisted Bill Clinton, Bush and the Republican Congress embarked on a spending spree that by 2004 had left the treasury $413 billion in the hole -- or so they said.

Never mind that recessions always kill tax revenues, creating big deficits. Or that World War III began eight months after Bush took office, requiring big spending on defense -- spending that Clinton never had to worry about. (His "surplus" was actually a result of the so-called Peace Dividend, as defense spending was slashed.)

Suddenly, Democrats -- who had created the postwar era of ever-greater deficits -- became born-again deficit hawks, chiding Bush for every tick up in red ink and predicting fiscal disaster.

But a funny thing happened on the way to federal bankruptcy: The recovery that Bush's tax cuts set in motion gained momentum and, as is always the case, revenue started pouring into federal coffers.

Before you knew it, Bush's deficit -- which he predicted, to the hoots and derision of his foes, would be cut in half by 2009 -- was plunging. In fiscal 2006, the deficit was $250 billion, $68 billion less than last year and just 1.9% of GDP, down from 2.6% in '05. Bush's promise was fulfilled three years ahead of time.

Today, you don't hear too much about the deficit anymore.

(While we're at it, let's remember this: Deficits represent only the debt side of our government's balance sheet. No one truly knows how much the asset side of the U.S. ledger has increased in 30 years. Our government owns massive acreage of valuable real estate in the West: many parks, dams, buildings, military facilities and an enormous array of other assets, which have grown in value substantially and probably far exceed deficit growth.)

"$4 a gallon gas." It was only a few months back that experts from oil tycoon T. Boone Pickens to Wall Street investment house Goldman Sachs to the BBC were predicting oil at $100 a barrel, gas at $4 a gallon and that we'd never see meaningful declines in the price of crude, gasoline or heating oil again.

Bush, of course, got blamed. A former oil man himself, a personal friend of Enron Chairman Ken Lay and -- along with a Congress in Big Oil's back pocket -- it was claimed he was doing nothing to ease our pain at the pump.

But again Bush understood how the market works. And instead of going off half-cocked and doing things that -- like Jimmy Carter's rationing scheme -- would only make things worse, he reminded us that the market would soon sort itself out. And he pushed for sensible government actions to bring new supplies of energy on stream.

The "wageless recovery." This one didn't pop up until all the other criticisms had been silenced by reality. Yes, the economy was doing great, even Democrats had to admit, but not everyone was sharing in the prosperity. As evidence, they -- really the liberal think tanks that find clouds inside every silver lining (until a Democrat takes office) -- cited median incomes as "lagging."

What they didn't say was that incomes were growing. And that much of the "lag" the data were showing was due to the 12 million or so illegal immigrants who had come into the U.S. and were now skewing our economic data.

Again, this belied an ignorance of how the economy works, and how that higher pay for workers doesn't really kick in until well after the economic growth begins.

Now, compensation -- including wages, salaries and benefits -- is soaring, as America's highly productive workers get their due. Since Bush has entered office, real per capita disposable income has jumped 10% to $28,135.

How often we hear that elections turn on economic conditions, and mostly we agree. But this year, there's a bigger issue out there: Whether Democrats, given their sorry record in foreign affairs and national security, can be trusted with governing in time of war.

Yet, the economy's important too, and we find it odd that it hasn't had more attention. But then, the reason for that is the Democrats have run out of negative things to say.

Why have Democrats gone quiet, letting the media's negative coverage of the economy do their dirty work for them? Those conservatives who think there's no difference between Republicans and Democrats are wrong. They don't see how highly unusual the period we just went through really was. Bigger, broader tax cuts plus increased spending weren't "for the rich" -- they were vital to pull the country out of its deep psychological funk, and get the economy going.

Bush's decisive action at a critical time created today's unusual economic success, when more Americans in all brackets own homes or investments, and where jobs are plentiful and incomes are rising.

Jack Kennedy, Ronald Reagan and now George Bush have proven conclusively that tax cuts work (see chart). Democrats are always bigger spenders and will raise taxes so they can spend more money. They'll say it's "for the deficit." It's not. They just want your money.

President Bush knows what he's talking about when he says tax cuts must be made permanent to sustain economic growth. Be very clear about this: If you don't bother to vote, and Democrats wind up controlling Congress, your taxes will go up.

Democratic leaders have taken to calling President Bush "incompetent." But if this is incompetence, we have but one word: encore!

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