It's Doesn't Have to be all Gloom and Doom

The editorialists at The Wall Street Journal put the current economic crisis in perspective. The basis for recovery lies in several factors that if allowed to play themselves out will bring the markets and the economy back:

The price of oil and other commodities have fallen by two-thirds since their 2008 summer peak, which has the effect of a major tax cut. The world is awash in liquidity, thanks to monetary ease by the Federal Reserve and other central banks. Monetary policy operates with a lag, but last year's easing will eventually stir economic activity.

Housing prices have fallen 27% from their...peak, or some two-thirds of the way back to their historical trend. While still high, credit spreads are far from their peaks during the panic, and corporate borrowers are again able to tap the credit markets. As equities were signaling with their late 2008 rally and January top, growth should under normal circumstances begin to appear in the second half of this year.

In the midst of the fog of fear and anxiety, it is heartening to see that the seeds of an eventual recovery are being sown now. But in any newly planted garden too much rain and not enough sunlight will retard or even prevent growth; Obama's policies are clearly having the same effect on the economy:

Every new President has a finite stock of capital -- financial and political -- to deploy, and amid recession Mr. Obama has more than most. But one negative revelation has been the way he has chosen to spend his scarce resources on income transfers rather than growth promotion. Most of his "stimulus" spending was devoted to social programs, rather than public works, and nearly all of the tax cuts were devoted to income maintenance rather than to improving incentives to work or invest.

Obama's team is trying to rescue banks while he is assailing bankers. His tax proposals punish the very venture capitalists and entrepreneurs whose investments will be necessary to help falling real estate and financial assets find a bottom. Users of fossil fuels will be taxed in order to incentivize them to switch to as yet unavailable alternative energy sources. Manufacturers will have to buy permits from the government to use energy resulting in higher utility costs to you, me and the "working folks" who Obama claims to represent. Private capital is being edged aside in favor of government "investments" in banks, auto companies and other private firms.

The Journal notes that on January 1st the Dow was at 9000, almost 35% higher than it is today. This decline is almost entirely attributable to Obama's policies, which are scaring away both small and institutional investors. The markets crave certainty, but the only certainty out there is that taxes and regulation will increase, energy costs will climb, and wealth will be transferred from investors and producers to shirkers and bureaucrats, with a little taken off the top for the politicans and their favored executives and donors.

How all this ends up helping the people in the middle that Democrats always talk about is not clear to me.