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The Democrats' America vs. The Real Thing

Things aren't as bad as the Democrats claim.

12:00 AM, Aug 29, 2008 • By IRWIN M. STELZER
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Then there is housing. Again, there is no doubt that foreclosures are all-too common, and a tragedy for displaced families. But the vast majority of Americans are paying their mortgages regularly and living in houses worth far more than when they were purchased, even though prices are down from their peak of a few years ago. And thanks to some sensible bipartisan work by Treasury Secretary Hank Paulson and Democratic chairman of the House Financial Services Committee Barney Frank, the government is doing a good bit to ease the plight of some who are caught in the credit crunch. The sort of bipartisan work in which John McCain has specialized for decades and in which Barack Obama has never engaged.

There is no question that the job market has weakened, but neither is there any question that it has not sunk to the levels of past recessions. There is also no question that inflation in food and energy prices is hurting American consumers, but price increases are nothing like those unleashed in the late 1970s by then-President Jimmy Carter, a smiling, warmly greeted Democratic superdelegate in Denver last week. Much will turn on whether the Fed is right in guessing that the worldwide economic slowdown will ease pressures on commodity prices and bring inflation down to acceptable levels.

Karlyn Bowman, the American Enterprise poll analyst who has her finger on the pulse of America, tells me that "Job satisfaction remains very high. Most workers don't fear losing their jobs nor do they think their job is about to be sent overseas .Seventy-six percent in a new Harris poll said things are on the right track in their personal lives."

But the number of Americans who say that their employer has laid off workers in the past six months is up, which must produce some anxiety, and even though 76 percent feel things are on the right track in their personal lives, only 18 percent think that of the nation. This gives Obama an opportunity to persuade the undecideds, some 30 percent of all voters, that he is the agent-of-change for whom they have been waiting.

McCain's chances, which are proving to be better than anyone imagined they would be, will depend heavily on two things: continued progress of "the surge" in Iraq, and the state of the economy. Fortunately for him, the economy continues to grow, at the quite satisfactory rate of 3.3 percent in the last quarter, powered by the exports that Obama would cut into were he to go ahead with his plans to crack down on free trade.

And there are signs that the housing market is finding a bottom, as Wall Street types put it. Faint signs, but signs nevertheless. The fall in prices is slowing, nine of the 20 metropolitan areas tracked by the much-watched S&P/Case-Shiller index posted price gains in June, new-home sales ticked up in July, and the inventory of unsold homes, although still high, declined for the second consecutive month. Nigel Gault, economist with forecasting firm Global Insights, told the Wall Street Journal, "We're starting to see some hopeful signs in parts of the country." And on a recent visit to Phoenix, arguably the hardest hit and over-stocked housing market in the country, one builder told me that sales of homes priced under $350,000 are picking up, and another that he is now buying building sites in anticipation of a pick-up early in the new year.

That might not be the beginning of the end of the housing crisis, or even the end of the beginning. After all, mortgage rates are creeping up; the banks face the enormous task of refunding almost $800 billion of their debt by the end of next year--$95 billion next month; the list of troubled banks is growing; and Freddie Mac and Fannie Mae may face tougher terms from lenders and be forced to curtail their support for the mortgage market.

But the majority of Americans are comfortable with their own circumstances as they fire up their barbecues for the last time this summer, or stretch out on their couches to watch some great tennis at the U.S. Open in New York, or subject themselves to the start of the Minneapolis-St.Paul shindig at which the Republicans will anoint their champion.

Irwin M. Stelzer is a contributing editor to THE WEEKLY STANDARD, director of economic policy studies at the Hudson Institute, and a columnist for the Sunday Times (London).