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We're Still Here

Counting our blessings.

8:00 AM, Nov 26, 2009 • By IRWIN M. STELZER
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Today we consume some 50 million turkeys who kindly dedicated themselves to sating our appetites as we try to decide whether we have very much to be thankful for. It turns out we do. And not only for the traditional blessings of freedom and the rule of law. Or the mixed blessing of families reunited by the return to the nest of unemployed sons and daughters, unable to pay their own way. Or steady increases in longevity as more and more diseases are conquered by the health care system our president is convinced is in need of radical reform. In three unrelated events this week my wife and I met with a 90-year old publisher, a 90-year old social scientist, and a 90-year old historian, all active, all sharp. Ninety is the new 60.

Most of all, as Peggy Noonan pointed out in the Wall Street Journal, we are thankful that, in the words of the ageing showgirl in Stephen Sondheim's musical, "Follies," we're still here. She warbles, "Good times and bum times, I've seen them all, my dear I'm still here." So are we.

Last year at this time it was not at all certain that the financial sector would avoid complete meltdown, and the world's economies a repeat of the Great Depression. Now, Americans remain worried about their economic prospects, which might be less than attractive but are not totally grim -- there is some cheering news to mix with the less pleasant reports.

Share prices are up, and with so many Americans invested in shares directly or indirectly (through pension and other saving schemes), that always cheers people up. Even more important to more people, the housing market seems to be at least stabilizing, and possibly turning up. Sales of both existing and new homes are up over last month, and prices have risen in each of the past five months. Neither sales nor prices are anywhere near what they were before the downturn, but both seem at least to have found a bottom.

We will know more about how consumers are taking all of this when we are deeper into the holiday season. But my own guess is that perennially pessimistic retailers will, when the final tally is in, permit themselves a sigh of relief. Consumers are showing signs of loosening the purse strings, and lower inventories will limit discounting to headline-grabbing items, despite the extension of the price war between Amazon and Wal-Mart from DVDs and books to appliances. "Our mission, and our dream, is no promotions," Millard Drexler, CEO of apparel-seller J. Crew, told the press. He can dream of such perfection, but is happily settling for an improved environment that has seen his sales increase 14%, discounting diminish in the third quarter, and profits more than double. On the other end of the market, Tiffany is expressing more optimism than it has since the crisis hit.

Consumers won't return to the profligacy of yore, but neither will they remain hunkered down waiting for the end of the world, as they have been doing of late. Goldman Sachs is guessing that the October increase in personal consumption will translate into an annual growth of rate of 1.5%. Not great, but it sure beats further retrenchment.

But the fact that most authorities are calling an end to the recession here and in most developed and developing countries does not mean that Americans are without worries. Some fear a double-dip return to recession, although that view is not shared by the majority of economists. One in four homes is in negative equity -- worth less than the outstanding mortgage. The unemployment rate is in double digits and likely to remain there at least until mid-2010, if not until 2011. The big banks might have escaped destruction, with more than a bit of help from the taxpayers, but smaller regional banks are weighed down with commercial property loans that are, to put it mildly, dicey, and hundreds of these banks have already failed -- but with no loss to depositors, thanks to the deposit-insurance system that is an enduring reform of Franklin Roosevelt's New Deal.

Most of all, Americans' anxiety is a result of the uncertainty surrounding government policy. The fiscal deficit is huge and shows no signs of shrinking, foreclosures are endemic, and taxes on "the rich", including the small businessmen who create most jobs, are headed up, in part to finance the president's health care bill, which is opposed by a vast majority of Americans.

But we're still here, and thankful for that.

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).