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Private Sector Tailwinds vs. Politicians' Headwinds

Hot products vs. hot air.

12:00 AM, Apr 24, 2010 • By IRWIN M. STELZER
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The profits figures also tell us that consumers will spend on convenience and bargains, and that competition is their friend. Amazon’s first quarter earnings topped last year’s by 68 percent: It is, after all, a marketer that keeps in touch with its customers and provides a wide range of goods at fair prices, delivered to your door. But its share price fell on the news, because analysts know that the arrival of the iPad means the day of the Kindle’s virtual monopoly is coming to an end, giving consumers choice and the upper hand.

Finally, the earnings figures give us a clue as to what has been going on in the shops and offices, and on the factory floors of America. Improved earnings have come more from cost cutting than from higher sales in many cases. In the last three quarters of 2009 productivity -- output per man-hour -- increased at the phenomenal annual rate of 7-8 percent. Bad news for job seekers, good news for the long-run competitiveness of American industry.   

All of this good cheer shouldn’t obscure a few very unpleasant fact. The U.S. economy is on steroids. The Fed is printing money, and the government is running large, stimulative but unsustainable deficits. Consumers have yet to be hit with the tax increases the Obama administration has in mind for them, and not only for “the rich.” Companies are taking large write-offs to reflect the increase in costs imposed on them by the health care “reform,” and the Obama administration is determined to pass an energy bill that will raise energy costs, putting a crimp in consumers’ ability to spend on other things.

The innovators are providing the economic tailwinds. Unfortunately, the politicians are setting in motion the headwinds. 

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