Irwin Stelzer

We have met the enemy and he is us. So Pogo might have described the situation that the business community has created for itself. There is no question that the Obama administration, and even more the Democratic leadership in Congress, harbor something between skepticism and hostility towards free markets.

THIS IS THE SEASON of high-level international meetings and, therefore, the season of many discontents. Europe's concerns about the fall of the dollar and America's fiscal profligacy were aired at the World Economic Forum in Davos last week, as were America's concerns about the inability of Europe's governments to stimulate domestic demand. The Europeans are watching their export industries suffer as the euro soars, and the value of the dollars their companies' U.S. subsidiaries earn drop like a stone, as the Euro appreciates to some 50 percent above its previous low.

THE DOLLAR IS DOWN. Oil is up. America is running huge trade and budget deficits. The Japanese are intervening massively in the currency markets to prevent the yen from rising, and the Chinese show no signs of abandoning the renminbi's peg to the dollar. So the euro is bearing the brunt of the dollar's decline, making euroland goods less competitive and snuffing out any signs of a European recovery.

AS ECONOMIC FORECASTERS cranked up their models at the end of last year, many pored over the printouts and decided that Robert Browning had it right when he wrote, "Never glad confident morning again." The economy seemed in such bad shape that the Democrats looked forward to teaching another Bush that "it's the economy, stupid." The unemployment rate was 6 percent and rising; the president's tax cuts threatened fiscal meltdown; the trade deficit was heading for a succession of records; the chairman of the Federal Reserve Board was warning of "corrosive deflation"; and the president had just

THE PRICE OF OIL has jumped about 7 percent in the past two weeks. Under ordinary circumstances, and for most commodities, volatility comes as no surprise and is of little consequence. But oil is different. For one thing, its price is affected by a powerful cartel, OPEC, that tries to lock in price increases. For another, it is so crucial to the functioning of industrial economies that past price jumps have thrown America and, in some cases, the world, into protracted periods of sub-par growth.

BY NOW, we will have consumed the leftovers from our Thanksgiving feasts, which saw us dispose of 45 million turkeys, perhaps 200 million sweet potatoes, and at least 50 million pies of various sorts. Add in stuffing made from white bread, cranberry sauce loaded with sugar, and carrots roasted in brown sugar and butter, and you have a dieter's nightmare--one estimate puts the carb content of a typical Thanksgiving meal at what Atkins would call "a whopping" 200 grams.

ONLY ONE THING can stall the U.S. economic recovery that is now underway: a major policy error by America's politicians. And, unfortunately, they have two such blunders in mind, namely protectionism and fiscal profligacy.

The economy itself continues to grow, although not at the breakneck 7.2 percent pace that has been reported for the third quarter (that figure will be revised upward this week to something like 8 percent). The housing market is a principal driver. In October housing starts rose 2.9 percent from the previous month's level.

IF PORK WERE A FUEL that could produce electricity and power SUVs, America would now be independent of imported oil. Unfortunately, the pork contained in the first new energy bill in over a decade has more to do with a desire to please Iowa corn farmers and assorted auto and energy companies than with the urgent need to reduce our reliance on oil from the world's most unstable region.

IF YOU THOUGHT the report that the U.S. economy grew at an annual rate of 7.2 percent was good news, wait until you see the revised estimate. I am told that the final figure will be at least 7.8 percent, and might well reach 8.0 percent.

So much for the look in the rear view mirror. The more important question is whether the road ahead will provide a smooth ride to a sustained period of economic growth or prove as bumpy as the one over which we have recently traveled.

HERE IN WASHINGTON, the November 2004 election is not a year away--it's now. So the Bush team is trying to figure out how fast the economy has to grow to create political capital at a rate that outpaces the mounting death toll in Iraq.

THE DEATH LAST WEEK of Madame Chang kai-Shek, wife of the Generalissimo who lost his battle to prevent the communist takeover of China, brings to mind the Republican accusation that communists in the Roosevelt and Truman administrations were responsible for that loss. "Who lost China?" was the accusatory question by critics who believed they had the answer.

Half-century later it is the Democrats who are in full cry.

GOOD NEWS about the U.S. economy is easy to come by. "The good times are back," chortles the Wall Street Journal. Most analysts are guessing that the economy is now growing at an annual rate of somewhere between 6 percent and 7 percent. It seems that the happy recipients of this summer's tax refunds surprised most analysts by dropping fully three-quarters of their refunds into shop tills.

Everyone seems happy.

* Investors have been watching share prices pursue an upward course that has taken the Standard & Poor's index of 500 companies to about 25 percent above its March lows.