I'm constantly amazed, and appalled, by what little actual wisdom I've actually gained in my more than half-century in this world. But if there are three things I have learned, they are:
1. Never trust luck to get you through.
2. Don't assume the best-case scenario.
3. The laws of economics, like the laws of chance, always triumph.
The economic news this week, like most recent weeks, is mixed but mostly bad. The good news is that the economy appears to have grown in the most recent quarter – at least in comparison to the miserable first half of this year. The growth in unemployment seems to be slowing. And, of course, the stock market has enjoyed one of its fastest run-ups in recent memory.
The bad news is that much of this third quarter growth was already predicted from the artificial juicing of the economy from the stimulus plan, the cash for clunkers program and inventory replacement by manufacturers. Take those away, and you're down to about a one percent improvement over the disastrous second quarter – positive, at least, but hardly grounds for cheering.
Meanwhile, the stock market rally may have peaked, and the indexes have begun sliding – although there is little indication whether this is the beginning of a second downturn or just a temporary hiccup. As for unemployment, its growth may be slowing because we've already reached historically high levels (especially if you measure real unemployment) and we're running out of people to layoff – and those who are laid off are giving up looking for work. Perhaps most dispiriting are the studies that suggest that other than paying off some campaign debts to Unions, the stimulus generated few jobs – meaning that hundreds of billions of dollars of taxpayer money were spent on … nothing.
In other words, about the only conclusions that you can draw from all of this is that, the administration's cheerleading aside – and that, of course, is their job – there is still no clear indication whether the U.S. economy is actually recovering, sinking into a double-dip recession (or worse), or sliding into the malaise of a '70s style stagflation.
What does seem obvious is that the economy wants to recover. I can see it everywhere around me here in Silicon Valley – companies (notably the PC makers) putting out great new products, entrepreneurs writing business plans, talented people anxious to get back in the harness. And I sense that's true almost everywhere else in this country. Even the stock market rally seemed like a bull banging against a gate waiting to be unleashed.
But while we all may be ready to get back into the race, Washington – in whose hands our collective fate now sadly rests – may not be ready to let us. And it's all because they seem to have forgotten, or never learned, those three hard-earned pearls of wisdom with which I began this column.
For example, inside the Beltway they seem to be pixilated (the old definition) these days with Magical Thinking. Both the White House and Congress somehow believe – despite all evidence that big, top-down and bureaucratic initiatives no longer work in our Web 2.0 world – that they can grab entire sectors of our economy and impose on them a whole new regime that will magically work without any unexpected and catastrophic side-effects.