It's Time to Get Mad About the Economy

WE HAVE NOTHING to fear but fear itself, unless it's two more "house for rent" signs on the block and the sight of the fuel oil truck in the driveway. Any day now President Bush will declare that recession talk aids terrorists and ask the nation to troop down to the mall and charge it.

And we will too, because the cards are not maxed out just yet, and because lives don't stop for the housing crisis, the dollar crisis and the energy crisis. I'd bet on January as the month that some survivors among retail stocks are liberated from the bargain bin, after holiday sales prove weak but not epically disastrous.

And if the market should manage not to crash, the dollar avoids an outright collapse and oil retreats to a reasonable price of, say, $80 a barrel, defenders of business-as-usual will emerge from their tax-sheltered bunkers to declare that, see, we told you everything would turn out just fine.

But economic crises don't just happen on a whim, and are not generally an indicator that everything is fine. We're about to discover how much of our recent prosperity was an illusion built on too much cheap credit. And the market is telegraphing its thinking on the subject with a string of minus signs.

Skim away the froth of mortgage equity withdrawals abetted by inflated appraisals and this is what you get: A consumer paying more and more for life's necessities while burrowing ever deeper into debt. The benefits of globalization and the Internet have increasingly accrued to a rather exclusive professional caste blessed with the most marketable skills, while the majority gets an education just as good as what they offer in Bombay, leading to comparable pay. It's possible for a service-sector manager to trade up from Wal-Mart (WMT: 43.57, -0.36, -0.81%) to Target (TGT: 59.21, +0.39, +0.66%), of course, but Nordstrom (JWN: 33.37, -0.30, -0.89%) is starting to look unaffordable now that houses no longer come furnished with ATMs.

But let's not fight about rising income inequality, and think instead of ways to bake a bigger pie. You'd want to consider basic ingredients like policies that encourage companies to invest in the future rather than in the share buybacks that have done so much to push executive payouts out of sight. You'd want airports that don't waste billions of dollars of everyone's time because of flight delays and a health-care system that doesn't end up treating tuberculosis, having stinted on cheap preventive care. You probably wouldn't be financing a costly foreign war as well as an archipelago of private prisons that incarcerate nonviolent offenders at per-room rates matching those in fancy hotels.

And you'd definitely protect families that have already packed their belongings from scammers thrusting reams of paper for their signature at closing, wouldn't you say? Alan Greenspan didn't — an oversight he now professes to regret in between updates on recession odds.

That's just one more regulatory failure to add to a list that includes electricity transmission, gas and propane trading and lax accounting standards that, years after Enron, permitted banks to camouflage exposure to risky assets and murky markets off their balance sheets. When the extent of a financial gain or loss is based on an opinion, that's not a valuation method most investors find attractive.

So the market is voting with its feet, and this poll too is starting to look worrisome for Republicans. Hillary Clinton's stump speeches about the need to rein in greedy corporations could ring more credible by the middle of next year than they seem now.

It's been 55 years since a General Motors (GM: 33.70, -0.25, -0.73%) president nominated for secretary of defense admitted that the national interest and the corporate one had seemed one and the same to him for years. "I thought that what was good for our country was good for General Motors, and vice versa," Charlie Wilson told a Senate panel. That sentiment has been proven wrong over the course of the last few decades, happily so given the state of GM.

So as we sit in our spacious and chilly houses this winter and crawl in traffic in those thirsty SUVs past the for-rent signs in strip mall after strip mall, we should let our minds wander a little from the narrow path our economic masters have laid out.

We should ask whether, if we could start from scratch, we'd really compel millions of moms and dads to commute for hours each day, just so that they could punch computer keys very much like the ones they have at home. We should ask whether accommodative regulation dictated by narrow economic interests is really the best way to promote growth in the world's largest economy. We should ask why only the foreigners forced to recycle dollars deign to buy our securities any more.

Whole industries have been cosseted by anticompetitive deals intended to limit consumer choice and shut out outsiders. Telecommunications is one such field; utilities and health care also qualify.

The "war" on terror has predictably increased business transaction costs; Iraq and the whole shoes-off-at-airports comedy routine sap tax dollars and run up the GDP without increasing national wealth, as such.

When a political system is more proficient at generating corruption scandals and hereditary dynasties than it is at balancing the budget, it's fair to call that system dysfunctional.

The shocker in the World Economic Forum's recent Global Competitiveness Report wasn't the fact that the U.S. ranked No. 1, thanks to investments laid down in happier times. The real shocker was that in health and primary education The Superpower came in 34th, in a virtual tie with Montenegro. In macroeconomic stability, a.k.a. balancing the books, we were No. 75, just behind Venezuela and Suriname.

In a related survey, tax rates, tax regulations, government bureaucracy, inflation and a poorly educated work force topped the list of executive complaints. The business cost of terrorism, crime and violence as well as red tape and corruption were all seen as important investment deterrents. We did look good based on our ability to attract smart people from overseas and the low cost of firing them when they get old.

If the business world is truly terrified by the prospect of a President Hillary Clinton (and it is, it is) it would do well to find an alternative with a more productive message than the no-new-taxes spiels of Mitt Romney and Rudy Giuliani. This particular brand of business as usual won't work next year. The next year is all about the dollar, jobs and housing. The next year is about learning from this year.