In early July, I was concerned enough about the antics of Nancy Pelosi, Barack Obama, and Harry Reid that I coined the term “POR economy” to describe what they were creating with their anti-oil, high-tax agenda.
The tax-happy, Big Oil-punishing trio seemed to believe that a poor third-quarter economy would enhance their chances of winning the presidency and larger Congressional and Senate majorities. They appeared to be in a position to make it happen.
Their energy intransigence, the prospect of automatic tax increases as the Bush tax cuts expired, and potential further increases under a President Obama led me to observe that:
Businesses and investors are responding to their [Pelosi, Obama, and Reid's] total lack of seriousness by battening down the hatches and preparing for the worst.
Three things have occurred since then to greatly reduce the chances that the economy will move into negative territory in the third quarter:
- President Bush and House Republicans have awoken from their slumber and gained the upper hand in the energy debate.
- Previously lukewarm John McCain has come out clearly for expanded drilling.
- Obama has performed poorly on the campaign trail, culminating with last Saturday’s disaster at Rick Warren’s church. Obama’s position “is more vulnerable than at any point since the primaries concluded.”
As a result, the palpable near-panic businesses and investors were exhibiting in early July has largely subsided.
The biggest factor in their improved outlook has been oil’s price retreat of over 20% from its all-time high of $147. [Update: in the two days since this column was written, oil prices have headed upward again, primarily because of the Russia-Georgia situation.] Although consumption has fallen, the bigger influences have clearly been President Bush’s executive order allowing offshore drilling in parts of Alaska and the tide turning towards the GOP in the Outer Continental Shelf drilling debate. These two developments have shown that the mere prospect of increased supply can bring down current prices, making it obvious that actual increases in supply, even if nominal at first, will bring them down even more.
Don’t get me wrong. This economy still isn’t, and shouldn’t be, impressing anyone. If it replicates the second quarter’s current sub-2% growth performance (pending revisions), that will be nice, given how things looked just a short time ago. But it remains unacceptable.