Saturday, June 04, 2011

Hope for the U.S. Economy

The WSJ obviously is one of my more trusted sources for news about business and the economy. This morning they featured an interview with one of Wall Street’s leading perma-optimists, BlackRock Chief Equity Strategist Bob Doll. Despite some of the things that are dragging on the American economy, Doll sees a number of bright spots:
“Credit markets are sound. Money growth is good,” says Mr. Doll, whose optimism has been the right market call since March 9, 2009, when stocks hit their post-crisis lows. The Dow has since risen more than 85%, and Mr. Doll expects the slow economic expansion to continue….

Mr. Doll’s job is to allocate almost $30 billion among shares of large U.S. corporations and to advise clients on the most compelling opportunities for equity investment.

Notably, his focus remains the United States, and he believes that the most important reason why America’s house remains the nicest in the neighborhood of developed countries is that our family keeps getting bigger.

“Over the next 20 years, the U.S. work force is going to grow by 11%, Europe’s going to fall by five, and Japan’s going to fall by 17. This alone tells me the U.S. has a huge advantage over Europe and a bigger one over Japan for growth,” he says. “And the reason for this is pretty simple. We have higher immigration than both of these, and we make more babies. We have a higher fertility rate. And they are the long-term determinants of population growth and therefore work force growth.” …

Mr. Doll’s optimism comes despite his skepticism about the last several years of heavy government intervention in the economy. His team at BlackRock calculated that, at most, half of the 2009 stimulus program was “true stimulus” for the economy. What about the rest? “Call your congressman and find out where the money went.” More than a few readers may be tempted to call BlackRock and ask how they concluded that even half of it was spent effectively.

What about the impact of ObamaCare, the 2010 Dodd-Frank financial reform law, and the president’s continuing advocacy of tax increases? “All three of them are retardants to growth,” says Mr. Doll.

He also concedes that “we face formidable long-term structural problems that make the U.S. less attractive than it otherwise might be,” and yet he has written in these pages about America remaining a “city upon a hill” in the vision of Puritan John Winthrop. Mr. Doll could be making the least inspiring case for American exceptionalism in the history of the republic. “You might say we win by default, which is not a fun way to win,” he says.

...even with all our problems, he says, “I think the entrepreneurial spirit is alive and well in the U.S.” He argues that we are still the source of technological innovation and home to the greatest universities and the most creative businesses. He sees promising advances in health care and alternative energy technologies. By alternative he doesn’t necessarily mean “green” energy, but simply new power sources given that he expects oil prices to keep rising.

Also, it should be noted that his outlook is premised on meaningful spending reductions in Washington. “I think we are moving in an austerity direction,” he says. “Six months ago, no one had a plan that said, ‘I’m going to be able to cut the deficit by X trillion over Y years.” Now, with House passage of a bill by Rep. Paul Ryan (R., Wis.) and the looming vote on the nation’s debt limit, he hopefully notes that all sides are at least talking about “trillions over years.”

Mr. Doll’s optimism—or, more accurately, his lack of pessimism—has at times gotten the best of him, as in 2008. “We turned slightly to the negative side of neutral, but I never said, ‘Get out,’” he recalls. “The severity and rapidity of the problems was beyond belief.”

Now in 2011, his views may not strike anyone as wildly optimistic. But on Wall Street, Mr. Doll’s sobering catalog of U.S. weaknesses is what passes for bullishness. With unemployment hitting 9.1%, Main Street can hardly be any more cheerful.

All of which suggests a political opportunity for someone who can present a credible plan to return to low unemployment and robust economic growth. Optimism about the future is implicit in America’s high birth rate. Pundits may continue to try to convince voters to accept a new normal, but Americans are probably aiming higher than the best house in a bad neighborhood.


  1. Wait a minute: the hopeful Mormon-in-Chief said that the economy is in shambles and that Obama has failed America. Who are we to believe??

    Of course, the reality is that economies are cyclic, and I really don't credit Obama for the whole recovery any more than I blame Bush for the preceding recession. I'm still waiting for the housing market to fully correct itself: that was exacerbated by greedy consumers, loan officers, speculators and house flippers.

    These facts don't really make good sound bites when you're running for office, though, I guess.

  2. Hi James. Well, there's no doubt that Obama has done great harm. I think the "hope" is more to be seen in the fact that (I hope) Republican candidates will all be campaigning around genuine growth-oriented programs.