Bears, Bulls, Chickens and Pigs: wOw’s Wall Street Weekly with Liz Peek (Week of 8/24) 

Editor’s Note: Liz Peek is a financial columnist and the author of wOw’s SHEconomics.

Will the death of Senator Ted Kennedy recharge the push for health-care legislation? Would he have wanted it to? Certainly Kennedy was keen to enact universal coverage. However, the long-serving senator was highly respected for his willingness to negotiate, and to work with opponents across the aisle. He was a master of "the art of the deal," knowing that success is best found in compromise.

As Congress streams back from the August recess, the gap separating Republicans and Democrats on how to control health-care outlays has not narrowed. Nancy Pelosi and others are talking openly about going it alone, and resorting to reconciliation if need be, which requires a simple majority vote to pass the measure – in other words, with not one Republican backer. I can’t imagine that Ted Kennedy would have approved of such tactics, which could become a disaster for the Democrats, the country and the stock market.

Americans have been alarmed by the Obama administration’s frantic efforts to re-order our economy, to change the rules of doing business and by the ominous build-up of our national debt. The view of our new president has changed; polls show that nearly half of our citizens now consider him "very liberal" as opposed to only 35% on election day. This growing anxiety is anathema to a robust economy. While the financial sector appears stabilized, and housing seems to have bottomed, we badly need consumers and businesses to resume spending to prevent the "double-dip" recession that some economists now predict.

Earlier this month it seemed that the consumer had put back on her rose-colored specs. The Conference Board reported that its index of consumer confidence, after sliding south in June and July, bounced ahead in August. The aggregate level of confidence is still quite low by historical standards – and in fact below where it stood in May. Still, if this recovery is going to produce jobs, consumers are going to have to open the spigots. And they’re not going to do that until they see the future with a less jaundiced eye.

I credit the successful push-back against President Obama’s health-care legislation as well as a peppy stock market for the bounce in August optimism. The notion that government would take over an ever-larger slice of the American pie has jarred a country still coping with a once-in-a-generation collapse in wealth. Well-founded concerns about higher taxes piled on top of continuing job losses have caused widespread alarm and, ultimately, a backlash. Raised voices at town-hall meetings may not be melodious, but to many they are comforting. We do have a voice, and even though the Democrats control all three branches of government, they may have to answer to voters after all.

Unfortunately, as Americans assess the most recent – and extremely fanciful – budget projections from the administration, their concern will only grow. Though the president’s men have boosted the estimated size of the deficit over the next ten years by $2 trillion to $9 trillion, the assumptions behind even this ghastly forecast are beyond optimistic. For instance, the White House is projecting that the economy will grow at 3.8% in 2011 and at 4% in each of the next three years – a rate that we have rarely experienced. At the same time, the plan calls for inflation to drop to 1.3% over the next two years, down from 1.5% this year. Notwithstanding this all-too-happy outlook, deficits in the out-years will average 4% of GDP, compared to 2.4% on average over the last 40 years. Moreover, total government debt is projected to rise to 76% of GDP by 2019, up from 56% in 2009. That’s trouble territory.