Why I’m bullish on America

Let’s begin with the need for Congress to change one of the worst ideas in history, so-called mark-to-market accounting, which will be the subject of an important hearing this week.

In mark-to-market accounting, assets are valued at current crash-level prices, which implicitly assumes, falsely for accounting purposes, that the crash prices will exist forever. Obviously, they won’t. Yet current accounting practices assume they will.

Regarding what are called toxic assets, some of them involve mortgage payments that are behind because homeowners may be jobless or facing health emergencies. Many of these people have good credit histories. They will rejoin the workforce, survive their health crisis and resume their payments.

These are “temporarily toxic” assets in real life, but are treated as “permanently toxic” assets in current accounting. There are many other examples. These assets should be valued at prices assuming a normalized economy and recovery in the future, not at prices assuming a permanent crash.

I have warned about this crisis for two years and have no illusions about our challenges, but I am bullish about America:

1. The next great jobs wave has begun. New energy. Green business. Advanced medical technologies. This will be as powerful as the great technology wave that lifted the economy in the 1990s.

2. Next-generation cars will drive enormous labor, business and technology progress. There is huge pent-up demand for new cars building throughout the world, from America to gigantic markets such as China and India. When recovery comes, global auto sales will explode.

3. Huge cash now sits on the sidelines. Bank hoarding will end. Risk-averse markets will reverse. Cautious money will be liberated, as it always has, sooner or later, in every market throughout history.

I am bullish on America. The big question is whether policy moves make the next great recovery, jobs wave and bull market come sooner or later.

On housing, I would like to see a bipartisan deal where Democrats accept the large tax credit for home purchases suggested by Sen. Johnny Isakson
(R-Ga.) and Republicans and banks accept major bankruptcy reforms. I would like to see Republicans accept modest tax increases for upper-income Americans after growth resumes, while Democrats accept bold tax cuts for new, fast-growing industries and fuel-efficient cars.

I believe the market will be dramatically higher in the foreseeable future. I believe Americans are now in the midst of a “buying opportunity” that comes once a century. I was surprised the president referred to the market, but he is right.

Comparing stock prices to corporate earnings suggests that for serious investors with a middle- to long-term horizon, the quality companies of America can be bought at bargain-basement prices with huge profits to investors who don’t worry about short-term trends.

History proves that every time pessimism and fear grip the land, reign supreme and dominate our media and markets, it is the moment to buy.

When pessimism reaches epic levels, throughout the history of markets through the ages, it is courageous optimists who defy the fear who will ultimately triumph. At times like this, great fortunes are made, betting on America for the longer term.

America is a good and great and strong and resilient place. Our people, our ideas, our workers, our entrepreneurs, our ingenuity and our spirit will always triumph in the end. The residual power of the American idea, and the innate optimism from a people who never quit and always dream, have made our home the world’s great builder of prosperity for more than two centuries.

You bet: I am bullish on America.

Budowsky was an aide to former Sen. Lloyd Bentsen and Bill Alexander, then chief deputy majority whip of the House. He holds an LL.M. degree in international financial law from the London School of Economics. He can be read on The Hill’s Pundits Blog and reached at brentbbi@webtv.net.