Much of the news coverage of the economic slowdown, even in the best business publications, has focused on the wrong place.
Alan Greenspan´s efforts to adjust interest rates should not be aimed at making the stock market an attractive investment. The S&P 500 is not the economy. Many stocks were overvalued last year. That was obvious. Many stocks still are too high.
But the bear market has distracted attention from the economy´s real weakness. That started a year ago, when energy prices shot up, triggering the sluggishness that persists today.
Raw material prices rose. Consumer spending slowed. The lack of an adequate response from the federal government meant the problem persisted into the winter, when it resulted in higher prices for electricity and natural gas.
Greenspan waited too long to jump-start the stalling economy, and election-year political posturing did nothing to fix the snag.
The key to fixing this mess this year will be getting Democrats and Republicans to correct the situation without worrying about who gets the credit. Also, Greenspan must act to fix the economy, not just to buttress the stock market.