With all the drama unfolding of a presidential election nearing its endgame while Congress and the Bush Administration wrestle over the terms of the Paulson plan, it's easy to neglect the "real" economy.
That seems to be the story with investors, who appear to be pushing up stock prices on the assumption that a deal on the bailout plan will be struck soon. Because normally, another decline in new home sales to a new 17-year low, combined with a spike in unemployment claims to a seven-year high, and a big decline in orders for durable goods, would be signalling that if the economy isn't in recession yet, it will be soon.
A successful deal on the bailout plan might restore order to financial markets by loosening up the credit freeze, but it's not going to do anything to reverse, on any short-term basis, the structural downturn the U.S. economy is currently experiencing.
Yet another reason for John McCain to suspend his campaign. There are no silver linings in the current economic headlines for someone who just last Monday unthinkingly uttered the stock phrase Republicans seem to learn before they are weaned: "The fundamentals of the economy are strong."