So long, recession

National | ECONOMY: Hottest GDP growth in 20 years aids Bush's lagging reelection hopes

Issue: "California's wall of fire," Nov. 8, 2003

Beset by bad news abroad, President Bush got a welcome reprieve on the domestic front on Oct. 30, when the Commerce Department announced that the nation's economy grew by a scorching 7.2 percent over the summer, blowing out the 6 percent figure predicted by economists. That marked the fastest quarterly growth in nearly 20 years, and, coming on top of a 3.3 percent rise in the second quarter, helped to reinforce the administration's claim that the recession is now firmly in the past.

It's been a hard sell until now: Technically the recession may have ended in late 2001, but the much-anticipated recovery has been elusive. The economy, as measured by gross domestic product, has managed barely a 1 percent growth rate throughout much of the Bush presidency, and for the first three quarters after Mr. Bush was sworn in, the overall economy actually shrank. Add to that mounting job losses-some 2.4 million since January 2001-and you have the recipe for a voter revolt.

With an election 12 months away, the Bush team is desperate for signs of a robust, sustainable recovery. The new GDP numbers-variously described as "huge," "sizzling," and "astonishing"-offered just the kind of proof the administration was hoping for. With good things in the offing, the White House began touting the state of the economy even before the numbers were officially released. "America is starting to add new jobs, retail sales are strong, business profits are increasing, the stock market has been advancing, housing construction is surging, and manufacturing production is rising," the president said in a Wednesday press conference, even though none of the reporters in the Rose Garden actually asked about the economy.

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That press conference was merely the first cadence in what is likely to be a constant drumbeat of upbeat economic pronouncements by the White House. Although he was officially on vacation at his Texas ranch, for instance, the president scheduled a quick trip to Ohio last week to tout the GDP numbers. He had other good news to share, as well: After a long slump, shipments of big-ticket items like home appliances jumped by 2.5 percent in September, according to Commerce Department numbers released on Oct. 28.

That should help stanch the job losses in vote-rich Rust Belt states like Ohio and Michigan, where Mr. Bush needs a win next November. Indeed, many election analysts say the Midwest manufacturing states will hold the keys to the White House in 2004.

Mr. Bush has worked hard to earn those keys. He staked an enormous amount of political capital on the massive tax cuts he pushed through Congress despite howls of protest from Democrats and the media. It's now becoming clear to even the most skeptical observers that those cuts played a major role in stimulating the moribund economy.

"Special factors boosted consumer spending and drove the summer's strong performance," noted Knight-Ridder, one of the nation's biggest newspaper chains. "One was a federal income tax cut that took effect around July 1. The other was a dip in interest rates that spurred many homeowners to refinance mortgages, leaving them with more cash to spend."

With the president's tax cut finally receiving some respect, the Democratic presidential contenders may find their criticism of Mr. Bush's economic policies appealing only to die-hard loyalists-and not helping them reach centrist voters. The biggest immediate losers may be Rep. Dick Gephardt and former Vermont Gov. Howard Dean, both of whom have built their campaigns on demands for a complete repeal of the Bush tax cuts. And it's not just the Gephardt and Dean campaigns at risk: All the Democratic contenders have called for scaling back the tax cuts to some extent. If the nascent economic boom continues into 2004, however, that cornerstone of Democratic policy could well become a millstone around the party's neck.


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