A boost for Bush, if new jobs follow
The new gross domestic product figures are out, and here's the political bottom line: President Bush's prospects for reelection appear to be rising.
Next November's vote is still a long way off, of course. Even if economic growth continues, Bush could still be the first chief executive since Herbert Hoover to see a net job loss during his time in office.
But there's no way that the best quarterly GDP numbers since Ronald Reagan's presidency aren't good news for the White House. It increasingly appears that as he tries for a second term, Bush may be less vulnerable to attacks on his economic stewardship than he is to criticism about foreign policy. That position is the reverse of what seemed likely only a few months ago.
"The short-term politics of this are favorable to the president and it puts his Democratic critics on the defensive," says Merle Black, a political scientist at Emory University in Atlanta.
The GDP growth of 7.2 percent annual rate for the third quarter was the highest such figure since the first quarter of 1984. It was almost double the 3.3 percent pace registered in the second quarter, and surpassed most analyst's projections.
Among the possible reasons for the performance cited by economists were continued low interest rates and consumer spending fueled by tax cuts.
Administration officials were quick to take credit for the improving economy. The value of US stock markets has gone up by $2 trillion since the beginning of the year, they pointed out, with personal income rising at a 3.8 percent annual rate since January. "Today's report on real GDP in the third quarter shows that the president's economic policies are having a positive impact on the economy," said Treasury secretary John W. Snow.
But others were quick to note that one stunning quarter does not a booming economy make. Nor does it ensure that the economic climate will continue to improve as next year's vote draws nearer.
In terms of forming voter attitudes the most important GDP numbers may be those from the second quarter of next year, which will be issued at the height of the presidential race.
"We could have a scenario where the economy comes back and then drops off again," says Mr. Black of Emory University.
Still, this good quarter will undoubtedly cause problems for Democratic presidential candidates. Many of them have shaped messages and proposed policies on the assumption that Bush might be vulnerable on economic policy - and on the effects of his tax cuts in particular.
Howard Dean, for example, has hit Bush's stewardship as "Enron economics," and called for a rollback of all the president's tax cuts. Dick Gephardt has similarly called for a complete tax-cut turnabout, saying they have created a fiscal mess that will lead to huge federal deficits for the foreseeable future.
Sens. John Kerry and John Edwards, plus retired Gen. Wesley Clark, have more limited positions that would eliminate tax breaks for the rich. Sen. Joe Lieberman pitches his tax plan as "reform," not rollback. It would cut taxes somewhat for the middle class, while raising them for the wealthy.
"There's no question that [the GDP number] is a big political embarrassment for the Democratic presidential candidates - especially Dean," says Stephen Moore, president of the Club for Growth, a group that promotes tax cut policies.
There's a caveat here, however, and it involves something much more real to voters than an abstract number - their jobs. Employment in the US grew by 57,000 jobs in September, but that was the first such growth in eight months. Unemployment remains at 6.1 percent, and the nation has lost some 2.7 million jobs since Bush took office.
Not since the Depression has a President presided over a net decline in employment during his time in office. Even Jimmy Carter, who was defeated for reelection in part due to Ronald Reagan's attacks on his economic policies (plus the Iranian hostage crisis), oversaw a growth of 10 million new jobs.
"We're a long way from knowing whether we're going to return to the type of 3-million-a-year job growth and across-the-board income growth that we saw in the 1990s," says former Clinton economic adviser Gene Sperling.
It was Democrats who pushed for short term stimulus in the recent Bush tax bills, insists Mr. Sperling. Meanwhile, the longer-term aspects of the cuts, such the reduction in income from eliminating estate taxes, will darken the government's fiscal future for years.
"I think it's virtually insane to suggest that after the administration has decimated our long-term fiscal future and guided one of the worst periods of job growth and confidence in memory that if the American economy ever ... has a strong quarter that that is a vindication of what has been a weak economic strategy," says Sperling.
Going forward the Democratic strategy on the economy will probably be to focus on weakness in specific areas, such as manufacturing, says Grover Norquist, president of Americans for Tax Reform.
But even those criticisms might not have resonance, says this GOP-leaning analyst, if GDP numbers overall continue to go up. "What people respond to is not where you are [economically] but the direction," he says. If that happens, Iraq might become the Democrats' primary political focus.
"The Democrats may shift to an all-foreign-policy-all-the-time critique," says Mr. Norquist.