Jewish World Review April 22, 2003 / 20 Nisan, 5763
Naysayers ignore signs of economic recovery
http://www.jewishworldreview.com | Now that Wall Street and Washington have turned their attention from Iraq back to the economy, the same naysayers who wrongly predicted that the war against Saddam would falter are making the same gloom-and-doom predictions about the economy. They're wrong again.
"There is a sense that at least the urgency of the war is over, and that people can sort of take a big sigh of relief and move on with business," said Diane Swonk, chief economist of Banc One.
Consumer confidence is up. Oil prices are down from pre-war levels. Retail prices hit a 17-month high in March. And we're now seeing gains in what Swonk calls the "Blockbuster index."
"Fatigue from watching the war on TV has resulted in people finally getting out and trying to return to normalcy," says Swonk. "You try to walk out and rent a movie, but you can't - they're all checked out. And movie theater tickets are going to become very hard to come by again."
Swonk adds that the same thing happened after 9/11.
And there is good reason to believe that these gains will continue. Greg Valliere of the Charles Schwab Washington Research Group says he has never seen this amount of monetary and fiscal stimulus in the works.
"You've got a tremendous increase in spending - 8 percent year over year - this year on the heels of an 8 percent increase in federal spending last year," Valliere says. "You've got a net tax cut coming along at just the right time. I think the Fed will stay very accommodative for the rest of the year. So monetary and fiscal policy could not be more stimulative."
Valliere says everyone is talking about whether Congress will pass President Bush's proposal to eliminate dividend taxes, when they really should also be focusing on the acceleration of the 2001 tax cuts.
"That's the other half of the bill, and I don't think anyone is even questioning that it's going to make it," says Valliere. "That's the half of the bill that would have the immediate GDP (gross domestic product) pop in the second half of the year."
Add up the huge degree of monetary and fiscal stimulus, lower energy prices and the need for businesses to finally upgrade equipment, Valliere says, and we could see GDP growth of 4 percent by this winter.
And that could mean a long, tough winter for Democrats like Terry McAuliffe, the chairman of the Democratic National Committee, who recently called the president's record on domestic issues "disastrous." The quick victory in Iraq and a return to solid economic growth would make President Bush's political capital formidable.
And, in an impressive display of political jujitsu, Bush may well prevail even if the economy stumbles. As Valliere notes, the president's allies "can always blame the congressional hatchet job on his tax plan."
The naysayers want you to believe that this President Bush is making the same mistakes as his father did a decade ago. As Valliere puts it, "This tortured analogy to 1992 has almost become hackneyed and cliched."
So, I might add, have the naysayers' tactics.
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04/15/03: Game over--but for whom?