Treasury Secretary John Snow is boasting about the prospects for the economy, and for job growth in particular. Pro-administration writers credit the Bush tax cuts, and say that a recovering economy will deprive the Democrats of a key campaign issue.
Why are they cheering?
The economy grew at a 7.2 percent annual rate in the three-month period of July-September. This expansion was driven by a 6.6 percent growth rate in consumer spending, an 11.1 percent growth rate in business investment, and a 25.5 percent increase in federal government spending. Productivity was up 8.1 percent. Then, on Nov. 7, the Bureau of Labor Statistics reported a net gain of 286,000 jobs for the August through October period – the best record since the recession began in March 2001.
There are good reasons to look on this scenario with skepticism.
The small part of the Bush tax cut that actually went to working families arrived this summer, providing a one-time-only $100 billion boost to the economy. Consumer demand was also spurred by a continuing high level of mortgage refinancing, which cannot remain at current levels. The construction industry has been supported by a continued bubble in the housing market, also unsustainable. Business investment has been strongest in computers – not because businesses are expanding, but because of the need to replace obsolete equipment. The productivity increases mean that companies are getting more done with fewer workers – good for profits, but bad for employment. Spending cuts and tax increases at the state and local level will continue to put a damper on jobs and on workers’ spending power. So will stagnant wages, depressed, in part, by the Bush anti-union agenda.
For all these reasons, a continued recovery is likely to be weak over the next year, and the economy could still slide into a double-dip recession.
In the long run, things look even worse. Continuing domestic and foreign deficits lay the basis for higher interest rates, higher inflation, attacks on government programs including Social Security and Medicare, and increased taxes. The result could be a long period of higher unemployment and slower growth or recession.
But the Bush administration isn’t concerned about the long run. They are looking at the economy between now and November 2004. They are looking at how they can spin the difficult situation most Americans face. Here are some strategies that Bush, along with Republicans at all levels, is likely to use.
• Distorting figures, or quoting them out of context. Like claiming that the 126,000 jobs gained in October mean the administration has turned the corner on unemployment. But the economy must average at least 150,000 new jobs each month to absorb the increase in the labor force. October, the best month in almost three years, was 24,000 short. This will be the first administration since the Great Depression to preside over an absolute loss in jobs.
• To get the tax cuts passed, the White House claimed they would create an average of 306,000 jobs per month. Now, the administration points to the job gains in the last three months as evidence that the tax cuts are providing jobs for ordinary Americans. They don’t mention their original promise, or that they have fallen almost a million jobs short just since June. The White House depends on a compliant media to ignore these inconvenient facts.
• The Bush administration can use much of the Pentagon budget, including the just-approved $87 billion, as a slush fund to pay off corporate supporters and influence voters. Look for a rash of press conferences in key states and districts next year, announcing new military contracts, along with a few jobs.
• Republicans will continue to claim that the only problem with the economy is too much government spending and high taxes. They don’t have to persuade everyone – just a bare majority in key states.
The economy is a disaster for working people, and is unlikely to improve in the next year. Bush can remain president only by wiggling out of the major responsibility his administration bears for the hardships we all face. But he is a slippery fellow. To beat Bush, it will take clearly explaining the issues, solid organizing at all levels, and confidence that working class families in every state can recognize where their interests lie.
The author can be reached at economics@cpusa.org
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