Friday 18 April 2003
WASHINGTON - President Bush's advisers are playing down prospects for a postwar economic rebound, and some Republicans fear time is running out for a broad-based recovery ahead of his 2004 re-election bid.
The cautious outlook may be political posturing as Bush shifts focus from the war to reviving his beleaguered tax cut plan -- the centerpiece of his economic program -- before campaigning begins in earnest later this year.
Some economists are confident a revival is around the corner.
Yet Republican insiders say the White House is genuinely concerned after the Senate scaled back the president's tax cuts to a level that they see as having little -- if any -- stimulative effect near-term.
The stakes are enormous as Bush seeks to avoid the fate of his father, former President George Bush, who saw his popularity soar after the victorious 1991 Gulf War only to lose his 1992 re-election bid to Bill Clinton over doubts about his economic stewardship.
While polls show this president receiving his own postwar boost, White House chief of staff Andrew Card acknowledged the biggest immediate challenge would be: "Jobs, jobs, jobs."
Democrats blame Bush's last round of sweeping tax cuts for turning budget surpluses into record deficits and for costing the private sector more than 2.6 million jobs. They say new tax cuts proposed by Bush will only make matters worse.
If he fails to jump-start growth that could also pump up the stock market, "then Bush is potentially vulnerable to being defeated in 2004," said Stephen Moore, president of the Club for Growth, a conservative political action committee.
"We're running out of time," added a top Republican congressional aide with close ties to the administration.
Another Republican insider warned that if job losses continue to mount into autumn, "then it will be too late to do much that will have a significant impact on 2004."
He said Bush's viable stimulus options may soon run out and that the White House may need Federal Reserve Chairman Alan Greenspan's help in the form of additional interest rate cuts.
Greenspan's relations with the White House frayed before the war when he warned Congress to hold off on plans for fresh economic stimulus. But in recent weeks Greenspan has met repeatedly with Bush and his top advisers to assess the war's impact, and many analysts believe the Fed will do its best to be accommodating.
"Unlike his father, this President Bush won't get into a dispute with Alan Greenspan," said Greg Valliere of Schwab Washington Research.
Bush's father blamed Greenspan in part for his defeat in 1992, saying the Fed was too slow to move on rates to boost the sluggish economy coming out of 1990-1991 recession.
SCALING BACK EXPECTATIONS
Before the war, economists inside and outside the White House made the case that growth should pick up once the conflict was out of the way.
"The reality is this will be behind us, the geopolitical risk will subside and the economy will have a recovery that will be robust and long," Philadelphia Federal Reserve President Anthony Santomero said in February.
While that still could happen, some of these same economists are not so optimistic any more.
"A lot of people thought that the end of the war would clear the air. We didn't agree with that then and still don't," said a top Republican congressional aide on economic issues.
Treasury Secretary John Snow reflected the administration's cautious thinking after meeting on Saturday with finance leaders from the Group of Seven industrial nations.
He said: "A reduction of geopolitical uncertainty will help a global recovery, but this alone will not bring about the strong and lasting growth essential for our country and for the world."
Likewise White House spokesman Ari Fleischer credited "resolution of the war" with removing uncertainties, but warned: "There were still fundamental issues in the economy that needed to be addressed."
Their efforts to lower economic expectations could help the White House step up pressure on lawmakers to revive the bulk of Bush's $726 billion tax cut plan, the centerpiece of which would eliminate the taxes shareholders pay on corporate dividends.
"That's smart politics," said Scott Reed, a Republican consultant. "This White House has made a political career of lowering expectations and exceeding them over and over again."
Bush held out hope this week of passing a scaled back tax cut totaling $550 billion, but many believe it will end up being closer to $350 billion -- an amount many administration officials see having little economic benefit.
"We don't think there's enough stimulative value in a tax cut of that size to make the effort worthwhile," Moore said.
But by fighting for the biggest possible tax cut, Bush could still win politically by shoring up public confidence in his stewardship of the economy, which has been battered since he took office by the Sept. 11 attacks, corporate scandals, and wars in Afghanistan and Iraq.
U.S. Faces $252B Deficit So Far In '03
By Jeannine Aversa
Saturday 19 April 2003
The government ran up a deficit of $252.6 billion in the first six months of the 2003 budget year, nearly twice the total for the same period a year earlier.
The latest figures, released Friday by the Treasury Department, highlighted the government's deteriorating fiscal situation. Record deficits are forecast this year and next.
The total deficit so far this fiscal year, from October through March, compares with a shortfall of $131.9 billion a year earlier.
Revenues were down by 6.1 percent to $825.2 billion for the six months in comparison to the same period a year earlier. That partly reflected lower tax revenue from the listless economy.
Individual income tax payments totaled $372.1 billion, representing a 6.8 percent decline from the previous year. Corporate tax payments plunged by 43 percent to $44.6 billion. That sharp drop reflected in part the impact of business tax cuts enacted last year and weaker profits, the Congressional Budget Office said.
Federal spending for the six months totaled $1.08 trillion, a 6.6 percent increase from the corresponding period in fiscal 2002.
The biggest spending categories so far this budget year are: Social Security, $249.3 billion; programs of the Health and Human Services Department, including Medicare and Medicaid, $246.5 billion; military, $180.9 billion; interest on the public debt, $160.6 billion.
For the entire 2002 budget year, which ended Sept. 30, the government ran up a deficit of $157.8 billion, ending four consecutive years of surpluses.
The Bush administration has blamed the return of deficits on lingering effects of the 2001 recession and the costs of fighting terrorism at home and abroad. Democrats say a major cause of the red ink has been Bush's 10-year $1.35 trillion tax cut and what they contend are bad economic policies being pursued by the administration.
For the month of March, the government produced a deficit of $58.7 billion. That was based on revenues of $120.4 billion and outlays of $179.1 billion. The deficit for March, however, was smaller than the shortfall of $64.2 billion recorded for the same month last year.
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