The Bush Boom

Wall Street Journal (Subscription) ^ | September 15, 2003 | Brian S. Wesbury

[Straight Vermonter]

President Bush has sounded upbeat about the economy of late: and he should. His tax cuts and Fed rate cuts are proving naysayers wrong. Not only did the economy grow at a stronger than expected 3.1% rate during the wartime second quarter, but the third and fourth quarters are on track for what could be 6.0% real GDP growth.

Retail sales show a 12.1% annualized increase in the June-August period. Housing starts are at a 17-year high, new and existing home sales have set new records this year, and disposable personal income is up an annualized 9.4% in the past three months. Productivity growth in the non-farm business sector expanded at an astounding 6.8% in the second quarter, while spending on computers and peripheral equipment jumped 57.5% at an annualized rate. The future looks just as bright. …

Under the radar screen, high tech is making a serious comeback. … Even in the services sector -- which many thought immune to efficiency gains -- productivity is rising. With it, incomes and profits will rise, setting the stage for a strong economy and equity market in the coming election year. …Yet these productivity gains have created at least one problem. Gains in efficiency are one factor undermining job growth in this recovery when compared with those in the past.

In late August, the AFL-CIO issued a press release titled "U.S. Workers Struggle in Worst Job Slump Since Great Depression." They said this with a straight face even though, at that time, the unemployment rate was 6.2%. In the Depression it was above 20% and in the early 1980s, at the height of union membership, unemployment was 10.8%. … While manufacturing output has held steady as a share of GDP, manufacturing employment has fallen from 25% of all jobs in 1970 to 11% today. …

… creative solutions are allowing small businesses to succeed despite extraordinary obstacles. In fact, they are creating jobs while large businesses are eliminating them. We know this because there is a big divergence between the two surveys of employment run by the Bureau of Labor Statistics. According to the Establishment Survey, non-farm payroll jobs fell by 93,000 in August, creating a total job loss of 437,000 for the first eight months of 2003. …

The BLS also collects data directly from households … This data is used to calculate the unemployment rate, which fell to 6.1% in August from 6.2% in July. Interestingly, the Household Survey shows that 1.186 million new jobs have been created this year. …

In the end, the jobs picture isn't as good as it could be, but not as bad as demagogues or some data suggest. Virtually every sector of the economy is booming today, especially high-tech. Weak job growth is an anomaly and cannot last.

With the capital gains tax rate lower than at any time since 1941 and dividend tax rates cut by 60%, the 2003 Bush tax cuts have stimulated venture capital investment, mergers and acquisition activity, and the stock market. … So while partisans will continue to produce pessimistic analyses, there should be no doubt that this economy is gathering momentum. The strength of economic activity will surprise many, just as it did in the early '80s following the Reagan tax cuts. George W. Bush should get the credit this time.

[Straight Vermonter]

I was surprised that this week old story had not been posted by the Bushbots.

Good news if true.

[Recovering_Democrat]

...the third and fourth quarters are on track for what could be 6.0% real GDP growth.

Tom Daschle is saddened, deeply saddened.

[proxy_user]

No one can tell what is really happening. The economy is changing so much, that it will be possible to tell what is happening only in retrospect.

That's why the comparisons to the Depression are meaningless. We were a completely different society, and economy, then.

[bushfamfan]

To hear the media and Demonrats tell it, you'd think our economy is destroyed. Of course there's the job problem, but funny how the Demonrats want to raise taxes on the very people who are the employers and it needs to be pointed out repeatedly because they offer up nothing but insanity and rhetoric.

[Uncle George]

And with the Commie owned media we will have to read it in the Wall Street Journal in fine print.

[Rubber Duck]

Note to news media-- the economic doom and gloom stories have just a few more months to play, then you'll have to find drug addicts and winos on the street to orchestrate criticism on how tax cuts are cutting the safety net for the most vulnerable members of society.

[YaYa123]

Thanks for posting this.

My husband tells me this is why the democrats have decided they must go after President Bush with renewed vigor on the war, and national security, and why Kennedy went beserk last Thursday.

Bush's economic plan is working = political death for Democrats.

By the way...I was in an AOL Bash Bush Chatroom the other day. They aren't even clever enough to know the term "Bushbot", they call us Bush Robots. I'm not insulted by either. In fact, I take "Bushbot" as a reminder to hold fast to the reasons why I voted for Bush. So many times I've faltered...oh me of little faith. But I know it happens to the best of us when we ingest too many pundits and pukes.

[Orangedog]

I'll start having faith in growth figures just as soon as these rocket scientists acknowledge the real level of inflation. Everything I spend money on has gone up. Groceries, electric, cable, phone, internet, pizza...just about everything. And don't even get me started on what cigarettes cost these days.

As far as the tax cut goes, every penny of mine was transfered to higher property & sales taxes and car/home insurance rates.

[boomop1]

What does the NY Slimes have to say about this, nothing I suspect.

[YaYa123]

You're right, none of us non-experts know what's going to happen with the market or the economy. Indicators? I hardly even know what that means, but they are astoundingly good right now. Wish I knew more...I just listen to my husband, try to understand the FOXNews Saturday morning money shows, watch Neil Cavuto.

Louis Rukeyser's Wall Street" airs at 8:30pm est on CNBC.
(Husband translates this one for me.)

[BushCountry]

I think the BushBots are sick of the DoomGloomBots.

[Rokke]

So let me get this straight...when the prices of everything start going down, you'll believe we're in an economic recovery?!?!

[Jeff Chandler]

George W. Bush should get the credit this time.

Don't hold your breath.

[bluefish]

Guess what... you know as much as your husband does. Take it from an economics junkie, former short term trader, former investment broker (who refused to accept the fact that it was just a sales job).. you know and understand what is going on, and maybe even better what WILL happen, than your husband. The "experts" don't really know. They only "interpret" the past.

[Orangedog]

Did I say that?....No. I was commenting on the fact that almost every economist and his brother says that there is almost no inflation when prices for most things are rising considerably. The Fed is not seeing (or admitting) the inflation that is taking place.

[maui_hawaii]

I hope it gets better too...

The only thing to talk about though is jobs.

They can quote 10% growth yada yada...and that doesn't equate to jack. Until it puts money into my pocket the economy is still bad.

[zencat]

I'd love to see GDP growth at 6% for the second half of the year. Even the liberal media will have trouble trying suppress that kind of good news. Such growth should lead to solid improvements in the labor market.

For those that say we can't know what will happen, while of course that's somewhat true, it can also be a cop out. We can make highly educated guesses by following stock markets and leading indicators. All those signs currently point to much improved economic activity in the near future.

A booming economy next year will likely reduce the Democrats chances to zero.

[SierraWasp]

"And don't even get me started on what cigarettes cost these days."

That has NO relationship to inflation whatever!!! That's politics, litigation and Liberal GREED!!!

[Rokke]

Actually, everyone (including the Fed) is saying the current rate of inflation is just over 2%. However, the price of most of the products you listed have little to do with the rate of inflation. Cable fees are driven as much by supply and demand and competition as anything else. Cigerettes are being taxed into the next dimension. Utilities are cyclical and driven by the cost of natural resources. In many cases prices are coming down. Especially electronics. In fact, with the exception of cigerettes, I can't think of anything that has become dramatically more expensive in the last couple years.

[null and void]

Good news if true.

Dunno if it's true, but I've recently managed to get a few small consulting gigs after a full year of NOTHING.

I even got paid for one.

;^)

When I went to get a haircut Thursday, it was a bit humbling when the woman ahead of me opened her wallet to pay and I saw that she had more money in her billfold than I've earned and been paid this year.

Still, anything is better that nothing!

I fear of jobs don't come back Dubya WILL be a one term President...