- The Washington Times - Sunday, May 4, 2003

  Is the economy finally showing signs that a recovery is coming just in time to ensure President Bush’s re-election to a second term?
   It appears so. The signals of an economic turnaround are popping up everywhere in business earnings, a postwar stock-market rally, a sharp rise in both consumer spending and consumer confidence.
  My own feeling is that the long, three-year bout of economic malaise is finally over and the economy is about to take off again. If true, it would rob the Democrats of their only real hope of recapturing the presidency.
  As the U.S. military restores order in Iraq and begins the long arduous task of rebuilding its infrastructure and a new government, U.S. businesses are busily rebuilding our economic infrastructure, too.
  One of the most bullish signs of an emerging recovery is coming from much stronger business earnings reports, often beating Wall Street’s more pessimistic forecasts.
  This week’s upbeat reports underscore what is happening in corporate America:
   Proctor & Gamble’s third-quarter profit shot up 23 percent as a result of sales rising 7.6 percent.
   Sysco, the biggest food service distributor in North America, saw its fiscal third-quarter earnings jump by 11 percent on better sales.
   Tyson Foods, the world’s largest meat producer, reported that its profit rose by nearly 11 percent in its second quarter.
   McDonald’s, the global hamburger and fries giant that has fallen into a slump in the last few years, said its first-quarter profit surge 29 percent on the strength of its new menu that is pushing salads of all things.
   Safeco, the huge property-casualty insurer, saw its earnings shoot up by 42 percent, after a four-year earnings drought.
  These and hundreds of other positive earnings reports do not make the front pages of our newspapers or the nightly news shows, but they are far-reaching in their implications for the future — economically, politically and socially.
  Improved earnings, if they continue to grow, means higher incomes and increased jobs. The fact that we are seeing these corporate earnings reports now, 18 months before the 2004 elections and before Mr. Bush’s tax cuts have been passed, has the White House feeling cautiously optimistic about the economy’s future.
  Fold in the latest rising consumer confidence numbers and you have the makings of something big going on here.
  The University of Michigan’s monthly consumer confidence index rose by 8.4 percent in April to 86.0. That’s half the 17.3-point surge after the first Persian Gulf war, but it comes after much more serious economic troubles than we had in 1991.
  The equally impressive surge in consumer confidence in this week’s monthly report from the Conference Board, the blue chip business lobby — especially in expectations for the future — underscores that the country is feeling a lot more optimistic about the long term.
  Most importantly, this confidence is being demonstrated in stronger consumer spending which rose 0.4 percent in March — its fastest growth in three months, according to the Commerce Department.
  We’re going to have to see further spending data, after a bitter winter downturn, before we can say that retail sales are on a solid upswing. Still, the jump included a sharp rise in spending for durable goods such as cars and appliances and is moving in the right direction.
  Throw in higher personal incomes that rose 0.4 percent in March and the fundamentals are there for more robust consumer spending which accounts for two-thirds of the economy.
  All this has boosted confidence among investors who are beginning to buy equities again in what has all the makings of another bull market.
  Long-battered stocks are woefully undervalued and smart investors are buying into strong companies at bargain basement prices. There is talk of the Dow rising above 10,000 by the end of the year.
   Unemployment remains the only dark cloud on the economic horizon. It stood at 5.8 percent in March. That’s not good but considering everything that has hit the economy — the stock market collapse, terrorism, corporate scandals and the wars in Afghanistan and Iraq — that’s relatively moderate.
  Martin Regalia, the U.S. Chamber of Commerce’s chief economist, says that given the anemic 1.6 percent economic growth in the first three months, the jobless rate “could go higher. We are likely to see increasing weakness in the labor market until the middle of the year.”
  That’s why the economy needs a major jobs-creating boost in capital investment that only Mr. Bush’s tax cuts can produce. The stock dividends tax elimination alone would create 700,000 new jobs, says a new analysis by the White House Council of Economic Advisers.
  There’s nothing wrong with this economy that a faster reduction in Mr. Bush’s 2001 income tax rate cuts would not cure.
  Donald Lambro, chief political correspondent for The Washington Times, is a nationally syndicated columnist.

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