Most of the economic indicators have been up lately, lifting White House hopes that the economy is finally turning around just 15 months before the 2004 presidential election.
Despite persistent Democratic attacks that President Bush’s tax cuts and deficits have driven the economy into a recession, economic growth is climbing, manufacturing orders have improved, incomes are up and consumer confidence is rising again.
There is an emerging belief among investors on Wall Street, which has been in the midst of a cautious bull rally, that the signs of an economic pickup are for real. After three long years of economic anemia, caused by many factors — a bursting tech stock bubble, terrorist attacks, the corporate accounting scandal and two wars in Afghanistan and Iraq — the American economy is clearly on its way back and not a moment too soon, either.
Among the chief signs of recovery:
c Demand for manufacturing products rose an impressive 1.7 percent in June. That’s the second month in a row that factories have seen orders increase — for things like household appliances, machinery, automobiles and chemicals, the Commerce Department said Monday. Durable goods orders — more expensive products expected to last at least three years — rose 2.6 percent. This is the biggest gain in nearly a year. And as orders rise, these companies will be rebuilding their depleted inventories, which will further boost manufacturing growth.
c The Institute for Supply Management’s manufacturing index upticked to 51.8 in July — up from 49 in June. Any figure over 50 percent means manufacturing is growing.
c Then there is the rise in the consumer confidence index in the first half of July. The University of Michigan survey index increased from 89.7 in June to 90.3 — the third jump in four months.
c Consumer spending has been rising, too, as a result of the Bush tax cuts. American shoppers pushed up retail sales by 0.5 percent in June. That was the strongest rise in three months.
The $350 billion in accelerated income tax cuts that were enacted this spring have led to lower paycheck withholding, which has given families more discretionary income. That is being followed by the child tax credit refund checks that began going out to 25 million families last month and will continue well into August. (Checks average about $400.)
And let’s not forget the dividend and capital-gains tax cuts that have had an important impact on the stock market. More and more companies are declaring dividends or increasing existing dividends as a result of the new 15 percent lower tax rate. This has helped to spur new investment that will give corporations more capital to plow into expansion as the economy continues to grow.
And it is clearly on an upward trajectory: up by 2.4 percent in the second quarter and probably headed toward between 3 percent and 3.5 percent over the third and fourth quarter.
It will be very hard for the Democratic presidential contenders to keep up their drumbeat of economy-bashing with that kind of growth. But it is doubtful many of them will soften their attacks, no matter what the growth numbers show, because, absent any big problems in Iraq, that’s really all the Democrats have to run on.
Of course, the national 6.2 percent unemployment rate (down from 6.4 percent in June) will continue to be their chief target. It fell last month on a statistical quirk because half a million people stopped looking for work.
The jobless rate is always the last statistic to show any improvement in an economic recovery. This is because businesses can continue to boost production with fewer workers through increased productivity — and there have been significant gains in productivity during this period.
Companies are waiting to see if consumer demand and earnings will continue to rise before hiring more workers and that usually does not occur until we are well into recovery when existing workers cannot keep pace with growing demand.
But this is not the 1930s or the 1960s. Americans are much more knowledgeable about the way the economy works. No matter what Mr. Bush’s prospective challengers may say about the state of the economy, people can read the economic indicators. They saw their 401(k) and other stock portfolios rise in the last quarter. They know an economic turnaround is in progress.
And Mr. Bush, his chief advisers and Republican leaders are not going to play into the Democrats’ hands in the months to come. They are going to be on the road talking up the economy and promoting their growth agenda. “Morning in America” ads are being prepared for the coming campaign.
Meantime, House Ways and Means Chairman Bill Thomas has drafted a bill to cut the corporate income tax from 35 percent to 32 percent. It’s aimed at small businesses with $10 million or less in taxable income who produce most of the jobs in this country.
In short, the once-sputtering economy is showing signs of new life, as it did in 1983, just before the 1984 election when President Reagan buried Walter Mondale in a 49-state landslide.
Donald Lambro, chief political correspondent for The Washington Times, is a nationally syndicated columnist.