WASHINGTON, April 19: President George W. 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 Bush 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 centrepiece of his economic programme — 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 and 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.
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.—Reuters
