CHICAGO — President Bush, usually upbeat in his economic assessments, recently conceded that the nation faces “economic challenges” due to rising oil prices, the home mortgage crisis and a weakening job market.
At the same time, the World Bank is forecasting that the global economy will grow by 3.3% this year, down from a 3.6% growth in 2007 and 3.9% in 2006. The U.S.’ economy, the world’s largest, is only expected to expand 1.9%, down from 2.2% last year.
“We cannot take growth for granted,” Bush said in a speech to a group of business leaders in which he acknowledged that “recent economic indicators have become increasingly mixed.”
But even after a government report on Friday that showed unemployment jumped to 5% last month from 4.7% in November, Bush stopped short of warning that the nation may be about to enter a recession.
Democrats in Congress and on the campaign trail echoed the president’s sobering view. With a number of analysts now predicting that an economic downturn could be imminent, both Bush and Congressional Democratic leaders say they are considering whether a rescue package is necessary to counter the threat of a recession, in which economic activity declines and joblessness increases over an extended period of time.
But the two sides would undoubtedly take vastly different approaches, setting up a clash that could dominate the 2008 election campaign and the remainder of the Bush presidency.
If the past is any guide, Bush is likely to favor broad-based tax cuts of the sort he pushed through early in his presidency. Democrats are discussing more targeted relief — tax cuts, spending programs,or a combination of the two — to help lower- and middle-income Americans who would be hurt the most if the economy falters.
“This is going to be a battle over doing more of what George Bush has done for the past six years, or doing more for the middle class,” Representative Rahm Emanuel of Illinois, the chairman of the House Democratic Caucus, said in a telephone interview after spending the day in Chicago with Bush. “That’s where the fissure is going to be.”
The clash comes as the latest negative signs on the economy, coupled with uncertainty in the housing and credit markets, have forced Bush to abandon his usual sunny rhetoric and paint a darker picture of the economy’s condition.
After months of insisting that the economy’s fundamentals are strong — a theme he reiterated on Monday — Bush did not mince words. He acknowledged that “many Americans are anxious about the economy,” and he noted that “jobs are growing at a slower pace.” He said core inflation was low — “except when you’re going to the gas pump, it doesn’t seem that low.”
Still, the White House is not convinced it must act. The deliberations are tightly held, and aides to Bush say he will not make a decision about whether to offer a stimulus package, or what it should contain, until later this month, in time for his State of the Union address scheduled for Jan. 28. Appearing in New York on Monday, Mr. Bush’s Treasury secretary, Henry M. Paulson Jr., echoed that approach, and cautioned against any rush to action.
“Working through the current situation and getting the policy right,” Paulson said, “is more important than getting the policy announced quickly.”
Polls show Americans are now more concerned with the economy than the war in Iraq, a trend that is reflected in the presidential campaigns. In New Hampshire on Monday, as the candidates furiously courted voters on the eve of that state’s crucial primary vote, pocketbook issues like the price of home heating oil and health care took center stage.
SOURCE: New York Times, Bloomberg News