Can Bush Be Elected With a 5.8% Unemployment Rate?
Here’s this morning’s question: is strong economic growth, as measured by a projected strong GDP figure in 2004 of 4.5 % be enough to get Bush elected next November, if such performance can only reduce unemployment down from 6 percent to 5.8 % by the time of the election?
The National Association for Business Economics made its projection for 2004 this morning of a GDP growth rate of 4.5%, and a resulting addition of 1.3 million jobs in 2004, a down payment towards the 2.3 million jobs lost in the private sector since Bush took office. But the projection is predicated on several things.
The U.S. economy, primed by tax cuts and low interest rates, should grow next year at the fastest pace in two decades, but that will do little to decrease unemployment, top economic forecasters predicted Monday.
"We are looking for a very strong bounceback," said NABE President Duncan Meldrum, chief economist at Air Products & Chemicals Inc. of Allentown, Pa. He said the biggest threats to the forecast are that job growth will turn out to be even weaker than currently envisioned, which could undermine consumer spending, or that consumer and business confidence will be rattled by a further escalation of terrorist attacks.
Those are pretty big “ifs”. How well will the economy bounce back if the majority of the job growth continues to be in the relatively low-paying service sectors, rather than manufacturing? These projections assume that Alan Greenspan continues to play ball and keeps interest rates down through the election year, which we can assume he will to help out the GOP, even though our deficit picture is heading towards the toilet.
Much of the current strength is coming from tax cuts Bush pushed through Congress in May and low interest rates engineered by the Federal Reserve, which is expected to keep holding its key benchmark rate at a 45-year low of 1 percent for some time to come.
"We just have an unprecedented amount of economic stimulus coming from Washington to boost economic activities," said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis. "That is going to keep economic activity at very high levels."
The nation's twin deficits are projected to worsen, with the merchandise trade deficit forecast to hit a record $525 billion this year and set a new mark of $545 billion in 2004. The federal budget deficit, which reached a record $374 billion in 2003, will climb to $462.8 billion for 2004, the NABE panel said.
The question, of course, is whether a recovery that will still reflect a four-year record for Bush of a net job loss of nearly 1.5 million jobs can be enough for the GOP to convince voters to give them another four years? And even these projections assume that the jobs materialize at those levels, and that there will be no rise in prices or another terrorist attack, which is far from certain as we head into 2004. Will voters overlook the situations in Afghanistan and Iraq, where the locals are turning against us with a fury, the spiraling deficits, and the prospects of still-poor well-paying job growth to elect the GOP to another four years of total control on the basis of better jobs are just ahead?
Sure, the GOP can buy its support from its campaign contributors with budget busting energy and Medicare programs that may do little to help fix their allegedly intended targets. But will such obfuscation efforts work next November against a backdrop of a 5.8% unemployment rate and still 100,000 troops in Iraq?
We'll see how good Rove really is.