December 21, 2003


Fatter Profits -- And Job Growth -- Will Send The Recovery Into High Gear (James C. Cooper & Kathleen Madigan, 12/29/03, Business Week)

To hear economic forecasters tell it, the trip from 2003 to 2004 will be like going to sleep in Kansas and waking up in Oz. And it won't be a dream. [...]

One big reason is that in 2004 the benefits of the economy's long-run trend of faster productivity growth will shine through. Even as demand sputtered over the past three years of recession and mock recovery, productivity gains were lifting profit margins and the real wages of workers who kept their jobs. Now, amid stronger and more widely based demand, every addition to revenue will create even more profits. And with payrolls rising, each new worker will generate even more purchasing power. "This is the virtuous cycle," says Gail Fosler at the Conference Board Inc.

The business economists in BusinessWeek's survey, on average, expect the economy to grow 4.1% in 2004. That's fast enough to spur enough job growth to cut the jobless rate to 5.6% by yearend from its peak of 6.4%. They expect almost no change in inflation, which will be 1.9% for the year. They also look for the Federal Reserve to be patient in lifting interest rates, most likely not until midyear. [...]

A sharp plunge in the dollar could bring a retreat in foreign capital so crucial to U.S. growth, along with higher inflation and interest rates. Mounting federal deficits also raise concerns about interest rates.

But that risk goes beyond 2004, and strong growth has a way of lessening other worries, including those over the dollar. For the coming year, forecasters see an economy ready to skip down a yellow brick road of rising demand, fatter profits, and solid job growth.

So, given that no one takes them seriously on national security, what exactly is whichever Democrat's presidential campaign going to argue in the face of a booming economy?

Posted by Orrin Judd at December 21, 2003 11:19 PM

Look for a big push to extend unemployment benefits (again) when Congress comes back. The Dems know this will slow job growth some, and it's a populist issue.
I expect there will be some mischief around the changes to the corporate tax structure that the WTO has prompted. There are some good, pro-growth reforms possible here, but given that discretionary spending is out of control, it's not likely we'ss see any.

Posted by: Dave in LA at December 22, 2003 5:29 AM

Since they can't argue that it isn't happening, they will instead argue it's a bad thing. We will start reading about the new decade of greed, all the homeless left behind, the dark side of the boom, etc.

Posted by: Keith R at December 22, 2003 5:46 AM

Which means, if a program of compassionate conservativism can be somehow implemented, or given federal backing, encouragement and incentive in some kind of non-statist way (?!), the liberal agenda may be blown right out of the water (assuming it's still afloat at the time).

How this might be implemented I'm not certain; though I think (i.e., I surely hope---betraying my own prejudices, no dobut) it can be done.

Some conservatives will likely regard such as the completion of the neo-con hijacking of the GOP, the culmination of many a betrayal.

And liberals will find themselves in the "interesting" position of having to criticize a Bush initiative that gets down and dirty and helps out people. (Though liberal supporters of murderous regimes, having "been there, done that," won't find it too difficult to repeat, I'm sure.)

(Just a fantasy of mine....)

Posted by: Barry Meislin at December 22, 2003 7:26 AM


Yes, Bush will have the same back-biting from conservatives that Blair has from liberals, even as the party and nation scale heights undreamed, while the Democrats flounder helplessly in opposition to their own ideas.

Posted by: oj at December 22, 2003 8:56 AM

Bush's approval rating on the economy has flipped significantly positive, even according to the not-so-unbiased AP:

Almost always, those boring old pocketbook issues decide elections. If Bush carries a 55-60 approval on the economy into election day, it's hard to see how he loses.

Posted by: CaseyAbell at December 22, 2003 9:53 AM

All the Democrats will have left is a pitiful plea that they not lose their jobs.

Posted by: jim hamlen at December 22, 2003 9:56 AM

I don't know about the other 6 (7?) but here's a guess at what the current top 3 would argue:

Dean might concede that it could possibly be a good thing. BUT, if it IS, then that's all the more reason to get the UN involved, which we should have done a long time ago.

Kerry will 'swear' it's not $!@%*# happening!

Gen. Clark will argue that, if he were President, the recession would have been shorter and the current growth rates would be higher.

Posted by: John Resnick at December 22, 2003 10:53 AM

It's the environment, stupid.

Posted by: Jerome Howard at December 22, 2003 11:07 AM