WASHINGTON, Aug. 27 (UPI) -- As election day draws ever closer, the pressure is on the Bush administration to prove that the U.S. economy has indeed improved under its watch over the past three years.
But recent data suggest that President Bush and his team have not been as successful about bring a turnaround as it had once thought.
For one, the Department of Commerce reported earlier Friday that the second-quarter gross domestic product growth rate was slower than it had initially stated. GDP for the April to June period was revised down to 2.8 percent, compared to the 3 percent growth Commerce had reported a month ago, and significantly lower than the 4.5 percent growth rate posted for the first three months of the year.
The 2.8 percent reading makes the second-quarter growth rate the slowest since the first quarter of 2003, and analysts said the downward revision for the latest quarter was due in part to the ballooning U.S. trade deficit, as well as a slowdown in consumer spending.
The government reported that consumer spending, which makes up two-thirds of GDP, increased by only 1.6 percent in the second quarter, the slowest pace since 2001 and a sharp fall from the 4.1 percent increase seen in the first quarter of this year. Meanwhile, there was considerable downward pressure on economic expansion as the United States posted yet another record-breaking trade deficit, reaching $588.7 billion by July.
But while the latest GDP figures may be worrisome for some investors, others took it in stride.
"Despite slower second-quarter growth, we expect an acceleration in the second half of 2004 activity boosting GDP to 5 percent or above," said Brian Wesbury, chief economist at Chicago-based investment bank Griffin, Kubik, Stephens, & Thompson. "In addition, nominal growth in GDP has climbed 7 percent in the past year, signaling that Fed policy remains excessively accommodative," which in turn allows both consumers and businesses to borrow money cheaply and thus put more money back into the economy, Wesbury said.
On the other hand, some economists such as the University of Maryland's economics professor Peter Morici said the GDP numbers reflected "the fading effects of President Bush's tax cuts (to bolster the economy)," while higher petroleum prices as well as rising imports were keeping the economy from expanding.
"This bad economic news will negatively affect the job market and voter sentiment in battleground states in the Midwest and South," Morici said. "The combined consequences of rising gasoline prices and the trade deficit, and cooling consumer and housing purchases, indicate the Fed's announced policy of raising interest rates in steady increments risks pushing the economy into recession and unemployment to levels above 6 percent," he added.
That may or may not be, but one thing is for certain: GDP is hardly the only data that the White House needs to be worried about.
Another particularly worrisome indicator this week came from the U.S. Bureau of the Census, which reported Thursday that the number of U.S. citizens living in poverty or lacking health insurance rose for the third consecutive year in 2003, as job growth failed to keep up with a macroeconomic rebound.
The national poverty rate rose to 12.5 percent, or 35.9 million people, up from 12.1 percent of the population in 2002. Meanwhile, the number of people without health insurance rose to 45 million, or 15.6 percent of the population, compared to 15.2 percent the previous year.
But the bureau also reported that inflation-adjusted income of the nation's median household was little changed at $43,318.
In response to the Census Bureau's data, Democratic presidential contender John Kerry said "while George Bush tries to convince America's families that we're turning the corner, slogans and empty rhetoric can't hide the real story ... under George Bush's watch, America's families are falling further behind."
The Economic Policy Institute, a Washington-based think-tank, said that "in general, the report confirms that the weak labor market that prevailed throughout last year continued to take its toll on family incomes, as it did in both the recessionary year of 2001 and the jobless recovery year in 2002."
"Clearly, the benefits of this growth (in broader U.S. economic recovery) have failed to reach middle- and lower-income families," the EPI said.
Another major headache for Bush remains, as it has for all presidents before him since they were first founded, social security and public healthcare. Federal Reserve Chairman Alan Greenspan didn't help matters much when he told financiers gathered at the Kansas City Federal Reserve's annual meeting in Jackson Hole, Wyoming that "the aging of the population in the United States will significantly affect our fiscal situation."
Greenspan, who is a Republican but served under presidents of both political parties, pointed out that social security and Medicare will prove to be considerable burdens on the nation's coffers.
"Our politicians have to start facing the future with honesty and start making the necessary adjustments. That means making hard choices now, not making more promises," said Joel Naroff, chief economist at Naroff Economic Advisors. "As the chairman said, 'if we delay, the adjustments could be abrupt and painful.' It should be interesting to see the political reaction to this speech," Naroff added.