America - Andrew Stephen on US economic woes

Rows of grounded airplanes, brand new libraries without any books, millions of lost jobs: the effect

I've been getting e-mails here lately that fit a pattern, usually from white male friends in their fifties or sixties. "My e-mail address has changed," they say casually - proceeding to give a new address with a personal domain rather than a business one. In other words, they have lost their jobs. Even as President Bush glories in his supposed victory in Iraq, he is turning to this new domestic battlefront: more than two million jobs have been lost since he took office, with every state's economy in a parlous way. Hawaii, to give one random example, built a spanking new library, but now cannot afford to buy any books to put in it; in Texas, 275,000 fewer children will receive healthcare; the order has gone out in Missouri that to save money, every third light bulb must be disconnected in state buildings.

It is a truism of current US politics that Dubbya is determined to avoid the fate of his father, who was turfed out of office by the voters just 21 months after winning the first Gulf war. Dubbya's answer: pre-emptive tax cuts of $550bn, which he says will create 1.4 million new jobs by the end of 2004 and loosen a lot of money into the economy, which will then hum away with ever-proliferating success. To hell with fiscal deficits, is the cry within the Bush administration: the deficit for the first half of this year stands at $252bn and is likely to reach an unprecedented $400bn by the end of the year.

All of which is likely to make George W Bush the first president since 1945 to face the electorate after presiding over an increase in unemployment; in contrast, 23 million jobs were created during Bill Clinton's two terms of office. But Bush has sent out his cabinet members to no fewer than 29 states to preach the importance of the tax cuts, which analysts say will substantially benefit only the well-off and leave the masses to eat cake (or brioche, as the New York Times put it). Bush himself, with an eye on a critically marginal state in next year's presidential elections, has visited Ohio ten times since becoming president.

Alan Greenspan, the veteran Federal Reserve chairman, says that the US economy is "prone more to long-term growth and not stagnation". But the International Monetary Fund predicts that the US economy will grow only 2.2 per cent in 2003; if this is so, unemployment will actually rise to 6.2 per cent. As for the expectation that success in war leads to a rosy economy, the economist Robert J Samuelson says that "the connections between military and economic success are emotionally strong and intellectually weak". Bush has so far received $80bn from Congress to pay for the Iraq invasion and its aftermath: the only bright economic result so far is that the price of crude oil has dropped significantly.

The economic state of this country is thus blurred; my friends who send those sad e-mails have millions of counterparts at all levels of the economy. There are signs everywhere of recession: in the Arizona desert, hundreds of perfectly good airplanes are parked because the airlines no longer have the bookings to fill them. "The markets traded down today," is a phrase you now hear constantly on American radio.

But Bush is a ruthless man politically, and he and his political strategist, the 52-year-old Karl Rove, have the next 18 months mapped out in a way the first President Bush failed to do. Two Republican senators who have stood in the way of Bush's tax cuts, Olympia Snowe of Maine and George Voinovich of Ohio, have found TV ads running against them that are funded by a shady right-wing group. The ads sneer at "so-called Republicans" who "stand in the way" of tax cuts just as "so-called allies like France" (cut to picture of Jacques Chirac) stood in the way of the Iraq invasion.

The Bush-Rove 2004 strategy revolves around Dubbya being portrayed as a strong president abroad (viz, the Iraq invasion) - and an equally strong one at home. With the presidential election due in November next year, they plan a shock-and-awe electoral campaign that will feature a dignified president uniting the nation around the anniversary of 11 September. It will be hard for any of the lacklustre group of Democrats running against him to beat the mixture of apparent patriotism and schlock that we can expect.

But Bush will struggle to overcome the sheer economic impact of job losses and pay cuts if they continue. If his policy of huge tax cuts does not work, he could still be vulnerable to a Clintonian "It's the economy, stupid" electoral barrage.

Though Bush rides high in the personal opinion polls, his hold over the American voters is brittle; and the environment, or helping the unemployed and the poor, barely feature (if at all) in his future plans. Probably no presidential election will ever depend so much on the slickness of mass marketing, but forces no one man can control - economic forces - are more likely to dictate whether George W Bush can win a second term as 43rd president of the United States.

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