Bush credits policies for positive reports on economic growth

Private analysts attribute change to private sector

August 10, 2005|By Edwin Chen and Joel Havemann | Edwin Chen and Joel Havemann,LOS ANGELES TIMES

CRAWFORD, Texas - President Bush expressed new confidence in the economy yesterday, declaring that his policies have laid "the foundation for sustained growth."

But he said he was concerned that growth could be slowed by the rising costs of energy and health care.

"In terms of ... the effect interest rates will have on our economy, I think we're more concerned about energy prices and health care prices," Bush said. "Those are the two areas that we see as having a greater effect on ... the future of economic growth."

Bush's glowing comments about the state of the economy included more rhetorical flourishes, but in substance they largely squared with increasingly bullish forecasts by private economists.

Just the day before, for example, Goldman Sachs, a New York investment house, revised its projections of economic growth from an annual rate of 3.5 percent to 5 percent for the three months from July to September, and from 3.4 percent to 3.8 percent for 2005. It saw the unemployment rate, which it previously had expected to hold steady at 5 percent, falling to 4.5 percent by the middle of next year.

On economic growth and joblessness, the Goldman Sachs projections are brighter than the administration's.

Unlike Bush, however, the private analysts typically mentioned forces in the private economy - not government action - for their rosy outlook. Goldman Sachs listed growing global consumer demand and an early reversal of manufacturers' pattern of clearing their shelves of inventory instead of producing more goods.

Bush acknowledged that "some challenges to the economy" remained but said his administration was moving to tackle them. He cited the recently enacted energy bill and the Central America Free Trade Agreement. He also called on Congress to pass the rest of his economic agenda, which includes making permanent the tax cuts enacted in 2001 and 2003, passing medical liability reform and simplifying the tax code.

Nevertheless, the president sounded almost boastful.

"I'm pleased to report that the strategy is working," he said. "The economy is growing faster than any other major industrialized country. Job growth is strong. We added over 200,000 new jobs in July. This country's added nearly 4 million new jobs since May of 2003. The unemployment rate is 5 percent, which is below the average of the 1970s, 1980s and 1990s."

Allan Hubbard, director of Bush's National Economic Council, told reporters that the administration's policies had resulted in "a spectacular economic growth."

But neither Bush nor Hubbard addressed some less encouraging economic trends.

Most recently, the Labor Department reported yesterday that productivity - defined as worker output per hour - rose at an annual rate of 2.2 percent in the April-to-June period, down from 3.2 percent in the previous three months. Productivity last grew that slowly for a whole calendar year in 1997.

The Los Angeles Times is a Tribune Publishing newspaper.

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