Political slant to upbeat mood in the White House

MOST analysts around the world have been suggesting that the fate of the world was almost entirely dependent on the fate of the US economy.

That economy is approximately 53 per cent of the world capitalisation. As a result, we have waited to see whether that economy would go into recession. Our concern has been that, if the US went into recession, it would take the rest of the world with it.

This was especially important for a commodity-based economy such as ours. If the rest of the world were in recession it would not have mattered too much if ours was in a strong state. None of our trading partners would need, or be able to buy, our commodities and therefore would force us into recession.

So it was with a great deal of trepidation that we waited to see what the White House would reveal as being the likely growth rate for next year.

The White House recently previewed a politically sensitive report. The report was somewhat upbeat about the economy. The White House’s economists have suggested that next year would bring an economic growth rate of 3.2 per cent after projected growth of 1.7 per cent for this year. In addition, they project that this current year also would bring a small surplus in the non-Social Security part of the budget. This means that the need to tap into the Social Security money to pay for other government spending would be averted. This would occur despite the fact that the overall surplus will be significantly less than the record $US236.92 billion in fiscal 2000.

The White House’s projection is certainly a lot more optimistic than those of most private analysts. One of the main reasons for the White House being so much more upbeat is that they have factored in the massive tax cuts announced by President Bush.

This also suggests that the White House is certainly trying to soften up Congress to pass those tax cuts as they hammer out the details of the budget for next year. This will occur over the next few months.

As President Bush’s Press Secretary Ari Fleischer said: “There is no question that the most important policy for America is growth, and the President’s budget by cutting taxes helps promote growth”.

Whatever the softening up process that occurs, the important thing is that the White House is upbeat. If they are able to get the growth that they have predicted, the rest of the world will cheer from the rooftops as we see the avoidance of a worldwide-synchro-nised recession that has been feared for some time. It must be said that the White House’s projection of a 3.2 per cent growth rate is considerably higher than the most recent survey of economists undertaken by Blue Chip Economic Indicators, a leading financial newsletter, which suggests a 2.8 per cent growth rate. We all await the release of the forecasts by the Office of Management and Budget and the Congressional Budget Office. If these forecasts are in line with that of the White House, then we could see the world turn its depressed forecasts around to far more bullish positions.

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