Friday, January 27, 2006

Reuters Says Cooling Economy Adds To Preznit's Woes

Just in time for next Tuesday's State of the Union address from the preznit, some really bad economic numbers came out today that bode badly for the future of both the nation and the administration:

WASHINGTON (Reuters) - A surprisingly tepid report on the U.S. economy brought new perils to President George W. Bush as he prepared to unveil his 2006 agenda and struggled to help vulnerable Republicans in a congressional election year.

The meager 1.1 percent gain in U.S. fourth-quarter gross domestic product, reported by the Commerce Department, threatened to undercut Bush's argument his tax-cutting policies had set the stage for a thriving economy.

The GDP growth was the weakest in three years and marked an abrupt slowdown from the third quarter's 4.1 percent pace.

"If the first quarter is weak as well, this could pose some problems for Republicans," said Kenneth Mayer, a political scientist at the University of Wisconsin. "There's a lot of latent unhappiness out there."

"The Republicans, because they have unified control of the White House and Congress, are the ones the public would blame," Mayer said.

Bush's approval rating stood at 43 percent in a CNN/USA Today/Gallup poll taken last Friday to Monday. His approval ratings, which are also in the mid-40s in several other recent polls, have steadied from two months ago, when they dipped into the high 30s.

But Republicans, facing midterm elections in November, have been anxious about both the spillover effect from Bush's poll numbers and about surveys showing voter dissatisfaction with the party generally.

The GDP report landed just days before Bush's State of the Union address on Tuesday evening in which he plans to lay out proposals to rein in health care costs and to extend his tax cuts.

Bush also hoped in the speech to add momentum to an all-out White House campaign to talk up the economy and dispel pessimism created by headlines about high energy costs and layoffs at auto industry giants General Motors and Ford.

Administration officials rushed to play down the latest GDP number, with Treasury Secretary John Snow and White House economic adviser Al Hubbard hitting the airwaves to insist the expansion was solid, job growth was strong and businesses were healthy.

1.1% GDP in the fourth quarter is pretty paltrygrowth - especially since analysts had been expecting 3.2% or higher growth. But the inflation numbers inside the GDP data are even scarier:

There were some signs of increased price pressures in the GDP report. The so-called "core" price index, a favorite of Federal Reserve Chairman Alan Greenspan that strips out volatile food and energy costs, picked up to a 2.2 percent rate of increase from 1.4 percent in the third quarter.

That will be enough to keep the Fed on edge, especially with energy costs heading up.

The GDP report surprised analysts, partly because it implied such widespread softness in key drivers of economic activity. Consumer spending, which fuels two-thirds of the economy, grew at only a 1.1 percent rate, sharply below the third-quarter rate and the weakest since a 1 percent gain in second quarter of 2001.

Geez - weak growth and inflation.

Not good news for the preznit.

Not good news for the rest of us either.

But you know what? Maybe a recession and/or stagflation is just what the doctor is ordering for the body politic.

Maybe widespread economic woes across economic classes will finally wake people up to the fact that the ruling GOP party has wrecked this nation through record deficit spending, low interest rates that encouraged consumers to take on shitloads of personal debt, an artificially created housing bubble, and economic policies that favor the wealthy over other classes.

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