Does the White House know something about the economy that the rest of the country doesn't?
There's some room for wondering about the accuracy of the rosy economic outlook that President Bush outlined this week at a time of some decidedly adverse developments.The Bush statement is also in keeping with a long-standing tradition by which the White House almost habitually insists all is well with the economy. The tradition is based on the theory that excess optimism is good politics even if it accomplishes nothing else.
But, just as a broken clock tells the time accurately twice a day, this could easily be one of those occasions when the knee-jerk optimists are right in stressing the inherent strength and flexibility of the American economy.
In any event, when President Bush sent his annual economic report to Congress on Tuesday, he predicted a short and shallow recession, with a recovery beginning by mid-year.
How's that again? The nation not only is at war, but is also locked in a recession. Unemployment is up; even White House economic adviser Michael Boskin expects it to rise further this year. Retail sales are down. Consumer confidence is at depressing levels. Has the White House lost touch with reality?
No, not at all. Consider a few encouraging developments that ought to make plenty of Americans feel better about the economic future.
Since Jan. 17, when the stock market rallied on optimistic early reports about the war against Iraq, the Dow Jones industrial average has shot up more than 15 percent. A broader stock index, the Standard & Poor's 500, is up more than 16 percent.
Though the stock market is not an infallible harbinger, it is one of the most-watched economic indicators with an admirable record for foretelling the direction of the economy.
Even if the stock market is wrong, the psychological effects of the current rally are starting to help. In some parts of the country, for example, home prices and sales are starting to surge as investors feel a bit richer and more confident.
Meanwhile, oil prices have fallen, providing more money for consumers and businesses to spend. As defense spending increases in response to the conflict in the Persian Gulf, the economy can be expected to grow. Interest rates are down, meaning lower payments on adjustable-rate mortgage and personal loans. The dollar is weak against foreign currencies, suggesting continued growth in export sales for U.S. firms because American goods will be relatively inexpensive.
One other interesting development has taken place over the past couple of years. There has been a surprising increase in childbearing among women of every age group and in all regions of the United States. At the same time, immigration to the United States has been increasing. These population changes, as the Providence Journal noted recently, "may very well help to make for a more dynamic and competitive economy - and so a stronger United States."
Under the circumstances, Congress should hold off on proposals for various job-creation programs as a remedy for the recession. Let's give the economy a chance to heal itself.