Evans & Novak

Outlook: The upward spike in economic growth cheers the administration, but the Iraq problem deepens.

1) The eye-popping estimate of 7.2% third quarter GDP growth is good for President Bush's political outlook. For the time being at least, it affirms the economic wisdom of the Bush tax cuts. It is widely agreed that the most determinant factor in the 2004 election will be the economy, and the Republicans have a slight edge there.

2) However, there is no question that this rate will soon decline-perhaps even in the re-estimation of the third quarter number. The political factor will be how quickly and how deeply the number goes down. Other politically attuned economic indicators are the Dow Jones industrial Average (on the rise) and unemployment (under control). The jobs number is the most sensitive statistic for Bush.

3) A big boost for the economy was given by the Federal Reserve last week when the Federal Open Market Committee (FOMC) kept the language that there would be no interest rate increases for a "considerable period." That represented a victory for Chairman Alan Greenspan over the Fed staff.

4) The number that causes the most political grief in the Bush Administration is the Iraq casualty list. Comparisons with Vietnam are grossly overdrawn. The numbers are far smaller, and there is no draft. Nevertheless, a continuation of death tolls from Iraq undermines Bush politically.

5) Behind the scenes, it is clear that Secretary of State Colin Powell, though a good soldier following the President's line, is not a happy warrior. His relations with Vice President Dick Cheney have never been warm and they now are absolutely chilly. Powell is known to regard Cheney as a major factor in mistakes made regarding Iraq. Cheney, however, is very popular with Republicans and has the unquestioned confidence of the President.

Steel Tariffs: Bush Administration officials are working on a plan for addressing the problem of steel tariffs, instituted last spring, and now under scrutiny by the World Trade Organization (WTO).

1) Policy advisers are now unanimous that ending the levies would make most sense, which is a change from last year, when staff was split on the wisdom of invoking anti-dumping laws to slow down steel imports.

2) The remaining question has been whether Karl Rove and the political staff are willing to defer to economic and trade experts in the administration. Sources indicate there is more openness now than in the past.

3) Economically, the tariffs are seen as doing more harm to steel consumers-chiefly auto-part makers-than they are doing good for steel makers, whose woes run deeper than cheap Asian steel.

4) Politically, the tariffs were aimed at winning labor votes in the Rust Belt-particularly 2000's Democratic states, Pennsylvania, Michigan and Illinois. There were no indications in 2002 that Bush's moves helped the GOP in those states, which all elected Democratic governors.

5) The White House is now entertaining a middle road: accelerating the exemptions granted to the tariffs while leaving them nominally in place.

6) If Bush sees capitulation on tariffs a political wash, the economic appeal together with diplomatic benefits would drive him to undo the tariffs.

End Game: Unfinished spending bills together with looming Medicare and energy negotiations hang over Congress.

1) Fiscal Year 2004 is already five weeks old, and most of the 13 mandatory spending bills have not yet been completed. In 2002, Republicans blamed slow progress on Democratic control of the Senate, but now they have no scapegoat; since the GOP controls the House, Senate and White House. While voters ultimately do not care much about timely completion of the appropriations process, this performance does reflect poorly on Republicans' ability to govern.

2) The House leadership made a point of passing early the Labor/Health and Human Services/Education spending bill, which tends to get larded up with expensive programs and controversial provisions. Majority Leader Tom DeLay (R.-Tex.) hoped to get that bill out of the way early and keep the price tag down. The bill remains unfinished, and could end up in a smorgasbord bill, opening the gates to pork and crushing conservative hopes of fiscal discipline.

3) The final version of the war supplemental contained none of the loan language the Senate originally demanded. This victory for Bush is rare when viewed in the context of Capitol Hill at large, but standard when considered as part of foreign policy. The original loan vote was mostly a stick in the eye of the White House-Congress really wants as little say as possible over war.

4) Thanksgiving is now seen as the backstop for this session.

This special report appears exclusively in HUMAN EVENTS. For subscription information on the Evans-Novak Political Report, call 800-789-5367.

Copyright Human Events Publishing, Inc. Nov 10, 2003
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