EVANS & NOVAK

U.S. Economy: The third-quarter report by the Commerce Department, showing 8.2% GDP growth, contains so much good news for President Bush that it is hard for his economic advisers to contain themselves.

1) It contains information of higher corporate profits per dollar, reduced unemployment compensation, reduced depreciation charges reflecting greater use of computers, and signs that the threat of deflation is over. All this adds up to a suggestion that 2004 will be a very good year domestically indeed.

2) Further, the post-Thanksgiving shopping rush saw a 5% increase in consumer spending compared to the same period one year ago.

3) The political implications of this are immense. President Bush's two great liabilities going into next year's election have been considered to be Iraq and the economy. The economic numbers indicate that the economy is fading away as a viable issue for the Democrats to use.

4) This means that the Bush tax cuts can be attacked by the Democrats only for ideological reasons, not as the cause of job loss. It can already be seen in the rhetoric of Democratic presidential candidates who have shifted the balance of their criticism heavily to Iraq and away from the economy.

5) Specifically, good news is damaging to the potential general election bids of front-runners Dean and Gephardt. Both candidates have promised to raise taxes back to 2000 rates, a plan they would sell by pointing to the prosperity of the Clinton years.

6) Bush's new economic team is not getting rave reviews from the President's supporters in the private sector. Only Treasury Secretary John Snow is put out front as public spokesman for Bush's position, and he has not been effective. Actually, it is Bush himself who is selling his economic program, and he has done well at it.

European Union: Rifts within the European Union deepened, and the prospects of fiscal discipline on the Continent faded as finance ministers voted to scrap rules for deficit control, essentially allowing France and Germany to run large deficits for at least one more year.

1) Meanwhile, European Trade Commissioner Pascal Lamy has reworked the EU's strategies towards global trade, hoping to hold firm on its agriculture subsidies while bending on customs rules and similar issues-the topics that most immediately brought down the WTO trade talks in Cancun in September.

2) The temporary abandonment of the Growth and Stability pact largely affects France and Germany, who are running large budget deficits. The pact was put in place two years ago in an effort to ward off inflation in the Euro. Sure enough, the common currency has risen steadily in that period from below 90 cents to about $ 1.20 currently.

3) But this move by the individual finance ministers, more than raising the risk of inflation, reflects a deeper problem within the European Union. It is not part of a trend of decentralization of the EU as many officials in Brussels fear.

4) It is a symptom of the EU's inability to curb the growth of government. The devolution on deficit control contrasts the strong centralized power the EU showed when it disciplined Ireland for cutting taxes two years ago.

Medicare-Prescription Drug: A tumultuous all-night session pushed the $400 billion drug-entitlement bill through the House, and then the Senate signed off on the bill after a heated debate.

1) Winning 220 votes on the bill required the most heavy-handed campaign of arm-twisting and vote-buying the GOP has un- dertaken at least since the Bush Administration took office in January 2001.

2) Conservative lawmakers split in the end, many buying into the argument that rejecting this plan would yield a worse plan later. Some got on board in response to a stick or carrot from the White House or the House leadership. President Bush made a middle-of-the-night conference call to Republican congressmen held captive in the cloakroom just off of the House floor.

3) Republican staff did not pretend that this bill was good policy, but that it was politically necessary. It is supposed to inoculate Bush and congressional Republicans against what the Democrats hoped to use as a chief line of attack in 2004. Not many congressional Republicans would have been in danger next year, and so this vote was primarily for the White House.

4) The difficult vote complicates things for Republican congressmen seeking higher office. Rep. Pat Toomey (R.-Pa.), challenging Sen. Arlen Specter (R.) for Senate, voted no, as did Rep. Jim DeMint (R.-S.C.), running for the open Senate seat in South Carolina. Rep. Richard Burr (R.-N.C.), also running for an open Senate seat, flipped from his "no" vote in June to a "yes" vote in November.

Copyright Human Events Publishing, Inc. Dec 15, 2003
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