HERE IN WASHINGTON, the November 2004 election is not a year away–it’s now. So the Bush team is trying to figure out how fast the economy has to grow to create political capital at a rate that outpaces the mounting death toll in Iraq. Take away the economy as a stick with which the Democrats can beat the president, and all they are left with is an unpopular attack on a leader while the nation is at war–a policy that looks suspiciously like abandoning our troops. A combination of the president’s tax cuts, Federal Reserve Board chairman Alan Greenspan’s multiple interest rate reductions, and a bit of the famous Bush luck now seems likely do the trick. Of course, even the wildest optimist in the White House is not counting on the third quarter’s 7.2 percent growth rate to continue in the four quarters remaining until the election.

For one thing, consumers, whose spending has helped the economy avoid a major recession, have already spent their tax refund checks. The consulting group Bridgewater Associates estimates that almost $14 billion in child credit checks were mailed in July and August, and other sources guess that consumers immediately spent about three-quarters of their windfall. And they are no longer cashing in on the rising value of their homes to the extent that they did earlier in the year. Applications for refinancings have fallen by half from their May peak, and are likely next year to come to only $300 billion, as compared with the $600 billion that will be the end-of-2003 total. So, by the end of the last quarter consumer spending was already dropping off. Personal consumption dropped by 0.3 percent in September–0.6 percent if we adjust for inflation.