A FUNNY THING happened on the way to our economic recovery: The people who engineered it are coming under fire for alleged policy errors. Federal Reserve Board chairman Alan Greenspan should be garnering kudos for his management of monetary policy and President Bush should be hearing applause for his handling of fiscal policy. Instead, the applause is being drowned out by the hisses. Start with the recovery itself. Corporate profits are rising, bringing corporate net income close to historic highs, and producing a rise in CEO confidence. Wholesale sales rose by 1.5 percent in June, the largest jump in 14 months. Retail sales rose in July by a surprising 1.4 percent, as tax refunds and mortgage refinancings fueled spending on autos, building materials, and gardening equipment. The service sector grew for the fourth consecutive month. Even farmers are smiling, with a record corn crop and bountiful crops of soybeans and wheat predicted, along with higher prices for these and other commodities.
So after meeting at the ranch with his notably unimpressive economic team, the president pronounced himself satisfied that his tax cuts will soon generate growth so robust that the nation’s job-creation machine will spring to life. But Bush’s critics don’t share his optimism. Although tax cuts have put money into consumers’ pockets just when the surge in long-term interest rates (rates on 30-year mortgages rose from the lowest level in 40 years, 5.21 percent in mid-June, to 6.34 percent early this month) has produced a 68 percent plunge in the mortgage refinancings that have kept consumers spending afloat, the president is under fire from Democrats who profess worry that the federal deficit, predicted to hit $455 billion this year (and rising), will slow the economy in the long run and leave future generations with huge debts.
