Kerry's Chances For a Slump Grow Slimmer

Dan Rather's claim of having found a long-hidden stain on George W. Bush's National Guard record seems to be backfiring as news comes out that he and CBS ignored credible testimony to the contrary. It doesn't help that the network news presenter's longstanding sympathies for the Democratic Party are well-known, as are those of quite a number of other TV stars and print newsies.

Further documentation of a general media tilt toward the Dems comes from researchers at the well-respected, albeit admittedly conservative, American Enterprise Institute. AEI economists Kevin A. Hassett and John R. Lott Jr. yesterday revealed results of exhaustive research on press coverage of economic news dating back to the first Bush administration. Bill Clinton consistently got better headlines than the two Bushes on such key matters as unemployment and GDP growth, the researchers say.

Using the LexisNexis database, the researchers sorted through over 13 years of economic coverage in 389 newspapers and the Associated Press. While one could speculate that judgments of what was "favorable" and "unfavorable" were partly subjective, the findings won't come as a big surprise to many people, especially to Republicans. Other surveys have shown that most major-league journalists are registered Democrats, and one might expect that their political affiliations would have some tiny effect on their objectivity. Some polls also show a declining trust in the quality of news reporting, by the way.

But the interesting thing about all this is that no matter how many journos vote Democrat, the U.S. has a Republican president and Congress. So even if some editors let their personal views get in the way of objective headline writing or some big-time anchormen sneer at George W., it apparently doesn't have much effect on how people vote. That would suggest that voters tend to cut through the media fog and listen to what the candidates are actually saying. Or more to the point, they tend to base their votes on an assessment of their personal circumstances.

No doubt John Kerry and his sidekick John Edwards, have been wishing secretly that the American economy would go into a funk before Nov. 2. They would of course never admit to hoping for ill fortune. That would be injudicious indeed. But as experienced politicians, they know that people vote their pocketbooks and that a flattening of those wallets would help their chances.

Unfortunately for them, it doesn't look as if it will happen. With only 60 days to go before e-day, there are no portents of the American economy tanking. In fact, the latest vital signs have suggested improvement in economic health, particularly with regard to prices and employment.

Last Friday, for example, the government reported that the producer price index actually declined slightly in August, confounding widespread predictions by economists of a slight rise. The PPI isn't a dead-certain predictor of consumer prices but the decline made it seem unlikely that shoppers will be getting price shocks in November. A recent drop in crude oil prices raises the possibility that voters will even get cheaper gasoline by election day. This news and a comment by Federal Reserve Chairman Alan Greenspan last week that the economic recovery had "regained some traction" gave both the stock and bond markets a lift. The lower PPI also lessened the possibility of a further ratcheting up of interest rates by the Fed between now and the election, which is good news for homebuilders, auto dealers and the markets.

Now, of course, there are signs of asset inflation, with home prices still climbing rapidly on average. That's bad news for prospective homebuyers. But it is good news for the record 68% of American householders domiciled in a place they own. For many, home equity is going up, which means that they feel richer and always have the possibility of a home equity loan if they get pinched for funds. There's a lot to be said for Mr. Bush's "ownership society" when it comes to cushioning the shock of asset inflation.

Another happy indicator for the Bushies is the high level of employment and a continued decline in unemployment. The latest data show that nearly 140 million Americans have jobs and that the unemployment rate has declined to 5.4%. Only 5% of males 20 years and older, usually considered to be the principal breadwinners in most households, are out of work. Given the number of workers temporarily sidelined for one reason or another at any point in time, a 4% jobless level is usually regarded as "full employment." At that point, a good many job offers go begging. In some areas, worker shortages already exist.

Yet another indicator of well-being, real disposable personal income, has been climbing steadily. This may help account for why retail sales in July were up 5.5% from a year earlier. All this adds up to expectations by economists that the U.S. economy will grow by more than 4% this year from 2003. That's a very respectable rate of economic growth by historical standards, particularly when you consider the huge $10 trillion base. The average rate of growth in the 1990s was 3.3% from a smaller base.

The Bush administration likes to take credit for the recovery and it has a legitimate claim. Instead of trying to finance homeland security and the Iraqi war and reconstruction with higher taxes, it made the crucial decision to lower taxes instead. A reduced tax burden correlates with faster economic growth just about anywhere you look.

The upshot of all that spending, of course, was a large federal deficit, now estimated at $422 billion for the fiscal year ending 16 days from now. Earlier, a $477 billion shortfall was predicted, but faster growth pumped up revenues. The deficit is huge, of course, and Mr. Bush has caught hell from both left and right for not exercising better control of spending. Yet Dems of the past, citing the sainted Lord Keynes, would have argued that deficit spending was exactly the right medicine for recession. A better argument is that when interest rates are low, it's wiser to borrow than to tax.

It's wiser still to control spending. But that's an argument for another time. Right now, Mr. Kerry has a problem. The good times are rolling on.