ET Blow for Bush as recession danger grows By Toby Harnden in Washington

THE US economy is in danger of slipping into recession, the White House admitted yesterday.

Ari Fleischer, President Bush's spokesman, said the president was "very concerned" by figures showing a drop in productivity during the first three months of 2001 - the first fall in six years. Mr Fleischer said: "There are signs of economic weakness that persist.

"The president believes the best way to address the weaknesses is by Congress passing the budget that he has sent up that includes a tax cut to get the economy going again." Conservative Republicans fear that Mr Bush's tax cut could be too little, too late.

It was trimmed from $1.6 trillion (£1.1 trillion) to $1.3 trillion by Congress after maverick Republicans voted with the Democrats in the Senate. Vice-President Dick Cheney said that although the long-term outlook was "very good" a recession remained a possibility.

He said: "The basic answer is we don't know whether we're going to tip into negative territory or whether we've sort of hit bottom here and we'll level out and begin climbing." Continuing economic problems are beginning to hit the pockets of Americans and threaten to undermine the Bush presidency if they are not brought under control quickly.

Treading a tightrope between an alarmism that could fuel a loss in consumer confidence and a failure to acknowledge the signs that Americans are seeing for themselves, Mr Bush has been wary of talking about the economy. White House officials have said privately that a recession could spell disaster for him in the 2004 elections.

The state of the economy, which was largely responsible for the election defeat of President George Bush in 1992, and a looming energy crisis have cast a shadow over the new administration. Recognising that his father was blamed for economic failings the president has pointed out that the current problems began during the presidency of Bill Clinton.

After the drop in productivity was announced, the Dow Jones industrial average fell 103 points while the Nasdaq composite index slipped four points. The 0.1 percent drop this year contrasted with a two per cent gain in the final three months of 2000. Productivity has been falling steadily since a peak of 6.3 per cent between April and June last year.

-- Anonymous, May 08, 2001

Answers

I see Bush's strategy as this: Better to get the inevitable recession out of the way now, so the economy is on the upswing during the 2004 elections, just as Reagan did in 1981. That assumes, of course, that this is just another "normal" recession. I think he and a lot of other people are about to get the economic surprise of their lives, but hey, what do I know?

-- Anonymous, May 09, 2001

Well, we certainly got an economic surprise when Sweetie was laid off a week ago. The layoff itself was nothing to do with the economy--the firm was nicely profitable and orders hadn't even slowed. The parent company wants to sell the firm and the income looks better with only half the employees. I wonder if anyone will notice the whole R&D division is missing? Anyway, failing a sale, I bet they'll simply kill off the company.

-- Anonymous, May 09, 2001