THE RECESSION in the US is over, according to the guardian of American economic statistics. The National Bureau of Economic Research (NEBR) announced recently that the recession actually ended nearly two years ago, in November 2001. Tell that to the Americans who are still losing their jobs. The US economy shed jobs for the sixth consecutive month in July.
According to the Financial Times, 'Like his father, Mr Bush has presided over a jobless recovery. Two years after the 2001 recession, private sector employment has fallen by more than 2.5 million. The unemployment rate, at 6.4 percent, is more than two percentage points higher. Larry Mishel, president of the left-leaning Employment Policy Institute, calls it 'the greatest contraction in private sector employment since the Great Depression'.'
George W Bush doesn't come out well from a comparison of his and his father's economic records. Two years into the economic recovery from the recession of the early 1990s, when Bush Sr was president, employment had begun to rise. Today, however, according to the NEBR, 'The most recent data indicate that employment has not begun to recover at all.'
It's tempting to suggest that maybe the recession isn't really over. This isn't the message that Wall Street and the other stockmarkets want to hear. Share prices, which have risen considerably in recent months, were boosted last week by some good news about the US economy. Between April and June of 2003 national income grew at an annual rate of 2.4 percent, the fastest in nearly a year.
Potentially more significant, business investment rose at an annual rate of 7 percent, the biggest rise since the stockmarket began to collapse in the spring of 2000.
The driving force of the US recession has been the huge amount of new productive capacity created by the giant surge of investment during the late 1990s. The slump happened because much of this capacity couldn't be profitably used. If companies were starting to invest again, this would be a real turning point. So is US treasury secretary John Snow right when he says the economy is 'coiled like a spring', ready to rebound?
The US state is certainly busy stoking the engines of economic recovery. Bush and Alan Greenspan, chairman of the equivalent of the Bank of England, may be right wing Republican lovers of the free market.
But, unlike their more naive British disciples Tony Blair and Gordon Brown, they don't let neo-liberal economics get in the way of serious politics. When it comes to boosting the economy in time for next year's presidential elections, Bush and Greenspan behave like loyal pupils of the interventionist economics of John Maynard Keynes. Greenspan has slashed interest rates.
Meanwhile government expenditure has been ballooning up at an annual rate of 22 percent between April and June 2003-thanks mainly to the Pentagon, whose spending rose by a whopping 44 percent. The big government that the Republican right loves to denounce contributed 1.7 percentage points to economic growth.
'Without the voracious winds of government spending, the USS Economy would have been a rudderless dinghy,' one economist told the Financial Times. Other US administrations have relied on this kind of military Keynesianism. Lyndon Johnson did during the Vietnam War in the mid-1960s, as did Ronald Reagan at the height of the Second Cold War in the 1980s.
Both these episodes ended in tears. Johnson presided over rising inflation and a crisis of the dollar on international currency markets. Reagan's legacy was the 'twin deficits'-in US government borrowing and the gap between imports and exports. Under Bush Jr the twin deficits are back.
The US economy keeps afloat thanks to its ability to borrow from the rest of the world the money that it needs in order to pay for the goods and services that the rest of the world exports to it. The boom of the late 1990s was itself financed by massive borrowing by firms and households.
According to an economist at Goldman Sachs investors in New York, this is still going on, with firms and households spending over $100 billion more than their income-'except for the bubble years of 1998-2001... the biggest private deficit since the Korean War' in the early 1950s. So the imbalances that pushed the US economy from boom to slump over the past decade continue to exercise their destabilising role. This is bad news for George W Bush.
His great fear must be that history will repeat itself. Like his father, he may-thanks to another joyless economic 'recovery'- change from triumphant conqueror of Iraq to the loser that he really is when he seeks re-election.