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Bush links economic growth to first-term tax cuts, other policies

KERNERSVILLE, N.C.—President Bush trumpeted recent sunny economic news Monday and said his tax cuts were responsible for rapid growth and new jobs.

Speaking to 600 workers at a Deere-Hitachi manufacturing plant, Bush credited his first-term tax cuts and other policies with helping the U.S. economy grow by 4.3 percent from July to September and adding 215,000 jobs last month.

"We lowered your taxes and gave you the opportunity to keep more of what you earned and let you decide how best to spend your own money," the president said. "We cut the taxes on families by lowering the tax rates and by doubling the child credit and reducing the marriage penalty. ... These cuts are making a real difference to American families."

Bush called opponents of tax cuts—particularly Democrats—pessimists. In a speech that echoed themes from his presidential campaigns, he renewed his call to make tax reductions permanent and urged Congress to revamp the Social Security and health-care systems.

The speech, which came as the president's approval numbers are at historic lows over the war in Iraq and the economy, was part of a White House offensive to gain support for his domestic agenda before he slides into irretrievable lame-duck status.

The sales pitch faces a skeptical national audience. Some 62 percent of U.S. adults disapprove of Bush's handling of the economy, while 31 percent approve, according to a survey late last month by the American Research Group. Its error margin is 2.6 percentage points.

Personal experience fuels such pessimism. While the economy grew by a healthy 4.2 percent in 2004, most families lost income; real median household income fell for the fifth year in a row, census data show.

In addition, people remain pinched by high gasoline prices, even though they've come down considerably from post-Katrina peaks, and haunted by news of mass layoffs at giant companies such as General Motors, which announced recently that it will cut 30,000 jobs by 2008.

Every president claims credit when the economy is prosperous, but independent experts long have agreed that presidents have little influence over short-term economic conditions.

However, several warned Monday that Bush's drive to make his income-tax cuts permanent could injure the economy in the future.

"I don't think the economy has been affected ... by the policies of the Bush administration," said James Feyrer, an economics professor at Dartmouth University.

Mark Zandi, chief economist for the economic forecasting and consulting company Economy.com, said, "The policies—the tax cuts—were timely after 9-11. But if the trend line continues, I think fiscal policies will be a drag on growth following the president's term because of the prospects of very huge budget deficits. "

Former Federal Reserve Chairman Paul Volcker, a towering figure in economic circles, said no president had much power to direct the economy.

"The press and public overrate the influence of the president on economic development," Volcker said Monday when asked by a Knight Ridder reporter.

In a speech before the National Academy of Public Administration, Volcker warned that the United States is, in effect, borrowing to finance its economic expansion. Three consecutive years of record budget deficits, fueled by borrowing from foreigners, leave the national and global economies vulnerable to a shock, he said.

The president's choice to visit a manufacturer was somewhat curious, since that sector in particular has been decimated in recent years by foreign competition. While the plant Bush visited has expanded its work force recently, U.S. manufacturing employment overall totaled 14.2 million in September, down sharply from 17.1 million in 2000, according to the National Association of Manufacturers.

Bush drew the loudest applause when he warned U.S. corporations not to mess with their retirees' pensions. He proposed a plan to revise pension rules and give companies with underfunded pension plans seven years to make them whole.

"And so my message to corporate America is, you need to fulfill your promises," he said. "When you say to a worker this is what they're going to get when they retire, you better put enough money in the account to make sure the worker gets that which you said."

Monday's speech kicked off an administrationwide media offensive to persuade the American people that the economy is strong. Treasury Secretary John Snow and Commerce Secretary Carlos Gutierrez will deliver economic booster speeches later this week.

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(The American Research Group poll was taken of 1,100 adults Nov. 19-22 and has an error margin of plus or minus 2.6 percentage points.)

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(Douglas reported from North Carolina with Bush, Hall from Washington.)

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(c) 2005, Knight Ridder/Tribune Information Services.

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