Economist

Forecast
Nov 30th 2005
From Economist.com

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Recent opinion polls show George Bush with the lowest approval ratings of his presidency. After suffering through the ignominious withdrawal of Harriet Miers's candidacy for the Supreme Court and the indictment of the vice-president's chief of staff, Lewis “Scooter” Libby, the president now finds himself on the defensive over the administration’s use of intelligence in the run-up to the Iraq war. The most recent NBC/Wall Street Journal poll shows that 57% of Americans believe Mr Bush “deliberately misled” the nation about the case for war. A hasty withdrawal from Iraq is still unlikely, but the Senate has passed a Republican-supported measure calling for a plan to end the mission.

Despite worries about imbalances in the economy, output has grown at an annual rate of 3% or more in each of the past ten quarters. But the economy still faces a number of challenges, including bloated budget and trade deficits, a wobbly housing market, the risk of higher inflation and a lacklustre jobs market.

Key changes from last update

Political outlook

In elections on November 8th, Democrats won the governors’ races in Virginia and New Jersey, boosting the party's hopes of making gains in next year's congressional elections. Republicans have sought to downplay the political damage, noting that Democrats already held the two governorships, but a last-minute campaign stop in Virginia by Mr Bush failed to sway voters to the Republican candidate.

Economic policy outlook

In testimony before the Senate, Ben Bernanke, Mr Bush’s nominee to head the Federal Reserve, said he would make it a top priority to continue the policies of Alan Greenspan, the current Fed chief. He also pledged to move slowly on inflation targeting—an issue on which Mr Bernanke and Mr Greenspan have differed. Mr Bernanke said he would only move forward with a formal inflation target if a consensus develops at the central bank.