The economy in perspective.(impact of the new economy)

DURING the 1997-98 season, the Chicago Bulls won the National Basketball Association championship after a regular-season record of 62 wins and 20 losses under coach Phil Jackson. In the next season Tim Floyd replaced Jackson, and the Bulls finished in last place with a record of 13 wins and 37 losses (during a lockout-shortened season). Does this contrast prove that Phil Jackson is a better coach than Tim Floyd? Maybe. But the retirement of superstar Michael Jordan and the trading of other key players after the 1997-98 season makes such a comparison difficult.

When Bill Clinton was president of the United States in 2000, the real gross domestic product of the U.S. economy grew 3.7 percent, the unemployment rate was 4.0 percent, and the federal budget ran a surplus of $236 billion. After George W. Bush became president, the economy tumbled into recession from March to November 2001, the unemployment rate rose to 5.8 percent by December of that year, and by fiscal year 2002 the federal budget was $158 billion in deficit. Does this prove that Clinton followed better economic policies than Bush? Maybe. But it might also mean that a certain prominent player--call it the "new economy"--made Clinton's economic record look especially strong, but then retired and made Bush's economic record look unfairly bad.

Indeed, the president of the United States has less power over the U.S. economy than the coach of a basketball team has over wins and losses. A professional basketball coach sets strategies and schedules for a roster of 12 players. But the U.S. economy is not one large corporation with the president as its chief executive officer. In fact, the U.S. economy has five million corporations, two million partnerships, and eighteen million individually owned proprietorships. The U.S. economy is what happens when 140 million workers produce $11 trillion in annual output.

Thus, in evaluating the path of the U.S. economy during the presidency of George W. Bush, we must begin with a look at how the "new economy" of the late 1990s set the stage for the recession of 2001 and has influenced the economy since then. This context also helps to clarify the strengths and weaknesses of federal tax and spending policy from 2001 to 2004.

The unsustainable boom of the 1990s