WASHINGTON, Aug. 21 — When the economy entered an unmistakable slump last year, economists quickly began a lively and jargon-filled debate about whether a recovery would be U-shaped (mild and slow) or V-shaped (sharp and quick).
But there was always a third possibility that would be especially painful
for the White House: the W-shaped recession — a double-dipped downturn.
The economics of it would be bad enough, but the perils of political parody
would be even more nightmarish for President George W. Bush. The Dubya
recession. The Dubya-dip downturn. It would be fresh meat for every late-night
comedian, right on the eve of national elections in November that will
decide which party controls Congress.
The Letterman-Leno-Jon Stewart potential for trouble was almost certainly on the minds of at least some White House staff members as they organized President Bush's feel-good economic forum last week.
Though Mr. Bush paid solemn tribute to the anxieties and disruption
that many voters are feeling, he and his top cabinet
officers relentlessly drove home the message that things seemed to be getting better. Is there a Dubya recession on the
horizon? Probably not, in the view of most economic forecasters. But most also have a disturbing caveat for White House handicappers: the risks cannot be neglected. If one is on the way, they add, there is not much that President Bush can
do to stop it before the elections.
The United States has experienced only a few true W-shaped downturns
in the last several decades. The most recent
occurred from 1980 to 1982, when the economy was clawing back from a recession but was then hit hard by the
relentless inflation-fighting policies of the Federal Reserve under Paul A. Volcker.
The situation today is almost the reverse. The Federal Reserve under Alan Greenspan is almost flooding the markets with money. Interest rates are at their lowest level in almost 40 years, and banks have channeled that cash into consumers' hands through low-cost home-equity loans and mortgages. President Bush's tax cuts have nudged the economy as well, though many of those cuts will not take effect for several years.
"The risks have increased, but we are not in the double-dip camp," said William C. Dudley, chief United States economist at Goldman, Sachs & Company.
What worries economists as well as people in the Bush administration
is that public confidence is shaky. After bouncing up
at a very high annual rate of 5 percent in the first quarter, economic growth plunged back to 1.1 percent in the second three months of the year. New corporate accounting scandals at Worldcom and other companies raised grave new doubts about much more widespread problems. The stock market dropped badly, erasing wealth and adding to anxiety.
James Devine, a professor of economics at Loyola Marymount University in Los Angeles, is among those who believe
that a W-shaped recession is likely. He publicly raised the prospect of a "Dubya recession" last May.
"I haven't changed my mind," Professor Devine said, musing that he ought to stake out a copyright claim for a "Dubya Recession" in case it really does come to pass.
Mr. Devine contends that the American economy still faces what he said
were the same "three bears" as before: high
debt among businesses, high consumer debt and a very high external debt in the national balance of payments.
Perhaps surprisingly, Democrats running in tight races for Congress are generally not warning about a Dubya-dip.
Instead, they are focusing on particular issues and votes that they contend expose the Republicans' vulnerabilities:
tax breaks for the wealthy, privatizing Social Security and voting for the "fast-track" law that could lead to lower
trade barriers against foreign imports.
"What you don't want to do is capitalize on people's misery," said Jenny
Backus, a spokeswoman for the Democratic Congressional Campaign Committee.
"We are not counting on hard times, but if they are going to come, then
us an opportunity to use that in showing there is a difference in how Democrats and Republicans lead."
The late-night comedians have not yet played with the Dubya recession,
but they are sharpening their scalpels.
When President Bush held his economic forum in Waco, Tex., last week, Jay Leno remarked that Mr. Bush would
do whatever it took to keep the economy strong — "even if he must stay on vacation for three more months."