*EPF303 01/30/2002
Bush Administration Pleased by Year-end Economic Expansion
(Asks Congress for action on stimulus package) (470)

By Andrzej Zwaniecki
Washington File Staff Writer

Washington -- President Bush says he is pleased by a report indicating that the U.S. economy expanded in the last three months of 2001.

The Commerce Department said January 30 that inflation-adjusted gross domestic product (real GDP) -- the most comprehensive measurement of the economy's performance -- increased at an annual rate of 0.2 percent in the fourth quarter of 2001.

But Bush cautioned in a statement "we cannot take growth and job creation for granted."

"For the sake of America's workers, I call on Congress to pass an economic security package that will protect American jobs and prosperity because I remain concerned about the economy," he said.

The economic stimulus package, a set of proposed spending increases and tax cuts designed to revive the economy, has divided Republicans and Democrats in Congress. The legislation is stuck in the Senate after the House of Representatives passed its own bill.

Even before release of the fourth-quarter GDP numbers, some private economists questioned the need for an economic stimulus, citing evidence that the economy had already started recovering.

Treasury Secretary Paul O'Neill called the unexpected growth of the U.S. economy in the last three months of 2001 "very good news."

In the third quarter GDP contracted 1.3 percent, and most private economists projected negative GDP growth for the fourth quarter as well.

O'Neill told reporters that the fourth-quarter growth could lead to faster 2002 economic recovery than forecast earlier.

In the first three months of this year, he said, he expects the U.S. economy to grow at a rate that is "some multiple" of the fourth quarter numbers, and later, at even faster pace.

But O'Neill emphasized the need for a quick action on the stimulus package to "have faster, earlier recovery that we would have without it."

He said that the GDP growth was a consequence of the president's tax policy working in concert with the interest rate cuts made last year by the Federal Reserve Board.

During a meeting that coincided with the release of GDP numbers, the Federal Reserve decided to leave interest rates unchanged, citing a "more promising" outlook for economic recovery.

Fourth-quarter GDP was boosted by a 5.4-percent jump in consumer spending, mostly on cars and other durable goods, and a 9.2-percent increase in government expenditures. But the upturn was mitigated by a 12.8-percent drop in business spending on new plants and equipment and a 12.4-percent fall in exports.

From the fourth quarter of 2000 to the fourth quarter of 2001 real GDP increased only 0.1 percent, the weakest performance of the U.S. economy since 1991.

Fourth-quarter estimates based on more comprehensive data will be released February 28.

(The Washington File is a product of the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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